Mortgage Loan Points

mortgage loan pointsAmong the decisions a home buyer must make before taking on a mortgage loan are the advantages or disadvantages regarding the paying of points. Beyond the loan term, loan amount, and mortgage interest rate, points play an important part in financing a home as well as affecting the final monthly payment amount. Points are lender-charged fees applied as a condition of loan approval, or allowing more acceptable loan terms. Some lenders apply points as part of closing costs, while others are applied to the loan principle. They are a revenue source for the lender beyond what is earned through the applied interest rate charges.

Discount Points versus Origination Fees
While most lenders assess a loan with one or two points or more, and some with none at all, they can certainly add to the cost of acquiring a loan if applied. Each point represents 1% of the total loan amount, so a single point added to a $200,000 mortgage would yield an additional $2,000 to the cost. The points are structured in one of two ways – discount points or origination fees. The discount type are tax-deductible points applied based on the interest rate, and paid upon loan approval, and will increase if mortgage interest rates decline. Origination points, on the other hand, are charged during the loan closing process, or in advance, are not tax-deductible, and are fees applied to the loan as a lender-charged expense for the loan approval. Your loan term has no bearing on the amount of points charged. So a 30 year mortgage could have the same amount of points as a 15 year mortgage.

Front End or Back End Benefits
mortgage benefitsThe points determine how a particular mortgage loan is structured. The differences come into play when a borrower has little money available toward closing costs, and would opt for a higher interest rate, versus a borrower who is better able to absorb the upfront expense of the discount points. Conversely, if a borrower must maintain a certain monthly payment amount, they can opt for more points in exchange for a lower interest rate to lower the monthly payment. In essence, paying the upfront points fee at closing would reduce the overall pay-out over the life of the loan.

Compare Mortgage Rates to Find the Best Deal

content_guides_buying_mortgage_adviceObviously, the most important part of finding a mortgage is determining the best mortgage rate. This involves two main things, each of which will be outlined in today’s article. By understanding the importance of each of these things, borrowers will effectively be able to compare mortgage rates and, in so doing, get the best possible loan.

Compare mortgage rates from the past to the present
One of the most important parts of picking a good mortgage rate is understanding how the current rate compares to past rates. If the rate has dipped by several percentage points over the last few years, could it fall any further? Or is it already on an upswing? If you can accurately answer these questions, you can ensure that the rate you eventually choose will be at the lowest possible percentage.

Obviously, analyzing the future trajectory of mortgage rates is difficult if you have no economic background. In fact, even those who do have extensive training in the subject are not always right. For that reason, it’s important to get a wide range of opinions from a number of different sources in order to get a general consensus of how to compare mortgage rates from the past to the present.

If you were to compare mortgage rates today with those in the past, you would find that many term-lengths are at an all-time low, meaning that there has never been a better time to buy for many lenders. Of course, mortgage rates are in a constant state of flux, and they could still become lower as the economy continues to sink. By monitoring information and analysis like this, you should be able to time the market much more effectively.

Compare mortgage rates from different banks
The other major factors that you need to look at are the rates that different banks are offering. Each bank has its own unique pros and cons, and by comparing their different interest rates, you can get a better idea of which lender offers the best solution to your home financing needs. One of the most straightforward ways of doing this is to go around to each bank’s website and look at their individual mortgage rates for the various terms.

However, there is an easier way. Certain websites have made it their duty to keep consumers updated on the best possible interest rates. To do this, they compare mortgage interest rates from a number of popular banks, and allow you to view a side-by-side comparison to determine which lender offers the best rates for the term you are interested in.

Usually, the mortgage rates for these banks are very similar. However, the difference of a few bank ratestenths of a percentage point can add up over time, and could eventually force you into paying thousands of dollars in unnecessary interest money. This is why comparing mortgage rates are so important: by getting a better idea of the options available, borrowers can pick and choose the one that gives them the best rate. In turn, these forces lenders to offer more competitive rates, as consumers can easily go to the bank that offers the most competitive rate.

If you can understand and utilize both of the objectives listed above, then you will be much better equipped to find the perfect mortgage rate. Put simply, in order to compare mortgage rates effectively, you need a combination of education and professional opinion about the past, current, and future trends of interest rates from all sorts of different banks.

Today’s Mortgage Rates – Take Advantage Now!

today's mortgage ratesWhether you’re a prospective first-time homeowner, or simply looking for another property to buy, you need to be aware of today’s mortgage rates. With rates changing every day, the dangers of being locked into a bad mortgage rate are serious, and could cause you to lose thousands of dollars down the road. So what can you do to prevent this from happening to you? Well, first of all, let’s learn a little bit more about today’s mortgage rates.

A mortgage rate is the price of interest that borrowers pay off of their principal amount. These rates are set by various banks, each of which is competing with one another for the attention of the consumers. This competition is one of the mechanisms of capitalism that helps keep mortgage rates relatively low.

However, where do the banks get their rates from? Well, in the United States, today’s changing mortgage rates based on the price of Mortgage Backed Securities (MBS). The greater the demand for MBS is, the lower the rate of interest is for home mortgages. Demand for MBS is created by investors, who often try to buy MBS when the stock market is down, or sell it when inflation is high. By paying careful attention to these trends in the marketplace, borrowers can determine when the best time is to take out a mortgage.

