In order to pay for your home, you will most likely need a home loan. Home loans are generally called mortgages, and come in many different forms with a variety of features.
The home mortgage right for you depends on many factors including the cost of your home, your current financial situation and your future home owning plans or goals.

Wells Fargo Home Mortgage is here to help you with the home buying process and will assist you as much as possible in choosing the right mortgage for your home finance needs.

First you need to know some financial terms that surround mortgages. For example, the cost of your mortgage will be determined by the interest rate of your loan, the discount points you pay up front and any loan fees you encounter. All of these put together make up what is called APR. This is the annual percentage rate, which is what you will pay after points and fees are taken into consideration.

Interest rate is the amount you pay the lender each month as a payment for the loan. This is the cost of borrowing money, so it is in addition to the amount it will take just to pay back the loan amount. This is based on factors such as the average rate according to the market at that time as well as your financial status and the specific features of your home loan.

Discount points are points you pay upfront with the down payment. These can lower your interest rate, making your payments more affordable each month. Although these points sound appealing, they cost a lot up front. One point equals one percent of your loan amount. You can pay as many points as you want to buy down your interest rate.

Loan fees are charges incurred up front, as you are purchasing the home loan. These are costs that come up in order to process and approve your loan, and to close on it. Basically, these are administrative fees for the lender’s services. An origination fee, which is one of these fees, is one percent of your loan amount.

Monthly mortgage payments basically have four variables. These are interest, principal, taxes and insurance. Interest is what was just discussed above, the cost of the loan that you are paying the lender. Principal is a portion of the loan you are simply paying back or reimbursing.

Property taxes will also be charged along with home owner’s and mortgage insurance. There are exceptions to some of these fees depending on individual circumstances and choices, but generally these are typical home ownership payments that come each month.