If you’re new to buying a home and don’t have the time to read an encyclopedia on mortgages, this is the article for you. We’ll go over some basic mortgage terms and concepts to get you started.

The decision to purchase a home by taking out a mortgage is both serious and far reaching. You’ll be either increasing or entering into debt, which means you’ll be responsible to make significant monthly payments. There will also be upfront fees you must pay. Thus you should make sure that you understand the mortgage process and pick both your loan program and your lender wisely.

You’re mortgage education should start with some basic explanations that will help you understand and pick your loan: closing costs, APR, rate, monthly payment, ARM, fixed, and of course, mortgage.

First, what is a mortgage? A mortgage is a loan used to either purchase a property or to pay off an existing mortgage loan. The property itself becomes the collateral. In other words, if the borrower defaults on the mortgage, then the mortgage owner has legal claim to the house and can take possession of it.

The term “rate” refers to the percentage used in calculating the amount of interest you’ll pay for your loan. The interest is essentially your cost for borrowing money. If the interest rate remains the same throughout the loan term, then the mortgage is considered a “fixed-rate” loan. On the other hand, if the rate can change, then the mortgage is called an adjustable rate mortgage or an ARM.

Besides interest, there are additional costs associated with obtaining a home loan. These could include fees for underwriting, the application, checking your credit history and scores, having the property’s value appraised, loan origination, title search and insurance, etc. Together, these fees are called “closing costs”.

Using the interest rate by itself an ineffective way of deciding where to buy a loan because two lenders with the same rate can charge different closing costs, making one loan more expensive than the other. That’s why you should always look at the APR, or Annual Percentage Rate. The APR takes into account closing costs and provides a more equalized measurement for comparing mortgages.

The total monthly payment, also known as PITI, is another important measurement to consider when choosing a loan. The PITI includes principal (P), interest (I), property taxes (T), hazard or homeowner’s insurance and mortgage insurance (the second “I”), and HOA dues. When mortgage insurance is taken into account, loans with a higher interest rate might actually have a lower monthly payment than loans with lower interest rates.