Understand rates, points and APR   Interest rates, points, annual percentage rate (APR) ... it can all seem confusing. But it's really all about making the down payment and monthly payment fit you and your lifestyle. So let's look at how you can custom fit a rate to your needs.

Know how interest rates affect your payment

The interest rate on a loan is used to calculate your monthly payment. The higher the interest rate, the higher your monthly payment. The lower the interest rate, the lower your monthly payment. Simple? Yes, but abstract until you see it applied to your loan. See our monthly payment calculator for a demonstration of how this works.

Lower your rate and payment with points.

Points are fees paid to the lender at closing. Each "point" is equal to 1% of the loan amount. For a $100,000 loan, a point equals $1,000. Two points would be $2,000.

With many loans, you can lower the rate by paying more points. If you have the cash, it's a good way to save money on interest over the life of your loan. See how points affect rates. If you're low on upfront cash, then go for fewer points.

Use the APR to compare loans

Home loans are more than interest rates and points. They also involve other costs. The APR expresses the annual cost of a loan as a percentage, factoring in not only its rate, but the points and other charges over the life of the loan.

The Truth-in-Lending law requires all advertisements for home loan credit terms include the APR. The APR is intended to enable you to compare terms of loan products from different lenders.

To make an accurate comparison, compare loans with the same terms, interest rates and points. Then look at the APR. The loan with the lower APR is the less expensive loan.

Lenders also provide the APR along with a loan's interest rate in the Truth in Lending Disclosure Statement. This document will be mailed within 3 days after you submit an application. See Today's Rates to see right now what the APR is for our loans.

Save cash with a "no origination fee" loan

Some lenders charge an origination fee to cover the administrative costs of processing a loan. If you haven't much available cash beyond the down payment, you might want to look into a no origination fee loan.

Unlike many lenders, Countrywide doesn't charge an origination fee on conventional loans in most states. On FHA loans, it's customary to charge an origination fee, but it can be added to your total loan amount and included as part of your financing.

Now that I found my home, should I lock in the rate or let it float?

Ready to sign a contract? If you're afraid rates are headed up, protect your buying power by locking in the rate at the time you apply for your loan.

What should you look for in a rate lock? Make sure it allows enough time for your loan to be processed. And get it in writing. This is important because some lenders offer rate protection for just a week or 10 days - not long enough for many loans or home sales to be completed. If you exceed the lock-in period and your rate expires, you may see your loan rate go up.

Countrywide protects your rate for 45 days (60 days on FHA and VA loans). Plenty of time for processing a loan. Longer rate locks are even available if you're building your home or need more time to close.

Think rates might drop while your loan is being processed? At the time of your application, take a risk and let it "float" instead of locking. You can watch rates and lock in at any time until the day before your loan closes. The moment you tell your lender to lock the rate, that's the rate you'll get. But be careful. Rates are as difficult to predict as the stock market. And if rates suddenly shoot up, you could find yourself with a higher monthly payment than you planned or, even worse, unable to afford the home of your dreams

Learn About Loans

We offers a wide variety of home loans for every borrower. You'll find everything you need to know about each type of home loan and its advantages here. Or, if you'd just like us to help match you up to your best choices based on your preferences, try the Loan Advisor. To read more about our products, see Loan Types.

Overview

Fixed Rate Home Loans

Adjustable Rate Mortgages (ARMs)

Fixed Period ARMs

Government Loans

Over $417,000 Loans (Jumbo)

Overview

There are home loans for every type of home buyer. The goal here is to match the benefits of a specific loan type with your goals for owning a home. Here's a chart to start you thinking. 

 Your Home Ownership Goal Your Loan Strategy

Plan to live in your home for many years.

Low interest rate over a long period of time. Since you're going to be making payments for years to come, your best strategy may be a fixed rate loan and paying points to get your rate as low as possible.

Plan to sell or refinance your home in just a few years.

  Avoid points and closing costs since the difference in interest payments won't typically make up for your out-of-pocket costs at closing. Also try for a smaller down payment. A fixed period ARM is a good choice for holding rates down for a set number of years.

Want to pay off home loan by the time your children are in college.

  Shorter term loans such as a 15 year fixed rate home loan are a smart way to ensure you can use income for other goals later in life. Plus you build equity faster.

