Lenders Loan Origination Fee
Lenders Loan Origination Fee
Home Loan Basics
Owning a home is a dream that many people share. Understanding the basics is a good first step in homeownership. This article will explore a few of the fundamental issues concerning homeownership and the terms associated with the process.
The vast majority of people looking to buy their own homes have to rely on financial help. Generally, this financial help comes from banks or Mortgage Lenders. Some of the terminology these agencies use can be confusing. Let’s look at some of them.
Mortgage: Mortgage is a term that you will hear over and over again as you move through the process of buying a home. In simple terms, a mortgage is a type of loan used to buy real property such a home or land. In essence, a bank or mortgage lender will loan you the money to make the purchase and they will hold the home or the land as security for the loan.
When you take the mortgage loan, the lender will hold the title to the property until the debt is paid off. If you cannot or do not make the required payments on the property, the lender may sell the property in order to recoup its money. This is known as foreclosure.
PITI: PITI stands for Principle, Interest, Taxes, and Insurance. This is a common term used during the home buying process.
Down Payment: As far as home loan basics are concerned, the down payment is the amount of money that you pay upfront. In a traditional sense, the down payment is money that you already have saved. The more of your own money that you can apply to the down payment the lower your payments will be. Conversely, if you make no down payment at all (or a very small one) the higher your monthly payments will be. A general rule of thumb is to have at least 3-5% of the cost of the home as a down payment.
Principal: The term principal is the total amount of money that you are borrowing from the lender. In other words, principal is the cost of the home or land, minus the down payment that you make.
Interest: Interest is the amount of money that you pay the lender for its services. This is above and beyond the principle amount. Interest is assigned as a percentage and it may come as either a fixed rate or a variable rate. The lower the interest rate on the loan, the less your payments will be.
Taxes: Many home shoppers do not realize the impact that taxes will have on their loan or the buying process in general. All home buyers are required to pay property taxes. The amount of the tax is often put into an escrow account where a third party will hold the money until the deal closes and the money is released to the taxing agency.
When considering buying a home make sure you take into account the various taxes that you will have to pay during the course of the year or at year’s end. These taxes must be paid so ensure that you plan for them.
Insurance: Insurance is another obligation and payment that you will be required to take on when you buy your home. The lender will require a certain amount of insurance on the home, but you will probably want to add other types as well. For instance, if you live in a flood zone you will probably want flood insurance.
Closing Costs: Closing costs can vary from one lender to the next so make sure you understand what your lender is charging. In general, closing costs include loan origination fee, title search fees, discount points, survey fees, appraisal fee, title insurance, deed-recording fee, and credit report charges.
These are only a few of the home loan basics. Home shoppers can find much more information on the home buying process either online or through a reliable real estate agent.
About the Author
Peter Kenny is a writer for The Thrifty Scot, please visit us at Bad Credit Remortgage and Cheap Mortgage
how can big banks advertise no points no fees?
And to slim out all the bull crap answers this answer can get and i know damn well there is no such thing the consumer will pay a higher interest rate than they qualify for or you are charging an origination fee that might be on the paper work up front or added on to other places but loan officers get paid thousands on every loan so how the hell can wells fargo say no fees no points maybe banks do do this but i doubt it since it is there money they r borrowing out but smaller MORTGAGE companies that use lenders also advertise no pts or fees its B.S. so why do they do it
Because it makes their phone ring. It gets people in the door. Then a person well trained in BS explains how sorry they are for having to break you the bad news but you don’t qualify for that program. You feeling suddenly hollow inside try to just invisibly ooze out the door and console yourself in a pint of Ben and Jerry’s. The Loan rep doesn’t allow it however. She has tracked you to your home and now demands a loan application. You will get a loan but not the free one. You think to yourself yay, we can now have cash to spend frivolously and pay off those pesky unsecured credit cards. You fantasize about the glorious sales you can now rack up new debt at. Your car needs washed but thats such a hassle, especially in these new capri jeans. Note to self, as soon as nails dry, go buy new car.
Sorry got side tracked, they keep the loan longer and bury the fees either into the loan, into the rate, or both. The rate they show you is higher than the par rate they pay.
The cost to rent money has several levels,
Theres the retail rate that the bank does most direct lending at.
Theres the wholesale rate mortgage brokers can build their fees onto and compete with retail rate.
And theres the banks actual source cost, that can vary but some banks lend their depositors funds so lets use savings account interest rate is their rental cost of your money @ 4% per annum
They now lend that at an amortized scheduled rate of 6.75% and top load the interest portion and once again, the bank wins.
Frank Hates Loan Points
