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How do I decide on a loan program?

The greatest factor to consider when choosing a mortgage program is the length of time you intend to own the property. To help you determine the best loan program for your unique situation we have provided information about purchasing loan financing on our home page. You can also access information about mortgage refinancing.

What are Points?

Points are paid to reduce the interest rate you pay on a loan. Each loan “point” is equal to one percent of the loan amount. Your decision on whether or not to pay points depends on how long you plan to keep the loan, your tax situation, and other factors.

Should I pay discount points to secure a lower interest rate?

Discount points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them, up front, at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing, however, you will have lower monthly payments over the term of your loan.

To determine whether it makes sense for you to pay guaranteed discount points, you should compare the cost of the discount points to the monthly payments savings created by the lower interest rate. Divide the total cost of the discount points by the savings in each monthly payment. This calculation provides the number of payments you’ll make before you actually begin to save money by paying discount points. If the number of months it will take to recoup the guaranteed discount points is longer than you plan on having this mortgage, you should consider the loan program option that doesn’t require discount points to be paid.

Are loan points tax deductible?

For most taxpayers, points paid on purchase loan transactions are tax deductible in the year the home is purchased and points paid on refinance transactions are tax deductible over the life of the loan. Tax consequences vary depending on the specifics of the transaction and the taxpayer. We encourage you to consult your tax advisor regarding your tax situation.

Is comparing APRs the best way to decide which lender has the lowest rates and fees?

The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some, but not all, closing fees are included in the APR calculation. These fees in addition to the interest rate determine the estimated cost of financing over the full term of the loan. Since most people do not keep the mortgage for the entire loan term, it may be misleading to spread the effect of some of these up front costs over the entire loan term.

Also, unfortunately, the APR doesn’t include all the closing fees and lenders are allowed to interpret which fees they include. Fees for things like appraisals, title work, and document preparation are not included even though you’ll probably have to pay them.

For adjustable rate mortgages, the APR can be even more confusing. Since no one knows exactly what market conditions will be in the future, assumptions must be made regarding future rate adjustments.

You can use the APR as a guideline to shop for loans but you should not depend solely on the APR in choosing the loan program that’s best for you. Look at total fees, possible rate adjustments in the future if you’re comparing adjustable rate mortgages, and consider the length of time that you plan on having the mortgage.

Don’t forget that the APR is an effective interest rate–not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.

The interest rate you offer is just a little less than what I am paying now. How do I know if it makes sense to refinance?

The simple rule of thumb for determining if it makes sense to refinance is to analyze the amount that it will cost you to refinance compared to the monthly savings you’ll have by reducing your payment. By dividing the cost of refinancing by the monthly savings you can determine how many monthly payments you’ll have to make before you’ve recaptured the initial refinance cost. If you plan on staying in your home longer than the recapture time it may make sense for you to refinance.

To fully analyze whether it’s the time to refinance you’ll have to look deeper. The remaining term of your current loan must also be considered, as well as your tax bracket.

What is the difference between the rate and the APR?

The note rate is used to calculate your interest payment each month. The APR (Annual Percentage Rate) is a calculation based on standardized federal regulations. In addition to the interest rate, it factors in other finance charges such as certain loan fees, to show the total cost of the financing over the scheduled life of the loan. The APR is designed to help borrowers fairly compare different lenders and loan options. Please note that the loan amount will influence the APR calculation, with higher loan amounts reporting lower APR calculations. To get a true comparison, the same loan amount must be used. Lenders like Integrity First Financial Group allow you to input your loan amount into their websites which generally calculates an accurate APR. Beware of lenders that just display a rate chart on their website; these websites are reporting an APR for a set loan amount and your APR will be different.

Can I apply for a loan before I find a property to purchase?

Yes, if you apply for your mortgage now, we’ll issue an approval subject to you finding the perfect home. We’ll issue a pre-approval letter that you can use to assure real estate agents and sellers that you are a qualified buyer. Having a pre-approval for a mortgage may give more weight to your offer. Once an offer is accepted you will have the opportunity to lock in a rate and complete the loan process.

Where will the closing take place?

We use a nationwide network of closing agents to conduct our loan closings. We’ll schedule your closing to take place in a location that is convenient for you.

We’ll deliver our loan documents and wire transfer your loan funds to the closing agent prior to closing so that they’ll have plenty of time to prepare for your closing.

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