The Cost of Your Mortgage Loan The same care and consideration you give to finding the right house should be applied to your search for the right mortgage lender. For most home-buyers a major determining factor in selecting a lender is the cost of the mortgage loan. But how do you determine the cost of a mortgage loan? Shopping for a Mortgage Loan
While most buyers concentrate on interest rates, its best to look at all the costs associated with a mortgage loan. Mortgage loans include the quoted interest rate, points and closing costs. More than Just Interest
A number of fees are associated with the mortgage loan, including: - Appraisal - A carefully documented opinion of value by a licensed, professional appraiser.
- Credit Report - A detailed report of your credit, employment and residence history prepared by a credit bureau.
- Principal - The amount owed on a mortgage which does not include interest or other fees.
- Document Fees, Loan Fees and Processing Fees - Miscellaneous fees charged by the lender.
- Discount Points - Points paid in addition to the loan origination fee to get a lower interest rate. (1 point = 1 percent of loan amount)
- Origination Points - the total number of points paid by the borrower at closing. (1 point = 1 percent of loan amount)
- Interest Rate - A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.
Using the Annual Percentage Rate (APR) to Compare Mortgage Loans
The APR was designed to help borrowers understand the relative costs of a mortgage loan. The APR takes into account the various fees associated with the loan, which is why it's often higher than the interest rate. Understand that not all lenders calculate a loans APR in the same way. That's why this should be only one of the factors used in selecting the best mortgage for you. Learn more about shopping for a mortgage loan by visiting my website at http://www.dallaschambers.com. If you have any questions, please don't hesitate to call. Dallas Chambers
Re/Max Greater Atlanta
1878 Piedmont Road
Atlanta, GA 30324
770-595-1541
dallasc@remax.net
http://www.dallaschambers.com
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Dallas, well said, "More than Just Interest"! I tell people all the time if they start shopping for a mortgage based on only the rate or only the closing costs they are ripe for the picking! Great post - not that it's a part of the cost but the term is also VERY important when shopping for a loan. And, much more important that the interest rate is the Annual Percentage Rate (APR).