American Bank & Trust knows the South Dakota real estate market is highly competitive right now. With the additional stresses placed on buyers and sellers, the last thing you need is a stressful process. In addition to priding ourselves on making the lending process hassle free, American Bank & Trust has outlined a few mortgage terms you should be familiar with when refinancing or purchasing your next home. You may also learn more about our loan offerings on our website.


Annual Percentage Rate (APR)

Annual Percentage Rate is the truest cost of a home loan. Per the Truth in Lending Act, all mortgage lenders must disclose their APR. In the mortgage industry, APR may include fees such as documentation fees, private mortgage insurance and more.


Closing costs

Closing costs are real estate transaction-related fees payable by the buyer and seller during a closing. A wide variety of fees may be included, such as title search, appraisal fees, origination fees, documentation fees and more.


Earnest money

Earnest money is a sum of money usually put up by the buyer when an offer on a home or property is made. The purpose of earnest money is as a token of good faith, a symbol that the buyer is seriously pursuing purchase of the home.


Escrow account

An escrow account is a separate account held by a mortgage lender. The escrow account pays required property bills, separate from the loan payment. Property taxes and insurance are examples of costs paid out of escrow. It is also sometimes called an “impound account.”


Home inspection

A home inspection is a comprehensive and exhaustive examination of a home by a licensed inspector that evaluates the mechanical & structural condition of the property. It is important to understand that a home inspection is different than an appraisal.


Homeowner’s insurance

Homeowner’s insurance is to protect your home against damage from fire, hurricanes and other catastrophes. Usually, homeowners insurance also covers you against theft and vandalism, as well as personal liability in case someone is hurt or injured on your property. A lender will likely require you to name it as a payee under the insurance you need to make a claim. Also called hazard insurance.


Interest rate

Interest rate is the figure calculated – as a percentage – by the financial industry to indicate the rate charged for use of money in a loan. Interest rates may be fixed or variable. See, Annual Percentage Rate



Your mortgage is a legal document between a mortgagor and a mortgagee that establishes a home and/or property as security for a home loan.


Mortgage insurance

When buyers take out a mortgage with less than 20% down on the loan, lenders require them to pay mortgage insurance, a monthly premium that is added to the mortgage. This protects the lender should a buyer default on the home loan.


Origination fee

An origination fee is a fee, calculated as a small percentage of the value of the loan, charged by a mortgage lender for processing the loan. This is one of the many fees often due at closing. The origination fee also must be disclosed on the Loan Estimate when a buyer first completes a loan application.



Pre-qualification is the process in which a homebuyer finds out how much of a home loan he or she would likely be approved for with a lender. Knowing this figure gives many buyers more flexibility when shopping for a home.


Property appraisal

Property appraisal is a must. It determines the fair market value of property performed by a licensed appraiser. It takes into account not only condition, but also the value of similar local properties or comparable sales.


Second mortgage

A second mortgage, also known as a home equity loan, gives borrowers flexibility to access the cash equity in their home. This may be used for other high-dollar expenses such as improvements, auto or college loans.


Title insurance

Title insurance is simply insurance taken out on the property title that protects both borrower and lender in the event of a title dispute.

We hope you find these terms helpful as you consider buying your first or next home. Contact us today to get started.


Kaye Mack, Mortgage Lender for American Bank & Trust located at the River Centre Branch in Sioux Falls SD, offering Mortgage Loans.Author Kaye Mack is Mortgage Sales Manager at American Bank & Trust. She has over 20 years experience in mortgage origination and management, helping make the process simple and hassle free. She loves putting her years of experience and attention to detail to help clients get into the home of their dreams.



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