The Five Stages of Grief – don’t have to be your experience in choosing a Home Mortgage.

Denial: “This can’t be happening to me.”

Anger: Why is this happening? Who is to blame?”

Bargaining: “Make this not happen – in return I will ____.”

Depression: “I’m too sad to do anything.”

Acceptance: “I’m at peace with what happened.”

Mortgage SMART Key

A Client told me they felt like they were experiencing the 3rd stage of GRIEF, when they secured an online mortgage that became too good to be true – at least for them! Actually, it wasn’t too good to be true; it’s just that the content of the online marketing was unfamiliar to the Consumer. We spend a lot of time telling Consumers to educate themselves about their financial decisions, to include deciding to buy a home and taking out a mortgage. However, since the mortgage industry collapse in 2009, the process has become more complex than ever. The terms used are not ones we use in our everyday life and that makes an already complex process more difficult to understand. We’ll try to help by breaking down some of the terms, beginning with Mortgage Interest Rates and Discount Points.

The marketing content was for a mortgage loan with rates below those of this Consumer’s local Lenders, which is why it was so appealing in the first place (the marketing implied fast/easy-online/economical). What they were unfamiliar with included terms that read; Discount Point(s) .05.  Why is this term so important to understand? Let’s use the following online marketing example without any Lender branding to explain:

$175,000 HOME MORTGAGE (Wow, Ad had a free and easy online mortgage calculator – cool!)

4.500% Rate 4.597% APR

Monthly Payment $887

NMLS#: XXXX | 30-Year fixed | Points 0.500

Payments do not include amounts for taxes and home owner’s insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Some loan products require you to pay these expenses through Escrow.

The 4.5% rate sounds great and is likely available from MOST Lenders, IF, you pay the DISCOUNT “Points .0.500”. You’re essentially BUYING DOWN your 30-year mortgage interest rate to 4.5%. The cost of the Discount Points (0.0500) at CLOSING would be $8,750.00 ($175,000.00 x 0.0500 =). This is paid at Closing in addition to your typical Closing Costs and any Down Payment (if applicable). If you have sufficient FUNDS to pay these and other required costs at Closing, that’s great and why one might desire to pay down the interest rate to reduce the monthly costs paid in interest over the life of the loan.

Just how much would be saved monthly?

 $175,000.00 x 0.050 / 360 Months (30-YEARS) = $20.31

How important is it to you to save $20.31 per month, versus an additional $8,750.00 out-of-pocket, FUNDS due at Closing? It’s really up to you; if you don’t plan on keeping the home for the 30-year mortgage life, and don’t have sufficient funds to pay these additional costs at Closing – then you may NOT desire to pay DISCOUNT Points. There are several reasons you might pay DISCOUNT Points, but all of them require having the source FUNDS available at the time of Closing.

Next…MortgageSMART moment will address: ESCROW – Not a SCARE-CROW!

Terri Axelson, Mortgage Loan Originator, NMLS #1486324

HomeBridge Financial Services *

Call me at: 318-617-0431 * E-mail me at:taxelson@homebridge.com

Related Articles

For many, buying a home is a major transition in life. It’s one that comes with a long list of benefits like building long-term equity, the freedom to personalize your living space, and possible tax deductions. That said, making the transition from renter to owner isn’t something to be taken…
Read More of the post Is Buying a Home the Next Step for You? (to Buy or Not to Buy)

Chapman Lending Team at HomeBridge Financial The Federal Housing Finance Agency announced Tuesday that it is raising the conforming loan limits for Fannie Mae and Freddie Mac to more than $510,000. In most of the U.S., the 2020 maximum conforming loan limit will be raised to $510,400, up from 2019’s level to $484,350. The San Diego limit is…
Read More of the post Fannie Mae, Freddie Mac loan limit increases to $510,400

Are you on the hunt for your first home? Rethink what you’ve been told and take a look at these commonly thought of mortgage myths. MYTH: “My credit score isn’t good enough to buy on my own.” REALITY: Credit is the five-letter word most people don’t like to talk about,…
Read More of the post Mortgage Mythbusting: First-Time Homebuyer Edition

As a self-employed business owner, you have a lot on your plate. While running a business and tending to your daily responsibilities, starting the home process might feel daunting. You may have even heard it’s more difficult to secure financing when you’re self-employed – but don’t worry that’s just a…
Read More of the post How to Qualify for a Mortgage as a Self-Employed Professional