When someone gets ready to purchase a home, they will find the mortgage process is full of all types of unfamiliar terms. For most buyers, this makes the process even more confusing than it already is.

Things like underwriting, appraisal, PMI, closing, and more can make getting a mortgage difficult and, at times, frustrating. While this is true, it is possible to learn a lot about the mortgage process by looking at tweets from Dustin Dimisa. Along with that, it is a good idea to focus on one thing at a time.

Here, those interested in getting a mortgage or just learning more about the process can learn more about mortgage points. This is the first step to better understanding the home buying process and what goes on when acquiring a mortgage or refinancing it.

Points Are a Good Thing

What many people don’t realize is that points are good. This is especially the case if someone is in a situation where they can take advantage of them. Put simply; one point is equivalent to one percent of the total loan amount. This means if someone is borrowing $100K, then a mortgage point would be worth $1,000, and two points would be $2,000, three points $3,000, and it goes on.

The points can be used as a type of trade-off for the mortgage interest. This means that when points are purchased, the home buyer receives a lowered interest rate on their mortgage than if they did not buy points at all. To be a bit clearer, every mortgage point purchased is not the same as a full percent of interest. It could take two points to reduce the interest rate by just .25%. No matter the case, even though points do cost more at closing, they will help the home buyer save money on interest for the life of the loan making this a smart investment.

Keep in mind, though, that several factors will come into play. As a result, it is a good idea for a home buyer to speak with their loan originator. This will provide the specifics of what it looks like for their loan and situation.

Paid at Closing

As mentioned above, purchasing points is going to cost at closing. That’s because the cost of this is added to the closing costs that have to be paid. This means if someone purchases five points on a mortgage of $100K, they will have to pay another $5,000 at the time of closing. While this may seem like a lot, it results in saving money on interest for the loan’s life, which will usually be more than worth the investment.

As anyone can see, using mortgage points can be beneficial. Be sure to keep the tips and information here in mind to see how they may benefit the home buying process. Being informed is the best way to help ensure the desired results are achieved and that a home buyer fully understands all the different things that go into getting a mortgage.