Applying for a mortgage can be an intimidating endeavor. But, according to the experts at Texas Lending, it doesn’t have to be that way; understanding the process from the get-go is paramount to saying goodbye to stress and anxiety. Here, the Texas-based home lending experts answer questions and dispel common myths about mortgages.
Q: What are “points?”
Texas Lending: There are two types of points that mortgage lenders may charge: discount and origination. Discount points are essentially pre-paid interest and they are a tax-deductible expense. Origination points are assessed by the lender to cover loan origination costs.
Q: Is there a benefit to “locking in” an interest rate?
Texas Lending: Absolutely. Since interest rates fluctuate, if you apply for a mortgage when the rates are low, locking the rate keeps you from spending more in the long term. Even a marginal upward shift can cost thousands of dollars over the life of the loan. Points may be locked as well — for a specified period of time. Keep in mind, however, that fees will often apply for this privilege.
Q: Which is better, a loan with a high down payment or one that involves the least cash out-of-pocket?
Texas Lending: That depends on the borrower’s personal situation. However, most loans require a downpayment of 20% in order to get the best interest rate and terms. There are a few loans that allow for a lower upfront investment. These may be a reasonable alternative for first-time buyers who need the money to furnish their new home. In these cases, refinancing beyond the prepayment penalty timeline (if applicable) is an option to lower payments and receive a lower interest rate.
Q: Do loans always take a month or more to close?
Texas Lending: Not always. In fact, there are a number of loans that can be closed in as little as two weeks. However, patience is a virtue as some mortgage products may take 60 days from start to finish.
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