Mortgage basics: Understanding rates, fees, and points

Purchasing a home might be a daunting task for every home buyer. Buying a home is the biggest investment for most people and knowing how to properly go about it is essential. Aside from determining the kind of mortgage you are getting, you need to understand the costs that comes with it. You will pay these costs upon closing the deal:

Purchase points

Purchases points are also called discount points or buy down points and this is the fee that you are willing to give up front so you can lower your interest rates. Each point represents 1% of your loan amount. Example, you have a $100,000 loan, one point will then be equal to $1,000. Purchase more points, the lower your interest rate.

Interest rate

When you get into a mortgage, you will have to deal with interest rates. This is the interest rate that will be charged to you by the lender for loaning you their money. This is a big factor on what your monthly payments will be. The higher your mortgage’s interest rate is, the higher your payment will be every month.

Fees

There are several fees that you need to deal with when you get a mortgage. These fees will be the cost to cover for underwriting the loan and processing it. The fees will also cover for appraisals, land survey, or checking the title of the home among other things.