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First Time Home Buyer
Refinance Your Mortgage
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Closing Costs and Other Fees
Even if you're a first time home buyer, we're sure you have heard of closing costs before. Any time that you get a mortgage there will be closing costs and fees associated with the transaction. It's our job to help you understand what those fees mean so that you aren't surprised at the closing tables.
Even if you're a first time home buyer, we're sure you have heard of closing costs before. Any time that you get a mortgage there will be closing costs and fees associated with the transaction. It's our job to help you understand what those fees mean so that you aren't surprised at the closing tables.
Discount Points
Discount points are an up front fee that is paid to the lender at the time of closing to lower your interest rate over the term of your loan. A very common misconception made is that one point will lower your interest rate by one percent. Unfortunately this is not how it works. Each point is equal to 1% of your total loan amount but will typically only lower your interest rate a .25 of a percent. This may not seem like much but if you're planning on staying in your home for a few years it won't be long before you recoup the points and start saving money on your monthly payment.
Below is an example of how you can save money by lowering your interest rate with one point.
Loan without a one point buydown:
Discount points are an up front fee that is paid to the lender at the time of closing to lower your interest rate over the term of your loan. A very common misconception made is that one point will lower your interest rate by one percent. Unfortunately this is not how it works. Each point is equal to 1% of your total loan amount but will typically only lower your interest rate a .25 of a percent. This may not seem like much but if you're planning on staying in your home for a few years it won't be long before you recoup the points and start saving money on your monthly payment.
Below is an example of how you can save money by lowering your interest rate with one point.
Loan without a one point buydown:
- $100,000 loan amount
- 5.25% interest rate
- 0 points
- $552.20 monthly principal and interest payment.
- $100,000 loan amount
- 5.00% interest rate (interest rate is lower due to paying a point to reduce the rate)
- 1 point - up front fee of $1,000 (1% of the loan amount)
- $536.82 monthly principal and interest payment.
- $15.38 monthly savings from mortgage payment
- $1,015.08 savings on your 66th mortgage payment
- $5,536.80 total savings over 360 payments or 30 years.
Interest Rate
When you get a mortgage, you will be charged an interest rate. Think of this the same way as you would a credit card. Whenever you buy something with your credit card you are using the creditor's money. Then at the end of the month you receive a bill from the credit card company. In your bill they charge you interest on top of what you owe. The interest they charge you is based on your interest rate. For as long as you hold a balance they will continue to charge you interest every month. Once you payoff you balance they can no longer charge you interest. Same goes for your mortgage. The interest that you pay is the lenders charge for the money you borrowed to buy your home.
Mortgage rates are constantly changing. They can change daily or even sometimes hourly. When you speak to a lender and are quoted a specific interest rate, don't just assume that you can come back in the next day or so and get that same rate. It might cost a point now where it didn't cost anything the day before. The only way to secure that interest rate is by locking with the lender at the time you are quoted that rate with a signed purchase agreement. Locking in your rate will guarantee you get your loan with that particular interest rate. We allow you to lock in for 30, 45, and 60 day periods. Unfortunately the longer your lock period the more expensive the interest rate will be.
When you get a mortgage, you will be charged an interest rate. Think of this the same way as you would a credit card. Whenever you buy something with your credit card you are using the creditor's money. Then at the end of the month you receive a bill from the credit card company. In your bill they charge you interest on top of what you owe. The interest they charge you is based on your interest rate. For as long as you hold a balance they will continue to charge you interest every month. Once you payoff you balance they can no longer charge you interest. Same goes for your mortgage. The interest that you pay is the lenders charge for the money you borrowed to buy your home.
Mortgage rates are constantly changing. They can change daily or even sometimes hourly. When you speak to a lender and are quoted a specific interest rate, don't just assume that you can come back in the next day or so and get that same rate. It might cost a point now where it didn't cost anything the day before. The only way to secure that interest rate is by locking with the lender at the time you are quoted that rate with a signed purchase agreement. Locking in your rate will guarantee you get your loan with that particular interest rate. We allow you to lock in for 30, 45, and 60 day periods. Unfortunately the longer your lock period the more expensive the interest rate will be.
Other Fees
When you are getting a mortgage, there are typically other fees involved outside of the discount points. These fees cover things like the cost of processing, underwriting, ensuring the title of to the home is free and clear, a land survey, and an appraisal which gives you the estimated value of the property and is required by the lender to close on your loan.
You always want to make sure that there are no hidden fees, and ask your lender lots of questions so that you understand all the costs involved with getting your mortgage.
When you are getting a mortgage, there are typically other fees involved outside of the discount points. These fees cover things like the cost of processing, underwriting, ensuring the title of to the home is free and clear, a land survey, and an appraisal which gives you the estimated value of the property and is required by the lender to close on your loan.
You always want to make sure that there are no hidden fees, and ask your lender lots of questions so that you understand all the costs involved with getting your mortgage.
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