A mortgage is usually the biggest purchase that an individual makes, and because of that, many people tend to get nervous during the process. But wouldnt it make things easier if you felt that you had a handle on the processor at least the terminology? After all, in order to get the best deal on your mortgage loan, you will need to understand certain things such as points, interest rates and closing costs. If you feel like you could stand to brush up on your mortgage loan terminology, why not read the following common terms and their definitions? Points A point is amount that a borrower will pay in order to reduce the interest rate on their mortgage. One point is generally equal to 1% of the loan amount. For example, if you were taking out a 100,000 mortgage, and wanted lower interest rates, you might have to pay anywhere from 1-3 points (or $1,000-3,000 dollars) to get that rate. Its important to note that some lenders will advertise very low interest rates, and only when you read the fine print will you learn that you will have to pay points in order to get them. Interest Rates When a lender makes a loan, they make money by charging interest on that loan. With a mortgage loan, all of that interest is front-loaded, which means that for the first few years, every payment that you will make will go mostly toward the interest. When applying for a mortgage, you will have the option of locking-in, or floating your interest rate. If you choose to lock-in your rate, then you will be assuredfor about 60 daysthat when you close it will be at that rate. However, if it appears that interest rates will go lower, you can choose to float the interest rate, which means that you can watch the rates carefully, and then lock it in whenever it reaches an amount that you are comfortable with. Closing Costs When you go to close on your home at the title company, both the buyer and seller will have to pay a pre-determined amount of closing costs. These are determined by the type of loan you get, and the area where you live. Your lender is required by law to inform you of any closing costs beforehand, so be sure to ask for your truth in lending estimate. As you can see, mortgage terms arent that mysterious! Do some research or read some more articles on this site to become familiar with the lending terms that you need to know. Look for mortgage companies that will provide you offers from more than one lender. That way, you can get competitive offers. To view our list of these recommended online mortgage companies, visit this page: Recommended Online Home Mortgage Lenders. |
