Tucson Mortgage Basics

Learn the essentials of Tucson mortgages here. We’ll explain more about rates, fees, and your monthly payment.

Points, Rates, & Fees

The total cost of your Tucson mortgage is primarily influenced by three factors: points, interest rates, and fees. The total cost of borrowing is expressed as the annual percentage rate, or APR, of your loan. Here is an explanation of the expenses that determine the cost of your mortgage:

• Interest rates. The interest rate on Tucson mortgages refers to the percentage of the remaining loan balance that you pay to your lender every month as one of the costs of borrowing. The type of loan you get, your credit, and the current interest rate environment will all affect the rate you pay.
• Discount points. Most lenders offer points that you can purchase to “buy down” the interest rates on Tucson mortgages. One point typically equals 1% of your loan amount. The more points you buy, the lower your monthly payment and interest rate will be. The amount by which your rate will decrease with each discount point will vary from loan to loan. Discount points can end up saving you thousands of dollars on interest over the course of your Tucson home loan.
• Fees. These expenses cover the costs or origination, closing, processing, etc. You pay these fees on Tucson mortgages up front, and loan fees can vary considerably by lender. You might have to pay for origination points, which are loan fees that amount to 1% of your total loan balance.

Mortgage Payments

The payment on a typical Tucson mortgage can be split into four components: interest, taxes, principal, and insurance. An explanation of each is offered below.

• Interest. This is the price you pay for the convenience of borrowing money. How much you pay in interest each month is determined by your interest rate.
• Taxes. Lenders usually charge you on a monthly basis for the fees assessed by your local government. The lender then pays these fees to the government on a semi-annual or annual basis. This arrangement is known as escrow.
• Principal. This is how much money you borrow to purchase your home. The principal also refers to the remaining balance of your Tucson mortgage at any given time.
• Insurance. Insurance payments will be collected by your lender in an escrow account. Insurance provides you and your lender protection from losses and has two major parts:
  • Home insurance – a homeowner’s policy will protect you against financial losses from fire, wind, theft, and other disasters.
  • Mortgage insurance – you will have to pay for private mortgage insurance (PMI) if you make a down payment of less than 20%. PMI protects your lender from losses if you default on the Tucson home loan.

Now that you understand the basics of a Tucson mortgage, visit FAQ to view the most common questions homebuyers want answers to.