Understanding Points, Rates, And Fees
Purchasing a home is one of the biggest decisions most of us make in our lives. You should go into that decision armed with all of the knowledge you can get about the subject. There is no shortage of information out there about mortgages and lenders, but how do sort through all of the clutter? Hopefully we can help you make sense of some of the murkier, confusing bits of the process.
The interest rate is the amount that the mortgage lender will charge you for using their money to purchase a property. It determines your monthly payment dues. In general, the higher the interest, the higher you have to pay for your monthly payment. A few tenths of a percent on your interest rate can make a huge impact on your monthly payment, so be sure and shop around for the best possible mortgage interest rate.
There are always fees associated with getting a mortgage. Mostly these will be known as the closing costs. These fees cover the processing of the paper work and the underwriting of your loan. The fees include charges for ensuring the home title is clear and free, and a land survey fee and home appraisal, which gives an estimated value of the home.
No single issue confuses a borrower more than the points. They are also known as “buy-down” or “discount points”, an up-front fee to the lender during closing to lower your rate of interest over the life of your loan. Each point is one percent of the amount of loan. If you have the money up front, buying points can save you a lot in the long run.
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