Mortgage Rates And Fees

One of the most confusing aspects of obtaining a mortgage loan is reading all the paperwork and not understanding the language used. While its important to understand what is being read you only need to be familiar with the most important vocabulary to help you make a money saving decision.

Interest Rate Lock

It may not be obvious but mortgage interest rates do fluctuate on a daily basis some times multiple times each day. That being said it would be a rude awakening to find out that the house you thought was $1800 per month now will set you back $2100. In order to prevent this you can lock your rate with your lender from 2 week to as much as 90 days with some banks. By locking your rate you are protected from sudden increases. The down side is that if rates drop significantly your bank will not reduce your rate. A mortgage broker is a better choice because they can easily submit your loan to a new lender with a lower rate in case this occurs.

Points

Points are used to let you know that in addition to fixed mortgage costs you can pay additional points to buy a lower interest rate. A point represents 1% of the loan amount so 2 points on a $100,000 loan is exactly $2000. Many loans are available with no points and no fees. You should pay points if you feel that the added expense will pay back with lower interest going to the lender. On a side by side comparison of total overall payments a loan with a point rate buydown will cost you less interest.

Closing Costs

Its important to understand there are many more closing costs involved these include:

• Title Insurance
• Escrow
• Appraisal
• Title Report
• Underwriting
• Processing