Getting a Mortgage: Know More about Fees and Penalties

Mortgage contractWhen it comes to choosing a loan, don’t be overly concerned about low rates. While these can have a substantial effect on your payments, you should carefully evaluate the entire mortgage. When assessing an offer, be sure to check for prepayment penalties and closing costs.

Many potential homebuyers overlook these things, even though it can cost them more money in the future.

Prepayment Penalties

Some lenders add prepayment penalties on the mortgage, which can prevent you paying off a loan based on your terms. This is why before agreeing to an offer, be sure to ask for these fees and have them eliminated if possible.

It is always best that you can pay down your mortgage quickly or make extra payments without worrying about penalties. You may do this if you recently get a promotion or suddenly have extra money at your disposal.

Home loan lenders in Utah note that this allows you to build equity faster and reduce your total payment amount.

Closing Costs

These fees are part of every mortgage. Keep in mind that lenders are required to give you a Good Faith Estimate (GFE). This lists down all the closing costs included in your mortgage. Be sure to review your GFE and look for points and origination fees.

  • Origination fees. This is the initial fee charged by the lender for a new loan application. This varies from lender to lender, and you can negotiate for lower origination fees.
  • Mortgage points. This is the fee paid to bring down the interests on the loan. In most cases, each point cost 1% of the mortgage amount. It is best to consider carefully if paying for points is a right move.
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You should remember that closing cost can increase the property’s purchase price. You may want to look at your loan numbers and get an estimate of what your closing cost will look like.

Buying a home and getting a mortgage come with risks and extra payments in the future. It is best to work with a reliable lender to learn more about loan options, as well as the other fees you should prepare for.