Want to budget for a fixed payment each month.

  A fixed rate loan has a principal and interest payment that stays the same for the entire term of the loan. 

Comfortable with periodic changes to interest rate if it means you can get more home now.

  Adjustable rate mortgages are a great solution for people with incomes that are going to grow and will quickly refinance or be able to afford a larger payment in a few years should interest rates rise.

Fixed Rate Home Loans

Some people just like certainty in their life. And though you can't count on the weather, you can count on a fixed rate home loan. It will have the same interest rate for the entire life of your loan. And you can choose a variety of repayment terms, with 15, 20 and 30 years the most common.

 Fixed rate loans are a good choice if you:

Like the new rate and want to keep it for the life of your loan.

Plan to stay in your house a long time.

Prefer the security of a fixed principal/interest payment over one that changes periodically.

30 Year Fixed Rate Home Loan

   Lowest monthly payment of the fixed rate loan choices

   Keeps home loan payments affordable by extending them over a long period of time

   Provides maximum tax-deductible interest (ask your tax advisor)

20 Year Fixed Rate Home Loan

   Helps you pay off your home faster and build equity quicker than 30 year home loan

   Has a lower interest rate than a 30-year loan (but higher monthly payments)

   Saves considerable money on total interest paid over the life of your loan

15 Year Fixed Rate Home Loan

   Has higher payments than a 30 year or 20 year home loan, but a lower interest rate

   Saves considerable money on total interest paid over the life of your loan

   Builds equity in your home faster

Want to further explore fixed rate home loans?

   Amortization Calculator - shows you how much of your payment goes to interest and principal on a monthly basis over the years

   Our fixed rate loans - gives information on loans available for periods of 10, 15, 20, 25 and 30 years

Adjustable-Rate Mortgages (ARMs)

What goes up, must come down. And that's basically the principal of ARMs. The interest rate you pay is adjusted from time to time to keep it in line with changing market rates. This means when interest rates go up, your monthly home loan payments may go up. And, when interest rates go down, your monthly home loan payments may go down.

Now that might sound frightening if you've ever lived in an era when interest rates shot up dramatically. But Countrywide's ARMs have built-in features that reduce the risk your rate will ever go too high.

ARMs are attractive because they offer start rates that are lower than the interest rates of fixed rate home loans. This typically enables you to begin with lower monthly payments and qualify for a larger loan.

 Reasons an ARM might be right for you:

You are planning to move in a few years and consequently aren't concerned about possible rate increases.

You're confident your income will rise enough in the coming years to handle any increase in payments.

You need a lower initial rate to afford to buy the home you want.

How ARMs work:

   A start rate, also known as the initial interest rate, gives you a special low monthly payment for a set amount of time (such as 1 year). 

   After the start rate period is over, your interest rate is based on the performance of a financial index, such as the average interest rate or yield on Treasury bills. For a better understanding and a historical perspective, see ARM financial indices.

   How often your payments are adjusted based on the index, and how much rates and payments increase at each adjustment, depends on your loan terms. A 6-month ARM adjusts every 6 months. A 1-year ARM adjusts once a year.

   At each adjustment, the new rate is computed by adding the margin - a predetermined amount that remains the same for the life of your loan - to your financial index. Example: If the interest rate for the financial index was 5.5% and your margin 2%, then your rate at the time of adjustment would be 7.5%.

   Two "caps" may put a limit on the maximum amount your rate can increase. The periodic cap sets the maximum your rate can go up from one adjustment period to the next. The life cap sets the maximum interest rate for the life of the loan. See How Caps Work.

   Some ARMs offer a conversion feature that allows you to convert to a fixed rate loan at certain times during your loan. 

See Loan Types for special features on Countrywide ARMs.

Fixed period ARMs

If you're worried by the thought of your payment going up in 6 months or a year, or know exactly when you'll be ready to move to a new home, you might want to look into an ARM that protects you against the possibility of rapid interest rate increases for a set number of years.

A fixed period ARM starts with a lower rate than standard fixed rate loans. Your rate then stays the same for the first 3, 5, 7, or 10 years, depending on the fixed period ARM you choose. At the end of that period, your interest rate adjusts every year like a regular ARM according to a financial index (that's why some lenders call them 3/1, 5/1, 7/1 and 10/1 ARMs).

