One of the first things you will see at closing is the information concerning your mortgage. Some mortgages have something called “points.” Points are simply a fee that you pay upfront so you can receive a lower interest rate for the life of your loan. Basically, you are paying a portion of interest upfront.
How Points Work
Let’s say you are borrowing $100,000 for your new home. Your lender has set your loan up with a low interest rate and one point. Usually each point is 1% of your loan value. That means you will bring $1,000 to closing to cover the point. It may seem like a strange way to save money, but if you are staying in your home for more than five years, the money you save on interest will be greater than what you paid at closing. Not to mention that the monthly payment will be lower!
Fees, What Fees?
Another thing that helps make up your closing costs are fees. Most fees are related to getting your mortgage in place. Often, the title company will do a search to make sure the title to your property is clear. Also included in these fees are such things as appraisals, and the cost of processing and underwriting the loan. Be aware: some lenders may advertise low closing costs but have a much higher interest rate. Do your homework and find what works best for you.
Speaking of Interest
The last thing you want to make sure is correct at closing is the interest rate you secured with your lender. Normally, you will have already “locked in” a specific rate. You can lock a rate for 15, 45 or 60 days. The longer you chose to lock the rate, the higher the interest rate may be.
This is just some basic information on what makes up your closing costs. With interest rates low, it is still a great time to buy that waterfront property in Smith Mountain Lake! If you are ready to make the area your home, call Vicki Millehan! Her team can help you find a home in the beautiful Blue Ridge Mountains!
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