I am in the process of purchasing a home and have received two different quotes from two lenders for a mortgage. Both were obtained on the same day, thus market rate fluctuations are not a factor here.My question is this: lender A has given me an offer to pay 1.25 points in exchange for a rate buy down of .5%. Lender B says that the benefit would not be the same. In other words, for 1.25 points paid to Lender B would result in something more like .3% rate buy down. He also says that the benefit received from each point is set by Fannie Mae. What's the story here? I'm inclined to believe that the deal from Lender A would be better in this case (shorter period of time to recoup the initial expense). Can anyone explain?
Autsin,TX | Sep 16th 2009
by simmons...
Answer
by KirkAnd...
by KirkAnd...
Each Lender has different sources of money, and as such, different costs and yields. The best way to compare quotes is to get a Truth In Lending Disclosure from each. This will tell you which deal is actually better based on the disclosed Annual Percentage Rate (APR) which takes into to consideration the finance charges that you will paying. Another thing that you might want to do in addition to this, is request that both Lenders guarantee their closing costs in writing (that's what I provide to all of my clients), and that way you know nothing can change at the last minute. Please feel free to call me directly should you have any further questions.Kirk Sep 17th 2009
First of all, Fannie Mae and Freddie Mac do not "control" the rate buydown. Sure, they set the criteria by which we all have to abide by to price our loans, but there are infinite rate/point combinations, and it is up to the lender how they will price their loans. Not every lender has the same pricing structure, which is why you should always get more than one opinion. On a purchase, the best course of action is a matter of simple math, as you have already figured out. However, make sure to do some research on Lender A and Lender B, and be SURE you are comparing apples to apples. For example, lender A might be quoting a rate/point combination that is based on a 30 day rate lock, when you aren't closing for 45 days. Rate lock length is typically not disclosed on the GFE ot TIL. That might make lender B's offer better. Sep 17th 2009
by Chris K...
Have both lenders quote you without any points. This will give you a better estimate as to whom is giving you the better deal. Also... my personal opinion is that a buy down (points) is always a bad investment. email me at ckelso@wbmtx.com with any additional questions you may have. Sep 17th 2009 |
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