There are a number of mortgage lenders advertising loans with “no closing costs.” These lenders brag that the mortgage comes with no closing costs, up-front points, appraisal fees, title insurance, or origination fees. If you sign up for this mortgage you pay nothing out of pocket at closing; sounds like a great deal, right?
On the surface, this does sound like a great mortgage deal. It’s what the lender isn’t telling you that make these loans and the mortgage lenders that tout them sleazy.
If you were to go out and finance your home with a traditional 30 year, fixed interest rate mortgage the average closing costs would run you between $2,000 and $3,000. This doesn’t include any points you may be required to pay at closing.
No closing costs mortgages are simply a way for the mortgage lender to disguise the fees they are charging you. Lenders do this by marking up the interest rate they are charging you by as much as 1 or 2 percent.
This markup on the interest rate is going to cost you significantly more than the $2,000-$3000 you would pay at closing on a traditional mortgage. If you stay with the mortgage for more than six years, this loan will cost you more than paying the closing costs up front.
In almost every situation it will save you money to pay the closing costs and shop for the most competitive interest rate. To learn more about common mistakes homeowners make when shopping for a mortgage sign up for a free mortgage guidebook.
To get your free mortgage guidebook visit RefiAdvisor.com using the link below.
Tucson Mortgage Refinance
Louie Latour has twenty years of experience in the mortgage industry as a mortgage broker. He is the owner of Mortgages Refinance Advisor, a mortgage help site devoted to saving homeowners money with a free guidebook Mortgage Refinance: What You Need to Know.
Sign up for your free guide today at: http://www.refiadvisor.com
Related Posts
Re-mortgaging - Guide To The Best DealsMortgage Rate Insider - Lessons LearnedMortgages for Dummies: When to Refinance
Posted by Linda- Home and Garden Ideas as Home Financing, Mortages: Mortage Companies and Mortgage Rates at 11:43 AM EDT
No Comments »
Confused About Some Mortgage Terms? Don’t Be! Read On To Get Your Mortgage Questions Answered!
by John R. Blakefield
When applying for your first mortgage, you are going to hear many terms tossed around that are specific to the real estate and financial industry. These terms are not hard, so don’t be concerned. If you are not dealing with financial information and real estate on a daily basis, you may not have learned what all the terms mean. Sure you may have heard them before but were never explained the specifics.
Loan to value ratio- This is a ratio that the lender who is financing your mortgage uses to determine how much he or she can loan you. It is determined by dividing the loan amount by the market value of the home in consideration. The market value is often determined by appraisals that evaluate the property and comparable homes that have sold in the immediate area.
Most lenders will loan up to 80% of the market value of a home. If the lender were to loan more than that, the lender would be risking not being able to recover the loaned funds if the property were to go into foreclosure. However, there are lenders who will loan more than 80% of the market value in exchange for a higher interest rate. You will be paying more in interest in exchange for their increased risk of loaning more money than what would normally be acceptable.
Points - This term refers to interest costs paid to the lender in exchange for a lower interest rate. Points are paid one time and are usually equal to one percent of the loan principal. It is not always a good idea to pay one-time points for a lower interest rate. This is where lenders can make a lot of money, and many times points are not even needed in a deal, and are just a bonus for the lender. Be sure to always do the math for each mortgage option to see what will cost you the least amount of money. Also shop around to see what a comparable contract is so you do not overpay.
Interest rate- The interest rate is a yearly rate that is charged on the principal of the loan amount provided by the lender. The principal accrues interest and you must pay it as an exchange for borrowing the money. Interest rates can be very different depending on the type and terms of a mortgage.
The interest rate charged in exchange for borrowing the money has a base percentage dictated by a national index and then percentages are added to this according to the amount of risk the lender is taking by giving you the money to finance the house. The lender should show you the breakdown of the final interest rate charged so you know why the number is what it is. If the lender does not do that, there could be some shady dealing going on and you should consider going somewhere else. Have all the parts of the interest rate disclosed so you know where your money is going and how you are being charged.
Loan term- This is how long you have to pay back the money borrowed from the lender. Common mortgage terms are 5, 7, 10, 15, 20, 25 and 30 years. The loan term is always negotiable depending on how much you need to borrow, what monthly payments you can make, and the amount of interest you will have to pay.
Debt service coverage- This is a ratio that a lender uses to see the borrower’s (you) ability to pay back the loan in monthly installments. The ratio is found by dividing your net income by debt. Lenders generally look for debt service coverage ratios of 1.2. This ratio compares the amount of debt to your income. The more income you have to cover your total debt, the better. This ratio shows the lender you are capable of paying the mortgage in addition to your other current debt.
Use this information to get educated and make your first time home buying experience a good one! These terms are specific to mortgage characteristics. For more information on other topics regarding first time home buying, check out the resource box where you can find more information that will help you with buying your first home!
John R Blakefield is a mortgage and real estate specialist. For more information, articles, news, tools and valuable resources on home mortgages or investment loans, refinancing, debt solutions, visit this site: http://www.scourtheweb.com/mortgage/.
Related Posts
Rock Band ROCKS!Finding the Best HR Outsourcing CompanyWorkflow 101: The Art Of Automation
Posted by Linda- Home and Garden Ideas as Home Financing at 6:37 PM EST
No Comments »
In many sections of the country the home purchase market has slowed down. Prices of homes for sale seemed to go through the roof. Mortgage interest rates, while still low historically, are up from last year. During this volatile time the homebuyer can choose from a number of options. Fixed rate mortgages give the purchaser of a home a secure way to finance that home. Fixed rate mortgages allow for a more certain base from which to budget house payments for the future.
Recently, much activity in home purchase loans has been in the category of conventional adjustable rate loans. Adjustable rate loans offer some really attractive features. One is a lower entry rate generally than a fixed rate mortgage. There is a designated period of time when the buyer is paying that lower rate. The risk element is that the payment more than likely go up when it starts adjusting. This could really disrupt your budget, since your property taxes and homeowners insurance will be going up also over a period of time. But, the amount of increases could be minimal. The money you save by getting that lower rate up front could result in some real savings. So the real benefit is getting into the house with lower payments thereby affording the new payments.
Read the rest of this entry »
Related Posts
Re-mortgaging - Guide To The Best DealsMortgages for Dummies: When to RefinanceNo Closing Cost Mortgage – The Ugly Truth Could Cost You Thousands
Posted by Linda- Home and Garden Ideas as Home Financing, Mortages: Mortage Companies and Mortgage Rates at 6:11 PM EST
No Comments »
