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can lender credit be applied to principal? Is there a max lender credit that I can get?

by jpilisuk697 from Seattle, Washington. Oct 2nd 2020 Reply

Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,423 contributions

Typically, you will see a lender credit getting applied to a Rate & term refinance. These loans allow for a limited amount of cash back to the borrower at closing. If it turns out that the amount of cash the transaction generates is going to exceed that limit, the lender will generally either reduce the principal of the new loan or apply the credit to principal. The credit is generated by accepting a higher than normal (or Par) interest rate. In years past, I've seen lender credits in the 4-5% of loan amount range, but because rates have fallen so much, most lenders have squeezed the top of the chart (higher rates) so that there is only a nominal credit available on most loans. Today, for each quarter percent increase in the interest rate on a loan, will generate about 0.25% in lender credit. This means the lender is recouping from you, just about the same amount of the credit they gave you every year in the form of more interest you are paying. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ Licensed in Arizona, California, Georgia, Oregon, and Washington. Need help in other states? We've got you covered. NEXA Mortgage is licensed in 46 states ~ 480-889-9000.

Oct 3rd 2020
Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,703 contributions

"Lender Credits" is the term lenders call it when you INCREASE your loans interest rate in exchange for a DECREASE in the loans closing costs of any loan, including both a purchase loan or a refinance loan. Except in the most limited capacity, this is NOT used or applied to principal reduction. I lend in MN WI IA ND SD, and can be found at - NMLS 274132

Oct 6th 2020
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