Tag: home loan

What to Know About Mortgage Points

You often hear mortgage companies and real estate agents discuss “Mortgage Points,” but what are they?

You may hear your mortgage lender utter the words “mortgage points” a few times while going over your loan. You merely nod pretending to know what they are in an effort not to appear dumb. This is a bad strategy when considering something as important as your mortgage–a contract that will be with you for 30-odd years. So, when trying to find out how much your mortgage will cost, what do these points mean and can you use them to your advantage?

What is a “point”?

A point is a fee that is equal to 1 percent of the loan amount. A 30-year, $150,000 mortgage might have a rate of 7 percent but come with a charge of 1 point (or $1,500). A lender may also charge 1, 2, or even more points. These points come split into two branches: discount and origination points.

Discount Points. These points translate to prepaid interest on the loan. The more points you pay, the lower your interest rate will be, and vice versa. You can pay anywhere from 0 to 4 points, depending on how much you want to lower your rates.

Origination Points. These are points charged by the lender to cover the costs of making the loan. Like a service fee when you buy event tickets: you don’t understand why, and there’s not much you can do about it. Luckily, these are tax deductible if you use them for mortgage purposes and not for any other closing costs.

These knowledge points you just earned will help you when it comes to the mortgage points you will inevitably come across. Contact  Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

Which Mortgage Is Right for You?

Mortgages come in many shapes and sizes, meaning that there is one that right for you.

A mortgage is something that is going to be with you for a significant portion of your life–30 years, on average. With the many mortgages that exist in the world, it’s important that you choose the one that will work best for you, instead of having one that will put you into a financial catastrophe! Here are the three kinds of home loans that you should be aware of before you go mortgage shopping.

Types of Loans

  1. Conventional Loans

Conventional mortgages are ideal for the hopeful homeowner with good or excellent credit. They’re relatively standard and follow conservative guidelines for credit scores, minimum down payments, and your debt-to-income ratio (the percentage of monthly income that is spent paying all debts).

  1. VA Loans

VA Loans are for active-duty military and veterans that qualify for Veterans Affairs mortgages. Spouses of a military member who sacrificed their life for our freedom on active duty or as a result of a service-connected disability may also qualify. No down payment is required with this kind of mortgage. The VA does not lend money but guarantees loans made by private lenders.

  1. FHA Loans

Federal Housing Administration mortgages were created for people whose house payment will be a big chunk of their “take home” pay, hopeful homeowners with low credit scores, and homebuyers with little down payments to offer. FHA loans allow the borrowers to spend up to 56 to 57 percent of their monthly income on monthly debt obligations.

It’s important to know about mortgage types, as it will be with you, potentially, for the next thirty years! Contact  Dean Rathbun when it comes time to determining the perfect plan of action to buy your home. We are happy to help you.

3 (More) Questions to ask Your Mortgage Lender

A little research to compare your options for a mortgage, and a few questions in your artillery, will help you get the best one when you work with your mortgage lender.

Previously, we wrote about three questions to ask your mortgage lender before you secure your mortgage–we now have three more questions you should ask to give you even more knowledge and help to secure the best mortgage that you can get. When you are ready to get the best potential mortgage, here are three (more) questions you should ask your mortgage lender.

  1. What are the closing costs that go with this loan? Closing costs usually fall between 2 and 5 percent of the total loan. This range, when factored in with hundreds of thousands or millions of dollars, is big enough to make this question an important one.
  2. Is it an adjustable-rate or fixed-rate mortgage? An adjustable-rate mortgage locks your mortgage for a specific amount of time, and at the end may increase your monthly mortgage rate. A fixed mortgage keeps your interest rates and mortgage payment locked for the duration of the loan but is a bit more expensive than the adjustable-rate mortgage.
  3. What is the down payment that’s required? There exist many kinds of loan types, and not all of them require the same down payment. Make sure to ask what your down payment will be–if it’s less than 20 percent, ask if attaching private mortgage insurance (PMI) will be an additional requirement.

It’s best to put your pride aside and ask as many questions as you possibly can when it comes to something as vital to your life as your mortgage. This thing is going to be with you, potentially, for the next thirty years! Contact  Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.