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why do lenders charge with points?

by nickbelefonte from San Jose, California. Aug 14th 2013 Reply


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

Lenders do not work for free.. they charge for their service.. and there is a variety of ways you can pay your broker.. one of which is by paying points.. if you choose not to pay points, your lender can make money by charging you a higher rate. Points are also used to "buy down" the interest rate.. this is usually never an advantage to a borrower unless you're purchasing a home and the seller has given you a larger than necessary credit.. with this scenario, you can use the excess to "buy down" your rate by paying points.. 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

Aug 14th 2013
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Ernesto Marez (Ernesto)
#68 ranked lender in Maryland - 137 contributions

We will only charge a client an origination point to buy the rate down and get a client a lower than market rate, unless it is a portfolio loan for "out of box or near miss fannie mae or freddie mac loan.

Aug 14th 2013
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John Moran (TheHomeMortgagePro)
#7 ranked lender in Arizona - 661 contributions

Hi Nick, Most loans have a no point option, so if you are really against paying them, you probably have the ability to do that. By paying points, what you are really doing is buying down your interest rate. For an upfront fee (points), you are opting for a lower interest rate and payment over time. If you will be in your mortgage and home for a very long, this may be an attractive option. People also choose to buy down their rate when the seller is offering them a credit that is larger than the closing costs. In this case, they would be leaving money on the table, so they decide to use it for a lower rate. A good loan officer will be able to explain the pros and cons of paying points and work with your goals to help you decide whether or not it makes sense for your unique scenario.

Aug 14th 2013
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,970 contributions

There are basic costs for every lender when doing a mortgage loan. Most of the items are not charged by the actual lender, and are "third party" fee. For example, we are not the credit bureau. They charge us, we pass it along to you. We are not the appraiser. They charge us, we pass it along to you. Anyone claiming to not have a standard fee or cost is hiding it in the interest rate they are charging you. The next aspect is also simple. We have costs to originate a loan... Personal (Loan Officers, Underwriters, Processors, funders, shippers), rent, advertising, paper, ink, taxes, phone bills, computers, etc. I'm sure wherever you work has to make money too... Another missed area is that we also have a very high level of risk versus reward when doing a loan, so it needs to make sense for us. Think about how much risk and cost there is to cover just one foreclosure, and how many good loans need to be done to offset the bad ones. Finally, discount points... This is an additional cost if you would like to buy down the interest rate from what would normally be offered. This is not a profit area for us. You are simply agreeing to pay a little more upfront today in exchange for a lower rate - which should save you in the long run. www.JoeMetzler.com

Aug 14th 2013
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Dave Metsker (DaveMetsker)
#37 ranked lender in Oregon - 2,317 contributions

Point pay the internal lender costs and adjust for small changes in the wholesale cost of funding the loan.

Aug 14th 2013
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Jeff Albrecht (Doctor_Mortgage)
#96 ranked lender in Texas - 77 contributions

Nick: The choice of "points versus no points" is 110% your choice!!! We will show you an % rate, that is based upon YOUR qualifications, the type of loan, and the type of property. I like to give clients 3 % rate choices. Click on my profile to the left, then click on my email address and let's discuss your needs offline. We look forward to working with you. My direct office # is 512-381-4643. Thanks...Jeff

Aug 15th 2013
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Larry Gray (lgray_312_247)
#592 ranked lender in California - 1,139 contributions

You might say there are fees and points. Lender fees, escrow fees, title fees,and miscellaneous fees can add up from $2000 to $6000 depending on the lenderand if a purchase or refinance loan.Fees for a purchase loan are always much higher. Points are origination points or discount points.Origination points are often applied because the lender has not built in the cost to the rate perhaps,and is giving you a lower rate. Or discount points are applied because that is the only way tobuy down that rate. Sometimes an origination point and a discount point is necessary on particular types of loans wherein the Mortgage bank Branch or Broker can not make their money without it.

Aug 15th 2013
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