 Fixed period ARMs work for people who:

Plan to be in a home for a short time

Expect to gradually increase their income and want a few years at a set payment level before potentially paying more

Intend to refinance before the adjustment period begins

See Loan Types for special features on Countrywide fixed period ARMs.

Government Loans

The Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA) offer government-insured loans. These loans have features that make them easier for first-time home buyers to obtain. These features include:

 Low down payments

Flexible lending guidelines

To get an FHA or VA loan, you apply through an approved lender like Countrywide. In fact, we are one of the top lenders for government loans. At every one of our branches, you work directly with local loan experts experienced with these loans.

FHA Loan features:

   Low down payment (usually 3% of the FHA appraisal value or the purchase price, whichever is lower)

   No maximum income/earning limitations

   Fixed rate and ARM loans available

   Insurance from the federal government replaces private mortgage insurance

   Maximum loan amounts vary by county - contact Countrywide for information on your county

VA Loans features:

   No downpayment loans up to $417,000 for qualified veterans.

   Fixed rate loans. ARM loans also available. Ask your loan consultant for details.

   More flexible qualification guidelines than conventional loans

   For eligibility information contact Countrywide

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Loans over $417,000 (Jumbo)

Loans for more than this amount are called jumbo or non-conforming loans. They exceed the loan amounts allowed by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) - two government-sponsored enterprises that help facilitate the availability of home loans by investing throughout the country.

Non-conforming loans typically have a higher rate and different requirements for your down payment.

Getting your non-conforming loan at Countrywide gives you several key advantages:

   Excellent product mix - we work with a number of investors to ensure we can meet all your borrowing needs

   Fast processing (unlike traditional home loan lenders or banks that require a committee at corporate headquarters to review your loan, we can approve your loan right at your local Countrywide branch)

   Loan amounts up to $2 million

   Reduced documentation loans 

   No income verification loans

   No down payment loans

   Investment properties and second homes can qualify

   Loans to foreign nationals

 Get pre-qualified or pre-approved

When you start shopping for a home, it's nice to know just how much home you can afford. Even better, wouldn't you like an edge over other buyers interested in the same home you are?

Here's the difference between these two buyer tools.

Pre-qualification  Pre-approval

Provides a "ballpark" estimate of your borrowing power

Is based on summary information you provide on your income and assets

Requires satisfactory review of property, financial documents and program requirements to issue final approval

Is offered by most lenders

Provides proof to real estate agents and sellers that you're approved for a specific loan amount

Is based on a verification of your income, credit and assets (in some cases, verification may not even be necessary)

Requires a satisfactory appraisal and title review and no change in financial condition for final approval

Is offered by Countrywide as a service to you before you find a home at no cost

Is quick and easy

How to get it

Contact your local branch

Call 1-800-825-4863

Or try our "How Much Can I Afford calculator

Contact your local branch

Call 1-800-825-4863

Or get pre-approved online now

 Anticipate total costs

At the start of the home buying process and particularly at closing (the meeting where you'll sign the paperwork and pay all the expenses to take ownership of your new home), you'll find yourself paying various fees and other charges.

Some of these costs are negotiable with the seller. Your real estate agent can help you negotiate these in the sales contract.

This section discusses the costs you most likely will be responsible for so you can have the funds ready. (See our Closing Cost Estimator for a quote on your loan's approximate costs.)

Lender-related costs

Third-party fees

Pre-paid costs

   Understand Rates, Points & APR  

   Learn About Loans  

   Get Pre-qualified or Pre-approved  

   Anticipate Total Costs  

   Understand the Loan Process  

   Close the Loan  

      Lender-related costs

The cost of a loan is more than rates and points. Prior to selecting a lender for a specific loan, you should ask what other fees there will be in addition to the points. Within 3 days of application, you'll be mailed what's called a Good Faith Estimate of what the loan will cost. And this is just what the name says. It's an estimate. And, in "good faith," it's as accurate as possible given the information available at the start of the loan process.

