It can be one of the most exciting times in your life - shopping for a new home, especially for the first time. But there are some things to be aware of - in particular, the mortgage interest rate. It can vary greatly.
"They'll call their banker or their loan officer and they'll ask what the rates are. There's quite a bit that's involved with the calculation of this rate, so generally when most people are calling, it's a quick phone call, they want to know what the rate is,” said Daniele Leong of Central Pacific Bank.
But that rate can go up or down depending on a lot of things including your FICO or credit score. And the mortgage interest rate doesn't depend only on the borrower.
"You also want to know a little about the property because it's not always about the consumer that adjusts the cost for the interest rate. It could be about the property, the property type may affect how much that would be."
You will hear the word "points" when you are discussing your mortgage loan with the lender. That's a cash up front payment that will be required to secure the loan.
"Two points, very simply put, is two percent. So if you had a loan for $500,000 two points would be ten thousand dollars of origination costs. And that's just one of the cost factors involved with purchasing a home."
No matter what the amount of the loan is, you can expect extra costs to show up before the loan is okayed, things like appraiser and underwriter fees, closing costs and more.
"In addition to that, you also need to consider that there's fees involved with the title and the escrow company. So you're going to pay for title insurance, and the escrow costs. Then you're also looking at insurance on the property, if insurance would be required for example on a single family home."
There is also the cost of a home inspection, which the bank requires and which must be paid for by the buyer. In other words, be prepared for costs above and beyond the mortgage itself. The best advice? Talk to a qualified home loan expert.
