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The Real McCoy: What is the deal with home loan rates?

By: Kari McCoy
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Dear Kari, My wife and I have been saving up for a long time to buy a house and we feel now is a good time to take that big step. We have $38,000 saved up for our down payment. What other costs will we have? Also, the loan rates seem to be confusing. Can you help sort it all out for us? Answer: When you buy a home, you will pay “closing costs” in addition to the down payment. These costs include any “points” you pay on your loan amount, lenders fees, credit report fees, appraisal of the property, title and escrow fees, hazard insurance and maybe more depending on the individual situation. Your Realtor can give you information about the closing cost in your area and will vary from state and county. Use this information as a guideline, but when you apply for your loan, the lender is required to provide you with a “good-faith” estimate of the closing costs. This figure is usually very close to the actual amount, since the purchase contract will have the price and terms of your new home spelled out. Your escrow offices will give you a final figure for the amount that is needed to close. Please note, years ago the U.S. Congress decided that consumers needed protection from some lenders and they passed the Truth in Lending Act. This became a benchmark helping the consumers compare one lender’s offer to another. Therefore in addition to the interest you pay on the loan, the APR (annual percentage rate) includes any origination fee (if applicable), discount points and other loan-related fees. The APR in the effective interest rate you would be paying if you spread the loan related costs over the life of your loan. Typically the APR for a mortgage loan is calculated and disclosed to you after you have picked the lender and made a loan application. If you want to compare costs from one lender to another beforehand, you should ask prospective lenders to give you a Good Faith Estimate of Closing Costs (GFE). Don’t be the silent type with your lender. That person is there to guide you through the mortgage loan process. There really is no substitute for a direct and personal relationship with your mortgage lender. They know the business inside and out and are aware that the process can seem overwhelming for many borrowers. Happy hunting! Kari McCoy has been a Realtor for 25 years and owns the Kari McCoy Group, Residential Real Estate, at Coldwell Banker. She can be reached at (916) 941-9540 or by e-mail sold@karimccoygroup.com.