Home Financing
So you are ready to make the leap from renting to owning. Shopping for your first home can be both exciting and stressful. Building your future means taking a good look at your financial situation and finding out exactly where you stand. There are also whole new sets of terms and rules that apply to home financing that need to be learned.
One idea you will hear over and over again in terms of home financing is buying points. A point is a loan fee equal to one percent of the total loan amount. There are actually two types of points to be aware of. These points equal the same amount but have different meanings to you as a buyer. They are discount points and origination points.
There are a variety of fees attached to mortgages. In addition to processing and application fees, you may also be charged an origination fee for any additional work your lender did while preparing your mortgage. Sometimes this is charged as a flat rate fee, but it can also come in the form of points, or a percentage of your mortgage. These are called origination points.
The types of points that can be beneficial to a buyer are discount points. Discount points are loan fees you pay to lower the interest rate on your home financing loan. They essentially help you buy down your interest rate. These points are usually paid at the closing and can save borrowers a lot on interest payments over the life of the loan. While buyers are the ones who generally pay for points, sellers will sometimes pay a point or two to reduce closing costs. Origination fees can also sometimes be waived if a higher interest payment is accepted.
To learn more about points and other terms commonly used in the mortgage industry, check out EZ Loan Apply's educational resources. You'll find a glossary, answers to frequently asked questions and many other sources of information that can help you learn more about buying a home and finding the right mortgage. |
