Home Hold – Your Real Estate And Mortgage Adviser

If you’re trying to educate yourself on the ins and outs of getting a home loan, then we’re happy to hear it. It can be pretty tough to absorb the large amount of information out there on actually getting a mortgage, but it’s well worth your time to take it in small pieces in order to make things easier.

For example, you might have heard the term “points” a lot. Points aren’t something that can be automatically dismissed as “good” or “bad” — it really depends on what your situation is and what you’re trying to accomplish. Simply put, points are a way of pre-paying your interest in exchange for a lower interest rate. This means that points can theoretically save you money, but that’s not the case all of the time.

An example is in order. Most people will be talking about discount points, which is what you’re paying to actually lower your interest rate. Every point translates to about 1% of the total principal of the loan. This means that points have a tendency not to be as cheap as you might assume. If you are paying for a 200,000 home loan, this means that you’re going to be looking at $2,000 per point, due at closing.

Now, keep in mind that you are not necessarily the one that has to pay these points. Your seller might be willing to pay for some of them in order to secure the home purchase. Many motivated sellers who are desperate to get out from under their homes will do this in order to make their home more attractive. Are you going to find that in a seller’s market? Definitely not. Yet it does happen — so make sure that you look around.

There are calculators available online that will let you see if paying points even makes sense over the long run. We suggest that you use them before you make any type of financial commitment. If you already see that your closing costs are going to be pretty high, you might do a lot better sticking with a higher interest rate and considering refinancing later down the road.

Overall, getting real information on mortgage points is pretty important, but we would like to think that we’ve covered the high points in such a way that you can move forward in your dreams of owning a home — don’t delay, keep going forward today!