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Mortgage
Information - Refinancing? Second Mortgage? Home Equity Loan?
Understand The Basics
By: Carrie Reeder
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 wouldn’t it make things easier if you felt
that you had a “handle” on the process—or 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. It’s 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 assured—for about 60
days—that 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 aren’t 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.
There are also many mortgage companies online that
can help you find direct mortgage lenders and home loan brokers that
will best suit your needs. This is a quick way to find a good mortgage
loan and compare rates and offers from multiple lenders. When lenders
compete for your business, it works to your advantage.
About the author: To see a list of recommended
mortgage loan companies online, visit this page:
http://www.abcloanguide.com/mortgageloans.shtml - Carrie Reeder is the
owner of ABC Loan Guide, an informational website with articles and
more about various types of loans.
Article Source: www.isnare.com |
