You will learn a lot during the home process. From the ultimate packing techniques to your credit score you will learn all kinds of new things. In fact, there will be so much new information it can sometimes get a little overwhelming. That’s why we’ve created this cheat sheet. We will outline for you 10 numbers that you absolutely must learn before you complete the mortgage process and attend your real estate closing.
1. Your Payment – Before you sit down at the closing table you want to know what your monthly payment will be. Including principal, interest, taxes, insurance and any homeowners association or condo fees. Knowing this number in advance allows you to plan your budget for your new home in advance.
2. The Loan Terms – The terms of your loan are several numbers that determine your monthly loan amount. The interest rate, loan amount and the principal and interest payment are set prior to closing. These numbers determine your monthly payment amount except that real estate taxes and condo or home owners association fees can fluctuate and change your payment amount.
3. Cash Required at Closing – A few days prior to closing you will receive a draft of the closing paperwork. This will list out the cash needed for closing. The number will include your down payment as well as closing costs if you choose not to roll those into the loan. It will be imperative that you have the proper bank check or wire transfer set up to deliver the exact funds required at the closing table.
4. Closing Costs – These are fees that are calculated as expenses needed at closing. Closing costs will cover the expenses associated with transferring the home. You will be required to pay a portion of the property taxes from when you buy the house until the next tax bill date. You will also be required to pay prepaid interest. This is the interest due from the day you close on the home until the first mortgage payment is due. There will also be a loan origination fee from your lender as well as the appraisal and other costs accrued during the mortgage process.
5. APR – APR stands for Annual Percentage Rate. This is not the same as your interest rate but rather your cost over the term of the loan listed as a rate.
6. Rate Lock Time Frame – When you apply for a mortgage you can find out from your lender the date on which you can lock in your interest rate. You cannot lock in until a certain number of days prior to your closing. The important thing to remember is that you want your rate lock period to go past your closing date, just in case something is delayed with the closing, your rate will still be locked.
7. Amortization Calendar – Your amortization table will outline the payments over the life of the loan. Understanding your amortization table will help you to see clearly how the interest paid over time will decrease if you pay extra against the principal along the way.
8. PMI Terms – If you don’t have a down payment that is 20% of the purchase price you will be required to pay PMI (personal mortgage insurance) in addition to your mortgage payment. You will want to make sure you understand how long you will have to pay PMI and what needs to happen once you own 20% of your home.
9. Lifetime Loan Amount – When you sit at the closing table one of the numbers they will give you is the total amount you will pay for your home if you make every scheduled payment. This number can be reduced by understanding the amortization table and paying extra on the principal of your loan.
10. Pre-payment Penalty – Some loans come with a pre-payment penalty. This limits the amount you can pay down on the principal at any given time. If your loan has a pre-payment penalty you will want to understand exactly what the terms are. Title Mortgage Solutions does not provide mortgage loans with a pre-payment penalty but be sure you understand the terms if the loan you have chosen does
When you arrive at the closing table you want to feel confident that you understand the documents being reviewed and feel fully informed about what you are signing your name to. Your loan officer and real estate attorney are there to help you understand these documents so don’t hesitate to ask all of your questions in advance. When you get to the closing table you want to be focusing on reviewing the documents for accuracy. You shouldn’t leave the closing table with any questions or concerns, just a hand cramp and a new set of keys.