You'll receive an initial Truth-in-Lending disclosure which includes the APR and other financial terms within 3 days of application. A HUD-1 Settlement Statement will be issued to you shortly prior to closing that provides you with the full disclosure of closing costs. It establishes the total funds you must bring to the closing meeting and itemizes how and to whom the funds are to be disbursed.

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Third Party Fees

Third-party fees are collected by your lender for services provided by outside parties, such as an appraiser. All lenders typically require some of these fees. Many of the services are regulated by various governmental organizations.

Appraisal Fee

  Payment for an opinion or estimate of the value of a property. A report is prepared by a professional appraiser to explain the determination of the fair market value. This fee is often paid for at the time of application for a home loan.

Credit Report Fee

  Covers the cost of the credit report used to help determine your creditworthiness. These reports are obtained from credit agencies and evaluate your capacity to pay debts or history of paying debts. This fee is often paid for at the time of application for a home loan.

Mortgage Insurance

  Payment for an insurance policy that protects the lender against loss should you fail to make payments. This type of insurance is typically required on loans with less than a 20% down payment. These costs may be paid upfront, included in your monthly payment, or included in your interest rate. To see how to avoid traditional mortgage insurance, see TAMI and HELOC.

Tax Service

Fee covering the cost of having a tax service agency monitor the payment of your property taxes. If you elect to pay taxes yourself, the agency monitors the tax rolls for the life of the loan and informs the lender if the taxes ever become delinquent so the lender can take action to protect its lien position.

Flood Check Fee

Covers the Federal Emergency Management Agency's (FEMA) review to determine if a home is located in a flood zone and if flood insurance is required.

Closing/Escrow/

Attorney Fee

Pays for the services of the closing or escrow agent, or the attorney that handles all the financial transfers and payments associated with the closing of your refinance loan.

Abstract or Title Search

  Pays for a written history of the title transactions involving the parcel of land where a home is located, including everything recorded in the public record. The search checks for liens, unpaid claims, restrictions or other problems.

Title Insurance

  The premium for title insurance, which protects you and the lender in case of an unresolved claim affecting the marketable title to the property. There are two policies issued, an owner's policy for you and a lender's policy for the lender. Special title binders and endorsements may also be included in this charge.

Homeowner/Hazard Insurance

  The premium for a form of insurance policy required to protect against certain risks, such as fires or storms. A regular payment for this insurance can be included in your monthly home loan payment through an escrow or impound account. The cost of the first year's policy is generally paid at closing.

City/County/

State Tax/Stamp

  Some states have taxes related to the real estate transaction. These taxes range from a few dollars to 1 3/4 percent of the loan amount depending on the jurisdiction. Current states charging mortgage tax include Alabama, Florida, Georgia, Hawaii, Kansas, Maryland, Minnesota, New York, Oklahoma, Tennessee and Virginia.

Recording Fees and Transfer Taxes

  Recording fees and transfer taxes are charged by most states and localities for recording the purchase documents and any liens in the public record and transferring ownership of the property.

Notary Fee

  Covers the cost of having a licensed notary public certify the signing of your closing documents and signature.

Survey Fee

  A fee for the certification of the location of the property, its dimensions, its boundaries, its contour, and the location and dimensions of any improvements. In some cases, the lender can use the original survey done for the purchase of the property.

Inspection Fees

  Charges for the various inspections that may be required for the sale, such as property, pest and septic tank inspections.

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Pre-paid costs

When you purchase a home, there will be some necessary charges to cover things like the interest on your loan until your first payment is due. These are called "pre-paids" and include the following items.

Pre-paid Interest

  When you buy a home, you typically don't make the first payment until the beginning of the second full month after your loan closes. For example, if you close on January 28, your first payment may not be due until March 1. However, you pay at closing for the interest on your new loan from the day of closing until February 1.

Escrow Accounts

  Escrow or "impound" accounts (also called reserves) are required if your lender will be paying your homeowner's insurance and property taxes. Your lender sets up the escrow account by collecting 2 to 4 months worth of the annual cost of your homeowner's insurance and 2 to 4 months worth of your yearly property taxes and any other items covered by your escrow account. At closing, you'll be required to pay these amounts to fund the account.

