Loan rate quotes can be confusing, a recent article by Bankrate.com indicates. The site breaks down some of the misconceptions about fee requirements for home buying.
Quotes for mortgage rates typically include fees, which are accounted for in points. Thus, a 1-point fee is equal to 1 percent of the loan amount.
Lender fees can come in two varieties, discount points or origination points. The discount points charged by lenders are prepaid interest on the mortgage loan. Discount points can typically account for anywhere from zero to four points. Origination fees are also typically included with each loan and cover the costs of creating the loan for the borrower.
Borrowers can decide on the points they choose to pay based on their down payment amounts and the length of time they choose to borrow for.
In today’s lending environment, the low mortgage rates borrowers can obtain are worth the additional fees that come with originating and closing a loan, the website states. However, home buyers should be sure they understand the delineation of the fees in their contract.
