Ross Bainbridge asked:




Home loans have become a part and parcel of everyone’s life nowadays. Many companies online offer first mortgage home loans also. Home loans are usually applied for buying or construction of houses, but sometimes, even for their maintenance.

The first step for mortgage home loans is the submission of the application, if the person feels he is qualified for the amount he desires. The prequalification phase checks for the terms of loans and the monthly payments that might be needed. Other debts like credit card payments and child support are also checked for. If the person already had taken other loans, then the feasibility reduces. The next step is that of finding what type of a house will he be able to afford. Again the requirements asking for interest rates, down payments, yearly property tax, and yearly property insurance are submitted for the results.

When the decision has been taken to go ahead for a loan, it is better to think about the loan term. If the length of loan is over a 30-year term, it might ease the burden on the monthly payment. In this process of making a decision between the 15-year and the 30-year term, the discount points, origination fee, and upfront costs are compared. Tax rates might vary with states. Input also is vital in calculating the term of years. First mortgage home loans can considerably reduce the levied taxes. Appraised value is accounted for deferring taxes. Loans can be taken on fixed or adjustable frames.

Home loans can be applied for in person or online. Online applications require the applicant to download a file to fill up. Along with the mortgage application, checklist with items needed is also attached. Some home loan application packages come along with finance calculators, which offer a variety of permutations for applying loans. Many mortgage firms operate through their agents. So contact with agents can prove to provide a better idea of the loans and their conditions.

Roberto

Kristin Abouelata – Home Loans asked:


Buying a home is a confusing process, and one of the most confusing prospects is settling on an interest rate.  Even when you decide what type of loan you want, you find you still have options as to what rate to lock.  Some of these options stem from whether or not you buy down the rate by paying a point.  A point is a fee that equals 1% of the loan amount.  For instance, if you are buying a $100,000 home, and your note amount is $97,000 (because you’re putting $3000 down), a point would cost you $970.

 

You can see the points you are being charged on line and 802 of your Good Faith Estimate, and later, on the same line on your HUD-1.  This line item reflects fees known as  “discount points”, but they truly aren’t interchangeable with origination fees (line 801) even if they sometimes serve the same purpose.  If you choose to pay a discount point, you should  expect a lower rate than if you didn’t.  So, if you’re quoted a rate of 6% 0 + 1, you are paying 1 discount point. If the quote is 6% 1+0, you’re paying an origination fee.  And 6% 0+0?  You’re paying no fees in either form.

 

What’s the difference between an origination fee and a discount point?  Well a few things.  Technically, an origination fee is what you pay the lender or the organization that takes the initial application and processes the loan.  A discount point is specifically paid to the lender to buy down or permanently lower the interest rate, and it’s usually a percentage of the loan amount.  You can also pay additional points to buy down your rate, not just a flat 1%.  You can pay a .5% or 2%.  It just has to make good economical sense for you.  And it shouldn’t be robbing you blind.

 

From a tax standpoint, there isn’t much difference.  An origination fee is generally tax deductible as long as it’s charged in the form of a “point” or percentage of the loan amount. However, you may ask your lender to charge you a discount point versus an origination fee to keep things neat and simple. Sometimes mortgage lenders charge you an origination fee when technically they should be charging you a discount point.  But they’re collecting all the fees anyway and happen to be giving you a lower rate.  It really matters most if you are working with a mortgage broker. Mortgage brokers can’t be paid discount points, only origination fees or broker fees. They can collect discount points to lower your rate, but  the discount point has to be paid to the mortgage lender with whom they’re doing business. And, this information should be disclosed properly on your Good Faith Estimate

 

 

A typical trade off is that a 1% discount point equals about .25% reduction in interest rate.  You should be able to easily decipher whether or not it’s worth it to buy your rate down.  How long do you plan to be in the home?  If not that long, then maybe you should think about a 0+0 quote.  If it’s your forever home, then dipping into your wallet and footing higher closing costs might be worth it in the long run.

 

However, if you look at your Good Faith Estimate and it seems you’re paying too much in origination fees and/or discount points, then you probably are.  Say something to your lender.  And if he doesn’t budge, you may want to look elsewhere.  Go with your gut instinct or call another reputable lender and get a second opinion.



YOUNG