How many points? Known as a “purchase pointâ€ or “discount points,â€ this up-front fee is equal to 1% of the mortgage amount. So, say you have a $200,000 mortgage; one point would equal $2,000. Purchase points can help reduce the interest rate over the life of the loan, according to online lender Quicken Loans, but it can also mean more when it comes to forking up your down payment. “If a lender says ‘we’re not going to charge you any points but charge you an origination fee — it’s the same fee,â€ Charles says, so beware. For more information on purchase points and to decide of buying points is right for you, check out Quicken’s guide to purchase points.
Don’t rely on others. Too often we rely on “expertsâ€ i.e. lawyers, real estate agents, and those with more “experienceâ€ to dictate what is in our best interest. But how much should we trust their expertise, especially when they have a stake in the matter? While these experts can add insight and give direction, it’s up to consumers to discern — given all available information — what is the best decision. During a business reporting internship in college, a former editor once told me, “When you’re going to sign your mortgage, ask everyone to leave for a few hours and go over the document by yourself. Highlight anything that doesn’t make sense to you and ask the lender about it before you sign.â€ The Internet gives consumers unparallel access to information. If possible, research terms and information and always go armed with questions.
“Loan officers have a vested interest in that deal,” Charles cautions. “A lawyer can’t really explain all the detail of the mortgage to the client.â€ The real estate agent also has a vested interest in the deal getting done. Heck, I make sure to exercise due diligence on every blog and article I write, but it’s still up to you to do your own research.
Renita Burns is the editorial assistant at BlackEnterprise.com.