25 May 2016
 Categories: , Blog

If you are interested in buying a home in the near future, it is important to understand the reality of modern mortgage loans so that you can save money on your purchase. Therefore, before you start to shop for the perfect home or make any binding decisions about your mortgage loan, you should be sure to understand the following information. 

#1--The APR Includes A Lot Of Extra Fees

It is easy to only consider the interest rate when you are learning about the expenses related to your prospective loan, but it is a better choice to continuously monitor the APR, which is also known as your Annual Percentage Rate. That is because although the interest rate will show you how much the loan accumulates in interest throughout the year, the APR is an inclusive term that can include a wide variety of other expenses that quickly add up.

The additional expenses can include:

• Administrative fees

• Loan processing fees

• Documentation and escrow charges

• Origination points

• Private mortgage insurance (PMI)

• Underwriting fees

#2-You May Be Able To Negotiate Some Of The Mortgage Expenses

Although you might consider haggling with the current owner about the cost of your new home and you probably negotiated on the cost of your last car, people frequently do not realize that there may be some wiggle room when you are determining the extent of your mortgage costs. For instance, the origination points that were mentioned previously are a fee that you, as a lender, give the lenders or loan officers in order to pay them for their role in getting your mortgage approved.

Since you cannot deduct origination points from your taxes each year, it is a good idea to try to negotiate them down whenever possible. It is first necessary to understand that the conversion rate of those origination fees is around 1% of the amount you are borrowing. You might be successful at negotiating a reduction of those fees if you have done business with the bank previously or if you have exceptionally good credit since both make you a more desired customer.

Another fee that you may be able to minimize is the non-specific administrative fee that may include:

• Extra charges for preparing paperwork (above the origination costs)

• Processing fees for the loan

• Costs for communication, such as courier or mailing

Although lenders rarely volunteer to do so, you may be able to get some of those extra costs removed simply by asking.

In conclusion, getting a loan for your dream house can be more challenging and expensive than you might think. In that instance, it is a good idea to be aware of the information listed above so that you can save money on what is likely to be the biggest purchase you ever make. Contact local providers, such as those from Doolin Security Savings Bank, for further assistance.