What Do I Need To Know About Rates

As you probably know the rate is referring to the interest rate. It is the current interest rate that will be one of the determining factors in your monthly payment of your new home. These rates change on a daily basis. So when asking your lender or broker for a list of its current mortgage interest rates also ask whether the rates being quoted are the lowest rate for that day or for the week. Ask the lender or broker whether the quoted rate is for a fixed or an adjustable rate mortgage. If the rate quoted is for an adjustable rate loan, ask how your rate and your loan payment will vary. Make sure you ask whether your loan payment will go down when the rates are lower. Ask about the loan's annual percentage rate. The annual percentage rate takes into account the interest rate along with the points, broker fees, and certain other credit charges that you may be required to pay.

The rates of an adjustable rate mortgage are made up of two parts the index and the margin. The index is the average of usual interest rates and the margin is an extra amount that the lender adds. If the index moves up so does your interest rate in most circumstances, and you will probably have to make higher monthly payments. If the index goes down your monthly payment may not go down.

Points are fees the borrower pays the lender at the time the loan is closed. The more points you pay the lower the interest rate. Most borrowers are aware that they can reduce or eliminate private mortgage insurance if they increase their down payment, but not many know that by paying points to reduce their interest rate is a better deal in most situations. Both the increase of the down payment and the increase of paying points are an investment. The borrower has to layout cash up front. However the larger down payment will lower the monthly payments because of the smaller loan and mortgage insurance premiums. With points the monthly payments are lower because of a lower interest rate. Which in the long run is a better deal for the borrower intent on staying in the home for several years.

Settlement fees are one of the most confusing and irritating features of home mortgage. There are many different types of fees involved, and can vary from lender to lender. How to deal with them is the irritating part of the transaction. Lender fees should be the shopper's main focus. The lender fee consists of the points and dollar fees. Dollar fees are those specified in dollars. The most common of these fees are processing fees, tax service, flood certification, underwriting, wire transfer, document preparation, courier, and lender inspection. All that matters about these fees is the sum total. Shoppers will take note of the points in selecting the lender, but the dollar fees and origination fees are forgotten. As a shopper you are better off if you find out up front all the settlement costs including a lender charge up front rather than waiting until you receive a Good Faith Estimate.

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