Why a Credit Union Mortgage? Mortgage Options Rates PREQUALIFY Rates Ratewatch Closing Costs

Mortgage Fundamentals

The concept of a mortgage is quite simple: a mortgage is a loan made to help finance a home. Your lender gives you money that you repay over a certain period of time. Each individual home mortgage, however, has its own special features.

Interest Rates and Closing Costs - The total cost of your home is determined by the sales price, interest rate and loan fees. While several lenders may offer you the same rate, the costs to obtain that rate will vary by lender.

  • The Interest Rate refers to the percentage of your outstanding loan balance that you pay your lender each month as part of the cost of borrowing money.
  • Discount Points allow you to "buy down" your interest rate at closing. One point equals 1% of the loan amount.
  • Closing Costs are the charges that cover the cost of originating, processing and closing your loan among other things.
  • An Origination Fee is a loan cost that typically equals 1% of the loan amount.

Monthly Mortgage Payment - Mortgage payments can be divided into four parts: principal, interest, taxes, and insurance.

  • Principal refers to the money you borrow to buy a home and the outstanding balance at any point during the term of the loan.
  • Interest is the cost of borrowing the money.
  • Taxes are assessed by your local government and will most likely be collected by the lender as part of the monthly mortgage payment and placed in an Escrow Account.
  • Insurance, as with taxes, is usually collected by the lender and also placed in the Escrow Account. There are two types of insurance that may be collected:
    1. Homeowner's Insurance, also call Hazard Insurance, which protects you against damage to your property caused by fire, wind and other hazards.
    1. Mortgage Insurance (MI) which protects the lender in the event you fail to repay the mortgage.

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