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Important Mortgage Terms You Should Understand When Looking for a Loan

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By : marco benavides    99 or more times read
There are people who set out to buy a house who do not really know or understand some of the terms that will be coming up quite often during conversations with real estate agents and mortgage lenders. Therefore, if you know what the terms mean, you will not feel as if everyone else is in on something that you know absolutely nothing about.

However, in today’s real estate market and overall economy, it really pays to know what other people are talking about so that you can really make an informed decision on what you are going to do. For example, one of the things you are going to have to decide is whether you should pay points in order to lower your rate and monthly payments. Think of a point as paying interest on a loan ahead of time. To be more exact, 1 mortgage point equals 1% of the total amount of the mortgage loan. If your mortgage loan amount is going to be $100,000, then 1 point would equal $1,000.

How exactly do you decide whether to pay points to lower your monthly payments and rate of interest? It is advisable for you to talk to your lender and real estate agent to find out whether you should pay any points. If you are planning to live in house less than 3 years, it is not usually advisable to pay points because you will not be in the house long enough to recover what you are going to pay in points through lower payments and a lower interest rate.

You must know the fees involved in the mortgage loan! This cannot be stressed enough because you really need to know how much money you are going to have coming out of your wallet when it comes time to close. The fees can vary, but they may include administration, settlement, entry, exit, and application fees, among others. Ask questions and really get involved in the loan process so that you know exactly what it is that you are paying.

Almost everyone is familiar with interest rates. Where mortgages are concerned, it is the money that you are going to have to pay the bank in order to be able to borrow the money you will use to buy the house. There are several types of mortgages and they all have advantages and disadvantages and there are different interest rates for the different mortgages, which is why it really pays off to be as informed as possible about what is being made available to you.

Once you know the terms that are being used, you will be able to fully take part in the conversation and in the bargaining process. After all, you should be a smart consumer and a smart consumer is a smart shopper who goes after the best deals. The best deal should fit your budget and expectations, and it should not leave you in a precarious financial situation. The recent real estate crisis has shown that it is not advisable to buy a house if you are going to end up without anything to show for it five years from now.
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