If you have any questions beyond our FAQs, please don’t hesitate to reach out. We’re happy to help answer any mortgage related questions!
A point is a percentage of the loan amount, or 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up-front. Lenders may refer to costs in terms of basic points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount.
Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan’s interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.
The Annual Percentage Rate (APR) represents a mortgage’s yearly cost, including points and credit expenses. It ensures fair comparison of mortgage types. While APR doesn’t impact monthly payments, it reveals the genuine loan cost. It prevents hidden fees by promoting transparent lending. Comparing loans involves requesting cost estimates for the same program and rate. Exclude independent fees like insurance or attorney costs. Total remaining fees for a cheaper loan. APR includes points, interest, processing, underwriting, and mortgage insurance. Not part of APR: title, attorney, inspection, recording, transfer, credit report, and appraisal fees.
Mortgage rates can change from the day you apply for a loan to the day you close the transaction. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Therefore, a lender can allow the borrower to “lock-in” the loan’s interest rate guaranteeing that rate for a specified time period, often 30-60 days, sometimes for a fee.
An Appraisal is an estimate of a property’s fair market value. It’s a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by an “Appraiser” typically a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.
On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year’s worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment, or ask about other loan program options.
Property ownership shifts to you at “Closing” or “Funding”. During this process, ownership is officially transferred from the seller to you. Participants include you, the seller, agents, attorneys, title/escrow reps, and others. Attorneys handle most tasks. Closing time varies based on contingencies or escrow. Escrow agents and closing reps with the lender handle most tasks, your involvement is typically minimal. Closing time varies, but generally takes a day or two.
A final inspection ensures repairs and agreed items are intact. Settlement by a title/escrow firm is common; they disburse funds and give you keys.
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