Financing in Hilliard>Question Details

Bill, Home Buyer in Hilliard, OH

are "Points" considered "closing costs"?

Asked by Bill, Hilliard, OH Tue Jan 18, 2011

? If so; With sellers normally paying closing costs now, it makes sense to choose a lowere interest rate and pass the points onto the seller, right ?

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They are closing cost and your question is a great one. I definitely recommending getting as much as you can in a buyer's market and negotiating points for a lower rate is a fantastic example.
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0 votes Thank Flag Link Tue Jan 18, 2011
Points are definitely negotiable. You could ask the seller to pay them, however, you might have to pay the seller more money to cover that expense. You should analyze the loan in different ways - with or without points, paying them yourself or having the seller pay them, etc. Then you can look at the long term effects of each scenario to decide which makes the most sense. Your real estate agent or lender can usually do this analysis for you.
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0 votes Thank Flag Link Tue Jan 18, 2011
Bill not all closing cost are passed onto the seller, things that are associated with your financing are yours as well as other fees that you create in the sale of the home! Don't be surprised if you find a home that is for sale where the seller has elected to have the buyer pay the closing costs, it is not a rule of thumb that sellers pay closing cost and in most sales closing cost are a mix of both buyer and seller!
0 votes Thank Flag Link Tue Jan 18, 2011
Bill,

Yes Points are considerred Closing Costs. Regarding the second part of your question, when asking a seller to pay your closing costs you have to offer them a higher price on the home. The question then is "Who is really paying the Closing Costs?"

Paying points or not is a seperate decision you need to make. Generally for every 1% Point you pay you can expect to recieve a .25% lower rate. You can call me at 216-324-8113 if a further explaination is desired. If you are a first time buyer there are other programs that might be of interest to you. The phone call and conversation are without cost or obligation.
0 votes Thank Flag Link Tue Jan 18, 2011
Actually, points are paid by the buyer. They are basically money spent to lower the interest rate of the buyers loan.
0 votes Thank Flag Link Tue Jan 18, 2011
You should talk to your lender about what your closing cost should be. They can break everything down for you. If you dont have a lender your comfortable with, I can send you some info on local lenders I use in the Columbus area.
0 votes Thank Flag Link Tue Jan 18, 2011
Points are mortgage interest fees paid up front. This one-time fee reduces the initial interest rate on your home loan. Points are a percentage of your loan amount, with one point being equal to one percent of your loan.

As an example, if you borrow $200,000, one point would be equal to $2,000. In general, paying this up front will reduce your interest rate by approximately .25%.

So to answer your question..Yes they are a closing cost. These points are generally deductible the year you close as well so keep that in mind when you are filing your taxes!! . This is true even if the seller is paying for them.

If you have any more questions I would love to help you! If you are looking for a good lender I can recommend a GREAT one. His name is Raub Warner with the State Bank. 614-571-0626 Raub's Cell. He has helped all of my buyers with their questions in financing!
0 votes Thank Flag Link Tue Jan 18, 2011
Sellers look at the bottom line when selling and normally a buyer asks to have them paid if they are short on funds. It really does not make the deal any sweeter if the seller looks at the bottom line. For example, lets say the seller decides $200,000 is the lowest he will sell for. Seller sells for $205,000 and pays $5000 in closing costs or he sells or $200,000 and pays no closing costs. These deal are the same to him, but he gets more tax deductions if he pays your closing costs.
That's how a seller looks at it.
0 votes Thank Flag Link Tue Jan 18, 2011
Not necessarily. Anything the seller "pays" for you is because you negotiate a higher price for the property. So in reality, you are paying for points to buy down the rate. Also, sometimes it's really not worth it, depending on how far you want to buy it, what the rate starts and and ends at, how much the mortgage is, and how long you will be there. Just know that you are really paying your closing costs, including your points.
0 votes Thank Flag Link Tue Jan 18, 2011
Bill,

If points are paid then yes, they would be part of the closing costs. That is a great strategy if you can have the seller pay to reduce your rate by paying down points.

Mike
0 votes Thank Flag Link Tue Jan 18, 2011
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