Property Taxes

  Property taxes for real estate must be paid quarterly, semi-annually, or annually to the local government. Property taxes are the most common expense prorated (shared or split) between the buyer and seller. Your closing agent will typically determine your portion of the taxes from the date of closing. This varies by state.

 Understand the loan process

Once a home has been selected, the processing of the loan can take up to 40 days or more if you use a traditional lender such as a bank.

How a traditional lender (such as a bank or mortgage broker) processes a loan.

   Loan Officer in branch office pre-qualifies you and collects required information and documents. Mails or faxes documents to corporate headquarters.

Processor, in a central office, reviews your information and requests any additional documents. Once documentation is complete, everything is transferred to an underwriter.  

  Underwriter, a person who typically has no direct contact with you before making the decision to approve or disapprove your loan.

If approved, the Closer assembles the paperwork and mails or faxes documents to the local office.  

  Escrow or title company closes the loan.

How Countrywide cuts so many steps out of the loan process.

Countrywide can significantly reduce the amount of time it takes to process your loan because there is no long chain of approval. Just you and your home loan expert.

  Whether you apply online or by phone, everything happens in our dedicated sales and processing center.

A more direct loan process puts you in the door of your new home faster.  

In addition to over one hundred loan programs, we also offer special quick approval programs that streamline the loan review process for people with good credit and for current Countrywide customers. These programs dramatically reduce the amount of documentation required for your loan.

 Close the loan

 The closing (or settlement) is the meeting at which you sign the paperwork and pay all expenses to take official ownership of your home. If you're looking for a day to celebrate buying your new home, circle this one on your calendar.

Although the closing process varies from place to place, many activities are standard. You'll be required to sign certain documents and pay closing costs. If you're wondering how you make your payments after the loan closes, see Choose your payment method.

How much will your closing costs be?

What happens at closing

Closing documents you receive

How much will your closing costs be?

Prior to the closing meeting, your title company, escrow company or attorney will review with you a copy of the HUD-1 Settlement Statement. This document will provide the final total for your closing costs. It establishes the total funds you must bring to closing. You'll need to obtain a certified or cashier's check for this amount. Personal checks usually aren't accepted.

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What happens at closing

Many of the people involved with the purchase of your new home will attend your loan closing. This includes you, the seller(s), their attorney (if they have one), both real estate agents, and, of course, the closing agent. The meeting usually takes about 1 hour and is held at the closing agent's office. You may live in an area where there is no formal closing meeting. In that case, either an escrow, closing agent or attorney processes all the paperwork, arranges for all documents to be signed, and collects and disburses the required funds.

The steps below explain what happens during and after closing:

1.  Closing agent reviews settlement sheet with you. Both you and the seller sign the settlement sheet.

2.  Signatures are collected for loan documents, such as the mortgage or deed, note and Truth-in-Lending statement. Evidence of required insurance and inspections is presented.

3.  If everyone agrees papers are in order, you submit a certified or cashier's check to cover your down payment and closing costs. (Or, in some proceedings, it is drawn from an escrow account established for your home purchase.)

4.  Lender provides check covering the home loan amount to the closing agent.

5.  If your monthly payments are to include property taxes and insurance, a new escrow account (or reserve) is established.

6.  You receive the keys to your new home.

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A few of the key closing documents

you receive

HUD-1 Settlement Sheet

Itemizes the services provided and the charges to the buyer and the seller. You should be allowed to review this form shortly before your closing meeting so you know your closing costs in advance.

Truth-in-Lending (TIL) Disclosure

You should be mailed your initial TIL disclosure within 3 business days after applying for a home loan. It outlines the costs of your loan and discloses the APR and other terms of the loan, including the finance charge, the amount financed, the payment amount, and the total payments required. Since it's possible that the annual percentage rate (APR) calculated at your loan application will change a little before closing, your lender is required to give you the final version of your TIL disclosure at or prior to the closing meeting.

Deed of Trust or Mortgage

(also Security Instrument)

Documents conveying a lien in your property as security for repayment of your home loan. (If you default on your loan, your lender has the right to foreclose your ownership interest and take possession of the property.)

The Note

The mortgage (or promissory) note is a legal "IOU." The note represents your promise to pay the lender according to the agreed terms, including the dates on which your home loan payments must be made and the location to which payment must be sent.