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Taking The Mystery Out of Financing a Home
Some Simple FAQ's    
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Now that you've determined how much loan you can afford, described your dream home and found it, it's time to take the mystery out of financing.

As you begin to work with a lender, you'll hear many new terms and will be introduced to new procedures. Some of the major concepts and terms you should know are: 

Shopping Rates


When shopping interest rates among lenders it isn't always easy to compare. Interest rates are expressed as:

Loan Type

Interest Rate

 Points

Origination Fee
30 Year Fixed 8.25% 1.25 1.00%
1 Yr. ARM 7.00% 1.00 1.00%


The top line translates to an 8.25% interest rate with 1.25 discount points and 1% origination fee. 

What are Points?

Points can consist of two parts, discount points and loan origination fees: 

Discount Points - Discount points are equal to one percent of the loan amount. 1.25 points is equal to 1.25% of the loan amount. For example: On a $100,000 loan that equals $1,250. If you pay more points it will lower the interest rate. Paying points can be good if you plan on living the home for more than three years and the points may be tax deductable. 

Loan Origination Fees - Origination fees are often expressed as a percentage. A one percent loan origination fee is equal to 1% of the loan amount. 

Some lenders may only tell you about the discount points and loan origination when you ask about closing costs specifically the discount points associated with the interest rate quote. Don't let them get away with it! Get an itemization of the costs to close the loan. The itemization is called a "Good Faith Estimate". 

What is an APR (a.k.a. Annual Percentage Rate)?

The APR combines the interest rate, points and related fees to more accurately reflect what you will be paying. Note: Lenders are required by law to divulge the APR. 

Lock in Your Rate!

Once you have decided to go with a certain lender and one of their loan programs, you should ask them to guarantee the interest rate in writing, at some point in time during the loan process. Make sure that guarantee lasts as long as it will take to close the deal. Contact us to lock in a loan rate today. 

What are Prepayment Fees?

Some lenders charge a fee for paying off your loan within a three to five year period. This charge can be as high as 6 months of interest on your loan and is charged only when you payoff the loan not when you close. This is usually done on higher risk loans and on adjustable rate mortgages. (Note: This charge is illegal in some states, and is regulated in all states.)

 

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© 2006 Copyright Janus Mortgage  Terms and conditions apply.  Please see our privacy policy for information about how we protect the information you give us.  All rates, programs and fees are subject to change.  Janus Mortgage is a Real Estate Mortgage Broker licensed by the California Department of Real Estate, license number 01078456.