Rates & Terms
When you start shopping for a loan, you’ll also start looking at interest rates. The interest rates, terms and fees of a mortgage will be based on your qualifications as a borrower and on the current lending market. Keep in mind that finding the right loan is not just about finding the lowest interest rate possible. Mortgage institutions offer loans of varying terms – typically 30, 20, or 15 years. Shorter terms can save more over the life of the loan if you can afford a higher monthly payment. You’ll want to get a complete picture and break down of what a given offer means to you on a monthly basis as well as how much money you’ll be spending over the life of the loan.
What you're approved for and what you want to pay per month may be drastically different. You and your lender should be the same page in terms of what you would like to keep your monthly payment at
Costs & Fees
Most loans have fees in addition to the total amount you are borrowing to finance your home. Some fees are paid up front, and others are not due until closing. Fees will vary depending on the specific loan and your situation.
Discount Points
The lender can charge you points on your mortgage. One point equals 1 percent of the loan amount. These are simply fees paid to the lender or broker that are often linked to the interest rate, and are usually paid in cash to the lender or broker at closing. A lender may offer you a lower interest rate, but charge more points, so it’s important to compare offers.
Loan Origination Fees
The institution that actually loans you the money will generally charge an origination fee for processing the loan. They are often expressed as a percentage of the loan amount.
Underwriting Fees
Certain lenders will charge a fee to investigate your creditworthiness and determine if you are likely to repay your loan.
Transaction/Settlement/Closing Costs
These fees lump together several charges for application fees, title examination, abstract of title, title insurance, property surgery fees, deed preparing fees, other mortgage fees and settlement documents, recording fees, notary fees, appraisal fees and/or credit report fees.
