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Is there a difference between the down payment and points?

by michaelmorris from Fullerton, California. Feb 7th 2013 Reply


Steven Ceceri (CreativeFinancingOptionsGroup)
#36 ranked lender in Massachusetts - 723 contributions

Hi Michael! A Point = 1% of the Loan Amount. The Down Payment is a Percentage of the Purchase Price if you are buying a property. The Down Payment reduces your Loan Amount and the Point is a Fee Charged to Originate your loan. I'm happy to answer any other questions or help you with any Pre-Approvals you may need! Enjoy the day!

Feb 7th 2013
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Elise David (MortgageGal)
#805 ranked lender in California - 2 contributions

Hi Michael, A down payment can be as little as 3% -3.5%. Sample $200,000 x 3.5% down payment = $7,000.00. Points are charged when you want to buy down a rate. Not needed in my opinion in this market when rates are already very low. Better to add an extra payment every year in January to help reduce your principal and interest for the remaining 11 months. Here to help guide you through the process. All questions welcome to prepare you on your home purchase. Hope this helps.

Feb 7th 2013
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William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,726 contributions

Down payment is monies used to reduce the sale price of the home.. $100K home, 10% down payment = $10,000... Loan amount is $90K.. 100% of your "Down Payment" went to reduce the purchase price.. Points on the other hand are a "Closing Cost".. Or a charge by the lender to do your loan.. The monies you pay them are how they get paid to originate a loan. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Feb 7th 2013
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Carlo Sanchez (MortgageLendingPro)
#0 ranked lender in Utah - 1,163 contributions

Absolutely, Down payment is the minimum amount needed from the investor to put skin the game and points are paid to get the rate you want or to qualify via your DTI Ratio's.

Feb 7th 2013
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Matt Pollina (matt@smartmtgs.net)
#58 ranked lender in Illinois - 40 contributions

If you are purchasing a home you will have a down payment. It is typically from 3.5% to 20% although it can be higher. For example, if you are purchasing a home that has a sales price of $200,000.00 and you put 20% down that would be $40,000.00. You would then obtain financing for $160,000.00. Points are completely separate. The term 'points' has been thrown around and has come to mean many things in people's minds. The confusion may come in because points by definition are a percentage of the LOAN AMOUNT not the purchase price. So, in this scenario if you wanted to pay 1 point then it would $1,600.00 since it would be 1% of the loan amount. What you should do is contact a local broker. The laws that stem from the Dodd-Frank Safe Harbor Act dictate the ways brokers can be compensated. Find one that is compensated only by the lender and you should not have to pay points at all. In fact, you can get a lender credit to help offset some or all of the closing costs as well as look for seller concessions.

Feb 7th 2013
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David Kosmecki (David_Kosmecki)
#38 ranked lender in Minnesota - 256 contributions

Down payment is the amount of money between the purchase price and the loan amount. Points are a prepaid fiance that are part of the closing costs. Usually points are paid (by buyer or seller) to lower the interest rate of the mortgage the buyer is obtaining.

Feb 7th 2013
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John Schweer (johnschweer)
#10 ranked lender in Missouri - 163 contributions

as has been stated there is.... additionally in todays low rate environment, typically it isnt wise to pay points... the time it takes to recoup the expense you have upfront will take years to realize the savings, and if you refinance or sell the home then the money is just wasted

Feb 7th 2013
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Garett Hyman (GarettHyman)
#43 ranked lender in Michigan - 14 contributions

Hi Michael, 1 point is 1% of the loan amount, which is used to buy down the interest rate. Do not confuse this with origination which is the fee to the lender to conduct business. Down payment is the amount of money you put down towards the purchase price.

Feb 7th 2013
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Joe Shamie (Joe Shamie)
#4 ranked lender in New Jersey - 1,412 contributions

The down payment is the difference between the purchase price and the loan amount. Points are fees paid to the lender to discount the rate.

Feb 7th 2013
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Larry Gray (lgray_312_247)
#594 ranked lender in California - 1,139 contributions

With traditional closing costs a point, representing 1% of the loan amount, was sometimes a normal origination chargefrom the bank. Now origination is shown as a combination of a lenders fees and any addtional points charged to buy downthe rate. If your tota the lender fees and apply the number as a percentage of the loan amount you have a more accuratereading on costs directly from the lender. Thus, on a $330,000 loan wherein lender fees total $1100 and that is also thetotal origination charge...you are paying 1/3 of a point (.333%) You could say you are paying 1/3 of a point pluse escrow services,title insurances, signing, government recording, & miscel fees like a transfer tax (purchase.) The down payment is exclusive of all these loan charges and shows an investment in equity by you. You really need to getqualified for now even if you are not ready to buy. You need to get a clear picture on all the costs. Some lenders, like ourselves,can assist you in applying for downpayment assistance, when qualified. Sellers will sometimes allow part of the sales price to gotowards covering some of your closing costs. The lender can provide alot towards your closing costs by going to a little higherrate, and even the realtor can sometimes help. There are alot ways to get new buyers into homes and some buyers havegotten into their own new home with a cost of as little as 1% of the purchase price!

Feb 7th 2013
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Barb Lanis (BarbLanis)
#71 ranked lender in Illinois - 663 contributions

The down payment amount is your minimum required investment in the purchase price. Depending on your loan program, this can vary. FHA requires 3.5%. Conventional typically requires 5%. Each of these options depend on your credit score.Regarding Points, there should be no reason for you to pay these, given this low rate environment.Points are paid to buy the rate down. This costs you out-of-pocket, unless you have a purchase where the seller is paying some, or all, of your closing costs.Points vs. down payment costs are not inter-changeable. Your minimum investment and points are independent of each other.

Feb 7th 2013
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,944 contributions

Down payment... Simple enough to understand. Points, usually expressed as a percentage of the loan amount is a cost to obtain the loan are part of your closing costs. There is a bit of confusion here as what actually is considered "points". The most correct answer is "points" are up-front costs above and beyond the normal closing costs on the loan to "buy down" the interest rate below what the lender would normally offer you. For example, lets use a $200,000 loan. Lets assume your regular closing costs are $6,000 and the lender is offering you a rate of 3.75%. By paying 1-point ($2,000) more up-front ($8,000 total), the lender will now offer you a 3.50% interest rate. www.StPaul-Mortgage.com

Feb 8th 2013
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