Home Buying in 11967>Question Details

Jenn V, Home Buyer in Shirley, NY

I'm totally confused about paying points to lock in a mortgage rate, any help would be appreciated

Asked by Jenn V, Shirley, NY Sun Jan 25, 2009

During much of the home-buying process we've been flying solo, with much of our advice coming from older, wealthier co-workers. Our mortgage is coming from a mortgage banker, not a broker and the communication has been sparse. We are approximately 2 weeks from closing and as of last week had not locked an interest rate. When I saw rates were rising again I called the banker's office and was told I could lock that day at 5.5% (FHA loan, my credit is around 680, hubby's is 720,) for the cost of 1 point ($2900.) I agreed via email and need to drop the check off tomorrow morning. I was told the $2900 will be credited at closing- does this mean the mortgage amount is reduced by $2900 (we are financing our closing costs) or does it come off of the cash due at closing? Any insight would be appreciated, there is good chance that no one will be available to answer my question tomorrow. Thanks in advance

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Hi Jenn,

For FHA loan, lenders don't care that much about credit and yours and your husband's credit are good enough for FHA loan.

Borrowers usually pay points to buy down the rate. It doesn't mean pay 1 point (1%) to lower 1%, might just lower 0.5% or less.

I know that some mortgage officers want borrowers to pay a deposit before they lock rates for clients; because they don't want borrowers shop around and back off after they lock the rate.

If you finance 3% closing costs, which would be $8,700. If your closing costs is less than that, you cannot get the money. Sometimes mortgage broker charge you 1% to increase your closing costs in order to use all your 3%. Then they credit you back the money as a refund.

Hope this answer your questions but this is not a norm. I don't know why your banker handles in this way. Don't be afraid to ask questions if you don't understand. They should explain to you and make it clear to you.

Good luck with your closing and congratulations!

Angela Leung
Real Estate Investment Consultant
0 votes Thank Flag Link Sun Jan 25, 2009
Jenn:

Something does not sound right. You should not have to pay a deposit since you are in contract on a property. Since you are in contract, why the deposit? That confuses me. I have been in real estate for 9 years and have never seen a deposit to lock a rate for 2 weeks. I have seen a 1% deposit charged on construction loans, but that is it due to the long term rate lock. I could see paying for the appraisal upfront which should be 300-500.00, but that is it.

The $2900.00 should be credited toward your bottom line to bring to closing instead of a principal reduction. However, if there is no money due at closing since you are financing your CC (Which also does not make sense), it may be taken off of the loan amount. Did you increase the Purchase price to cover the CC?
0 votes Thank Flag Link Sun Jan 25, 2009
If I understand correctly, $2,900 is coming out from the closing cost to buy 1 point, your mortgage stays the same (what is your total closing cost including $2,900). Please call your atty explain everything. Get a "Good Faith Estimate or Estimated Closing Cost" and ask your mortgage banker to explain to you (very clear communication) before you sign anything or hand over the money, also have your atty go/look over with you (ASAP). You don't want any surprises at the closing table. I am not a mortgage broker but have seen things.
If you like to reach for any questions... steven.ochs@wellsfargo.com cell# 516-607-2958
Good Luck....
If you like to reach me...Jane Zilpelwar
631-889-2997
jzilpelwar@yahoo.com
0 votes Thank Flag Link Sun Jan 25, 2009
Jenn:

if I understand your question correctly, the $2,900 should come off the cash due at closing. Your mortgage amount stays the same.

However, you really should talk to your mortgage broker and/or escrow officer to get an estimated closing statement so you know what you are looking at. There should not be surprises at the last minute.

Best,
Sylvia Barry
Marin Realtor
0 votes Thank Flag Link Sun Jan 25, 2009
Sylvia Barry,…, Real Estate Pro in Novato, CA
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