Understanding the finer details of a mortgage is not just a good idea, it should be a requirement for all home buyers. This blog explains the main details of mortgages:
Not only do you have to understand what type of mortgage to choose, you must understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.
Purchase Points: Purchase points, also known as "buy-down" or "discount points", are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. The more points you buy, the lower your interest rate but the more money you'll need at closing.
Interest Rate: When you get a mortgage, you are charged an interest rate. This is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.
Fees: There are always fees associated with getting a mortgage. These fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear, paying for a land survey, or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).
Decideing which mortgage to get may depend on what each lender does because different lenders may charge different amounts. Before it comes time to close, do your homework, make sure there are no hidden fees and ask your lender lots of questions so you understand all the costs involved with your mortgage.
* Courtesy of Yahoo Real Estate