Why Do Mortgage Rates Matter?

Well, with a mortgage, borrowers lock into a set rate for a specific period of time. If you lock into a longer term, then you effectively shield yourself from any short-term market volatility. However, the flip side of that coin is that you also prevent yourself from capitalizing on any potential gains. For example, if you’re locked into a five year mortgage term, and mortgage rates gradually go down by a couple percentage points over the next two years, then you are paying thousands of dollars more than you should for the remaining three years of that mortgage.

Meanwhile, somebody who has locked into a shorter, two year mortgage term can refinance after the term is up in order to take advantage of those lower interest rates. In that sense, taking out a mortgage can be likened to high-stakes gambling: with thousands of dollars at stake, should you choose short-term risk now with a chance to minimize your interest in the future? Or should you lock into a long-term mortgage at a slightly higher rate in order to avoid market volatility?

There is a huge debate in the mortgage community about this very topic and, essentially, there is no right answer. Today’s mortgage rates are in a constant state of flux, and nobody knows for sure in which direction they are going. While today’s economic situation may prevent much up or down movement over the next two years, what will happen four or five years from now?

Check-Online-For-Mortgage-RatesOnly time can tell, which means that you should mainly focus on the mortgage rates today. In order to compare today’s mortgage rates, check online for independent mortgage rate charts, which will highlight the lowest and highest interest rates in the country, as well as the lender’s currents rates on variable or long-term mortgages. This will allow you to choose the best mortgage rate for you right now. After that, whether you choose a variable or fixed-rate mortgage is entirely up to you.

Improve Your FICO Credit Score

improve-credit-scoreBefore you apply for a mortgage, you must ensure that your credit score is in the best shape possible. Banks are simply not lending money to people with below “Grade A” credit scores. Here are a few tips to help you increase that score. Remember to take it slow and easy. It takes time to repair your credit and there are no magic bullet fixes. You must manage and take care of your credit over time. If you follow a plan and make good decisions, you can increase you credit score and be eligible for a mortgage loan that will ensure you get that dream home you have been searching for.

  1. Get a free copy of your credit report – The first step to fixing bad credit is to find out exactly where you stand. Get a copy of your report and scan it for errors or discrepancies that can be fixed.
  2. Setup automatic bill pay or payment reminders – Paying your bills consistently, on time is one of the biggest factors affecting your FICO score.
  3. Eliminate unwanted debt immediately – having no debt on your credit report will make you look responsible to lenders. It’s a tough job, but you need to eliminate credit card debt as best a possible.

Some quick tidbits you should know:

  1. Always get current on missed payments first
  2. Paying of a collection debt will not remove it from your report
  3. If you are having trouble, see a credit counselor and make a plan
  4. Always keep credit card balances as close to $0.00 as possible
  5. Pay off debt when possible, rather than moving from card to card
  6. Don’t close unused cards and don’t open new cards to try and manipulate your score
  7. You can check your own credit without fear it will hurt your score as long as you order directly from the credit agencies and not through a 3rd party
  8. Use your credit cards as much as possible while still being able to pay them offfix credit

Fixing your credit is much like losing weight. You have to find out where you are, make a plan to get where you want to be and then diligently stick to that plan. If you fix the errors and then follow good credit guidelines you will improve your score and be able to get a mortgage on that dream home you have been hoping for.

Take Advantage of Today’s Historically Low Rates

mortgage-ratesToday’s mortgage rates continue to hover at all time record lows and this along with government incentives has made a refinance mortgage more financially attractive than any other time in history. Currently the interest rate on a 30 yr fixed mortgage is 4.28%. Generally, anywhere around the 4% interest mark is a great deal. Not every one should be refinancing for this reason alone however there are several factors that make refinancing at today’s mortgage rates a prudent financial decision for many homeowners.

How do you know if now’s the time to pull the trigger on a refinance mortgage? Start by finding out what your current loan balance is, relative to the value of your home. If it’s 80 percent or less, you have lots of options. If it’s between 80 percent and 105 percent, you’ll have to see if you qualify for a Home Affordable Refinance Program which was recently passed by our government in an attempt to help people better manage their loans. If it’s more than 105 percent, you’d have to pay down your mortgage balance with cash to refinance. That may not be a bad idea, depending on your financial situation-but talk with a mortgage loan adviser before proceeding.

is refinance mortgage a wise financial decisionThe next thing to determine is how long you plan on staying in your existing home. Because refinance mortgages come with closing costs, you don’t start saving money on that lower payment until you’ve repaid the upfront costs of the loan. Also, when estimating closing costs, remember to account for any prepayment penalties on your existing mortgage. A mortgage loan officer will analyze your current mortgage and give you a cost benefit analysis so you are able to fully evaluate whether a refinance mortgage is a wise financial decision.

If you want to take advantage of the lowest mortgage rates in history and refinance your mortgage then it would behoove you to get several quotes from various lenders so you are able to compare lenders and go with the one you feel most comfortable with. The most efficient way to receive multiple quotes is to fill out an online application through a website that is affiliated with several top lenders. This requires filling out only one application and you are then matched with 3-4 lenders who are licensed in your area. The mortgage professionals will then help you further explore whether or not refinancing at today’s mortgage rates is a wise financial decision for your situation.