WHAT ARE DISCOUNT POINTS?
Discount points allow you to lower your interest rate. They are essentially prepaid interest, with each point equaling 1 % of the total loan amount.
Generally, for each point paid on a 30 year mortgage, the interest rate is reduced by 1 / 8( or. 125) of a percentage point. When shopping for loans, ask lenders for an interest rate with 0 points and then see how much the rate decreases with each point paid. Discount points are smart if you plan to stay in a home for a longer length of time, since they can lower the monthly loan payment and the difference will add up over several years.
Points are tax deductible when you purchase a home, and you may be able to negotiate for the seller to pay a portion of them.
WHAT ARE MY CLOSING COSTS?
Your lender is required by law to provide a Loan Estimate of all costs involved in closing your loan.
The typical costs involve the following:
• Escrow closing fees
• Loan Origination Fee(( approximately 1 % of loan amount, may vary by lender))
• Recording fees
• First year of homeowner’ s insurance
• Interest( paid from the date of closing to the end of the month)
• First premium of mortgage insurance( if applicable)
• Prepayment of reserve accounts( usually 3 months) for property taxes and homeowner’ s insurance
• Title insurance
• Lender loan fees( such as document preparation, tax service, etc.)
• Home inspection
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