Mortgages provide secured financing for a variety of terms. Whether you want to purchase, refinance or borrow against the equity in your home, a mortgage loan may be used to facilitate the transaction. Understanding how mortgage rates and mortgage loan fees impact your monthly payment could be useful toward budgeting and financial planning.
Getting a Home Mortgage Loan
Typically, a home mortgage loan is one of the largest debts that a consumer will incur.
Banks and mortgage lenders offer home loan financing to borrowers who meet certain underwriting requirements.
Mortgage approval requirements are generally based on an applicant’s credit strength, earnings history, existing debt, financial reserves, down payment or home equity and the proposed debt-to-income ratio for a new mortgage loan.
About Mortgage Rates
Mortgage rates are determined via a variety of benchmarks. However, the investment risk for issuing a home loan is carefully underwritten against the probability of timely monthly payments. Therefore, mortgage rates will vary among lenders.
To generate mortgage rates, a lender might rely upon certain factors, such as Fannie Mae, Freddie Mac and bond pricing within the secondary market. Additionally, a borrower’s credit history and credit score, loan term, loan size, other economic indicators and an investor’s desired earnings may be used toward calculating a mortgage rate.
Shopping to find an attractive mortgage rate could save you a tidy sum. For instance, if you were only comparing the interest rate for a $250,000 home loan from a lender who offered a 30-year fixed-rate mortgage of 5% versus a lender who offered 4.75%, you would pay $1,342.05 (5% Fixed) versus paying $1,304.12 (4.75% Fixed). The latter and more attractive rate would reduce your mortgage payments by $37.93 per month. A savings of $13,655 over a 30-year term.
Understanding Mortgage Loan Fees
Mortgage lenders thrive on increasing home ownership rates in the United States and helping families reposition debt, as well as consolidating above-average credit card rates with affordable mortgage loans.
Typically, a broker or a lender will charge mortgage loan origination fees to cover certain operating expenses and to earn a profit for getting a transaction from the initial point of origination through the funding process.
You should receive a Good Faith Estimate shortly after applying for a home loan. Federal and state laws require mortgage lenders to provide an initial disclosure of your mortgage loan fees.
Additionally, you will receive a Closing Disclosure that should arrive three business days ahead of your scheduled settlement date.
Your mortgage loan fees might be reflected as loan origination fees, underwriting fees, processing fees, rate lock fees or other items.
While the aforementioned fees will display a specific dollar amount, a loan origination fee may be shown as a percentage of the loan size. For instance, a one-percent loan origination fee on a $250,000 home loan would amount to $2,500.
Finding a competitive home loan requires a comparison of mortgage rates and mortgage loan fees. Some lenders might charge zero fees; however, you may be offered above-par mortgage interest rates. In other scenarios, you might have higher upfront fees with a super-competitive mortgage interest rate.
In certain instances, it might make sense to pay additional mortgage loan fees to buy down a mortgage rate to meet your monthly payment goal.
At Prospect Financial Group, our lending experts maintain a pulse on market trends and favorable mortgage rates.
Contact us today to discuss your home financing needs.
Prospect Financial Group
948 Garnet Avenue
San Diego, CA 92109
NMLS: 349089 | BRE: 01837707
Jason Vondrak has been in the mortgage industry since 2004 and co-founded the mortgage brokerage Prospect Financial Group in 2006 in San Diego, California. Today he serves as President and CEO of Prospect Financial Group and the president and founder of Prospect Property Group, a real estate development company, established in 2012.
“I’ve had the privilege to serve in an industry that exists to ensure homeownership remains among the top priorities of government and citizens alike. Over the years, it has been a pleasure working alongside homeowners, real estate professionals, and business associates combining efforts and teaming up to help homeowners realize the dream of home ownership.”