|
|
 |
|
 |
||
|
|
|
|
|
|
||
Understanding Mortgage Points
When a mortgage broker asks a borrower to pay points, he or she is asking for a lending fee expressed as a percentage of the value of the loan. For example, two points on a deal worth $100,000 works out to $2,000.
Sometimes, a lender may require the borrower to pay origination points on a mortgage. This fee allows the lender to recover many of their costs sooner in the deal rather than waiting to recoup them as part of interest payments. Many lenders use origination points to advertise lower interest rates to potential home buyers. Though their interest margin is thinner, these institutions improve their cash flow by pulling in these profits on the front end of the loan.
Along the same lines, a lender may offer a borrower the chance to pay discount points to qualify for a greatly reduced interest rate on a new mortgage. In these deals, the customer can pay an extra percentage point or two of the loans value as an upfront investment. In return, the lender agrees to knock the interest rate down by a quarter of a percent or more. Though the borrower surrenders more cash at closing, they enjoy tremendous savings over the life of the loan.
In this hyper-competitive, internet-fueled mortgage market, a handful of innovative lenders have experimented with rebate points. They work very much like discount points, but in reverse. Cash-poor borrowers who want to purchase a home with little or no money down can receive a rebate of a percentage of the homes value. In exchange, they agree to accept a higher interest rate or a prepayment penalty. Though these deals work against the customers long-term interests, they provide a valid solution for many prospective home buyers without the liquid capital needed to close the deal on a conventional mortgage.
Whenever dealing with points, borrowers should weigh all their available options to understand the best long-term deal for their situation. Home buyers with the ability to afford a large down payment and closing costs will usually benefit from paying discount points. Customers with spotty credit histories may have to lump origination points to a lender thats willing to run a manual underwriting review on their case.
Tips for Getting Home Loans from the Right Lenders
Getting home loans is possibly the biggest step in an adult?s life. It?s up there with having kids, landing that big job, starting your own business. Actually, the whole point of those big three landmarks is so you can be able to afford your piece of the American Dream.
But you don?t want that dream to turn into a nightmare. Ask around. For many people, buying a house can turn into one of worst mistakes in their life. It?s not because their home was a bad idea. More than likely, they signed up for a faulty mortgage. To avoid making the same mistake, follow these steps to signing the right mortgage for you.
First off, home loans come in fixed rates or variable rates. A fixed rate mortgage makes perfect sense at a time such as right now, when the interest rates are so dramatically low. You can buy a house that?s worth much more than you could normally afford. However, just because your lender says it?s a fixed rate mortgage, don?t take him on his word. Be sure to get that rate, and the fixed status, on paper.
The benefit of a rate lock can be explained further by describing exactly how the investment works. First, in a locked interest rate, the lender guarantees a loan at that rate for exchange for payments and fees handed over by the buyer at certain points. The buyer and the lender work their best to close the house before the specified date. Otherwise, the mortgage expires without going into effect.
These locks usually last for one to two months. You?ll typically have to pay more for a longer lasting lock. That makes sense, considering that the lock is like taking out insurance on the low rate that you want. Even if the interest rates go up in that month or two, the lock ensures you will have your agreed upon, lower rate. The lender looks at it as insurance, too, that you will borrow the money that you agreed to.
Of course, the trickiest part of these home loans is deciding when to lock. The decision, part intuitive guesswork and part research, comes down to weighing when you will need to pay the lock, how long your mortgage will be, and your guestimate of where rates are going.
Home Buying - What Can You Afford?
Okay, you?ve decided to buy a home and are trying to figure out what you can afford. Before you go home buying, you need to carefully consider what you can afford as far as a mortgage payment.
Mortgage Payments
The first step you should take in determining what you can afford is to talk to a mortgage lender. In fact, the best step you can take is to go through the loan process to the extent required to get a pre-qualification letter. A pre-qualification letter tells you and a seller how big of a home loan the lender will give you.
So, once you have the loan in hand, that must be the amount you can afford? The answer is maybe or maybe not. The prequalification letter is based on a number of factors such as your earnings and credit. It is not based on a picture of your life, which can lead to problems.
Other Expenses
There is nothing worse than buying a home and straining to make the monthly mortgage payments. This situation occurs when a homebuyer relies solely on the pre-qualification letter or their own wishful thinking. You may have purchased your dream home, but don?t let the payments be a nightmare.
In determining how much you can afford to expend on a home purchase, you must consider your overall financial situation. Although you may be in a decent financial situation at the moment, do you have future expenses that will put pressure on your finances? Such situations might include:
1. Planning to have kids in the next year or so?
2. Are your current children going to college soon?
3. If you own a business, is the financial outlook stable?
4. If you work for a company, are you reasonably sure the company is headed in the right direction?
5. Do you have any concerns regarding the dreaded downsizing?
6. If you are the sole bread winner, what would happen if you were unable to work for a few months because of health issues?
These general questions are intended to wake you up to the possibility of over extending yourself on a mortgage. Every situation is different, so make sure you take a careful look at your life to make sure you are committing to a loan you can afford now and in the future.
 |
©Copyright
InsideTheWeb.All Rights Reserved.
|
 |
|
|
||
 |
Designed by kohj |
 |