Loan Types for Home Purchases or Refinances
Basic Loan Types for Home Purchases or Refinances.
Although there are many different types of loans out there in the market, there are some basic issues you need to be aware of and be certain to get all the information prior to the closing if at all possible.
Interest rates, points, and fee- The interest rate and its terms are either fixed or adjustable. You will need to know the terms of the loan, including whether there are points (normally a percentage of the loan amount, payable to the lender) to be paid and a schedule of other fee, if any, payable to the lender. Having this information in advance will assist you in determining how much up front fees to expect, plus the monthly payment over the life of the loan. Be aware that you will also have real estate taxes and homeowners insurance, also normally due on a monthly basis. When your anticipated monthly payment is given to you by your loan officer be sure that the taxes and insurance are added in to that figure so you will have a true picture of you obligation.
If the rate of interest is adjustable there will be a rate adjustment or a “balloon payment” on a set date. With an adjustable rate the interest rate may be fixed for a certain period of time, then it will adjust, either up or down, depending on the market at the time. In the event that the interest rate adjusts up and you are not able to make the payment at the higher rate, you may need another loan, or refinance, which means more fees, points, closing costs, etc.
Be aware of the potential of a prepayment issue in the loan documents, if there is one and you decide to pay off the loan ahead of time you may be responsible for additional fees at that time. This is an item you should discuss with your lender before you proceed with the loan in the event you should move before the loan is fully paid through monthly payments. Some of these can be rather costly, however, a reputable lender will discuss all of this with you and answer any questions you may have. Ask your Realtor, Attorney, or your local Title Company for a recommendation to a reputable lender if you are not sure who to call.
Any questions can be directed to Benchmark Title at 618-239-3750. Please feel free to call or email:
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