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PLease help me with "Origination Fee"

I am currently purchasing a home and am not quite sure how "buying down the rate" works and am wondering if my lender is trying to pull a fast one on me. I am being charged a $3,809.20 origination fee to buy down the rate from 4.5% to 4.375% on a 5/1 ARM $387,586.00 loan amount.Is that correct? Can anyone explain how this works? by NewarkerB18 from Newark, New Jersey. Sep 16th 2009 Reply


Joshua Crater (Rate1st.com)
#204 ranked lender in California - 47 contributions

For staters that rate sounds too high for a 5/1 ARM. Our current rate for 5/1 ARM is 3.625% with 1 point or 3.375% with 2 points.Call me at 949-274-8564 my name is Josh if you would like to get a better deal than what you are currently being offered.Now for your original question...What are points? Points are costs that need to be paid to a lender in order to receive mortgage financing under specified terms. A point is a percentage of the loan amount (one point = one percent of the loan). One point on a $100,000 loan would be $1,000. Discount points are fees that are used to lower the interest rate on a mortgage loan (you are discounting the interest rate by paying some of this interest up-front). Lenders may express other loan-related fees in terms of points. Some lenders may express their costs in terms of basis points (hundredths of a percent). 100 basis points = 1 point (or 1 percent of the loan amount).Should I pay points to lower my interest rate?If you plan on staying in the property for at least a few years, paying discount points to lower the loan's interest rate can be a good way to lower your required monthly loan payment (and possibly increase the loan amount that you can afford to borrow). If you only plan to stay in the property for a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front. We can help you determine how long it would take for your monthly savings to recoup the costs of the discount points.

Sep 16th 2009
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John Mattsson (John Mattsson)
#9 ranked lender in New Jersey - 2 contributions

Hello, without knowing more about your loan, it is a little tough to answer. But that seems like a lot just to lower your rate just by .125. If that $3,809.20 is on the origination fee like, it is probably a combination of cost and some buydown.I would be more than happy to discuss and help you understand. You can contact us at (732) 275-1600

Sep 16th 2009
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Jack Myers (jmyers)
#11 ranked lender in New Jersey - 2 contributions

If the entire 3809.20 origination fee was to lower the rate by .125% this makes no sense. Your monthly savings is only $28.68. So, it would Take 132 months (11 years or so) to recoup the upfront cost. Contact me at 973-292-6500 x 108 ask for Jack. I can make it clearer for you.

Sep 16th 2009
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Marco Sepulveda (mspulveda)
#202 ranked lender in California - 5 contributions

Please call me right now ,i can definitly give you a better deal than that and i will explain you why..Call me 925-207-4933.Thanks.

Sep 16th 2009
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