Should I lock my rate?
Locking your interest rate means your lender guarantees the rate on your loan even if market rates change before closing. Most lenders will allow you to lock your rate for 30 to 60 days, with the option to extend the rate-lock period for a fee. So how do you know whether to lock your interest rate? It depends on whether you expect rates to rise or fall before you close on your home. No one knows for sure which direction rates will go at a given time, so it's difficult to make a reliable prediction. It helps to keep track of announcements from the Federal Reserve Board, whose monetary policies have an effect on mortgage rates, and to talk to your financial advisor about what may happen in the near term.
Should I pay discount points?
Discount points are prepaid interest, which you can pay to your lender at closing in exchange for a lower interest rate on your mortgage. Paying discount points, each of which is equal to 1% of the loan amount, is often called "buying down" your rate.
So does paying points make sense for you?
The answer depends primarily on how long you plan to stay in your home. First, find out how much lower your monthly payments will be if you pay points. Then, calculate how long it will take for those monthly savings to add up to the cost of the points. If it would take five years to break even and you're planning to live in your home for 10, paying discount points may be a smart move.
What closing costs will I have to pay?
Closing costs vary based on a number of factors - including the lender, mortgage type, purchase contract, and location - but they usually include the following:
- Lender fees: your mortgage company may charge for expenses related to making the loan, including an appraisal fee, a credit report fee, origination points, and discount points.
- Third party fees: charges for services not provided by your lender often include the settlement fee, title insurance, and attorney's fees.
- Prepaid items: certain mortgage costs must be paid to your lender in advance.
The most common of these are pre-paid interest, hazard insurance, and deposits to set up an escrow account.
Will I have to pay for Private Mortgage Insurance?
Private Mortgage Insurance (PMI) provides your lender with a way to recoup its investment if you are unable to repay your loan. PMI is usually required when the mortgage amount is higher than 80% of the home's value. That means that if you buy a home with a down payment of less than 20%, you will probably have to pay for PMI. One common way of bypassing PMI without making any down payment at all is to use an 80/20 program, which combines a first mortgage with home equity financing. Learn about the 80/20 loan from Realty-Rx.
What if I've had credit problems?
Your credit history is only one factor in qualifying for a loan, and having made some late payments doesn't ruin your chances. There a variety of mortgage options to help people with less-than-perfect credit become homeowners and leave credit challenges behind.
Should I refinance my existing home loan?
People refinance their existing loans for a number of reasons including obtaining a lower interest rate, to save on monthly payments and to change the term of the loan. People also choose to refinance if they want to switch from an adjustable rate to a fixed rate or to consolidate debt by refinancing for a higher loan amount and using the difference to pay off other debt. To see if it makes sense to refinance your loan, try our Home Loan Payment Calculator.
What will a lender look at when I apply for Realty Rx mortgage refinancing?
Lenders consider many factors in evaluating your loan application, but they usually focus on four areas:
- Income and debt: How much money you make and what other bills you have to pay helps the lender determine whether you can afford to make mortgage payments.
- Assets: The lender needs to make sure you have enough money to cover the costs of buying a home.
- Credit: Whether you've met other financial obligations helps the lender predict whether you will repay your mortgage.
- Property: The home you want to buy has to be worth enough to act as collateral for the mortgage.