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| Mortgage Rates - Lock your Rate or Not |
| Mortgage rates are in an upward trend now, so rate locks are increasingly important. You take a risk if you apply for a loan and decide to float --
to not lock in a rate. Basically, a rate lock is a legal commitment between the borrower and the lender. The
borrower promises to pay certain points and fees. The lender promises to lend at a specified interest rate. Locks typically last for 30, 45, 60 or more days. The longer you lock, the more likely
you'll have to pay a fee for the privilege. Get your rate lock in writing, in the form of a loan commitment from the lender. |
| Short vs. Long Term Financing |
| By opting for a shorter term, you can save thousands of dollars in interest – not only because you’ll be paying off the loan sooner, but
lenders generally offer better interest rates on shorter-term loans. Even though your payment will be more each month, it may not be as much as you may think. As an example, on a $100,000
loan at 8.5% interest, you can save approx $100,000 in interest by having a 15 year loan vs a 30 year loan. By doing so, your payment only increases from approx $750 to $950. |
| About Points |
| Points, also known as Discount Points, are a source of confusion for many home loan borrowers. When shopping for a loan, you have many
options with respect to paying points. A point is calculated as a percentage of the loan amount. For example, 1 point charged for a $100,000 loan would be $1000, and ˝ point for the same
loan would be $500. Although points are part of your closing costs, they are not considered loan fees. They are an optional feature of the loan that enable the borrower to buy the interest
rate up or down. |
| Down Payment & Closing Costs |
| Depending on your credit and the loan amount, you may be able to get a home with 0% down. However, the more you put down, the lower your
monthly payment will be. And if you can provide a 20% down payment, you’ll avoid the extra monthly cost of Private Mortgage Insurance (PMI). Closing costs generally add 1% to 2% to the
final bill. You’ll be asked to provide the down payment and closing costs in the form of a cashier’s check at closing. |
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