point on mortgage

[Anonymous]

Don't know if this is the place for this or not, but is paying 1 point for an origination fee for refi normal and is it negotiable?

My bank wants to charge me 2,400.00 for a 242,000.00 loan. I think it's very high.

Thanks.

[ShanetheMortgageMan]

You have the option to pay points or not... if you pay a point it is used to get a lower interest rate, so you'd have to determine what the rate would be without any points (ask), and then calculate the breakeven point to where if you pay points, how many months of the lower payment would you need to be in in order to save the amount of the point ($2,400 in your case).  So if it's lowering the paymen tby $50/mo, then the breakeven point would be 48 months ($2,400 / $50 = 48).

[Anonymous]

The previous post is referring to loan DISCOUNT points. The original poster is referring to ORIGINATION POINTS. These are two totally different charges. The latter is the amount of money the lender charges you for securing the loan. It is a mandatory charge due at closing. 1% is perfectly normal (and reprsents 1% of the homes selling price).

I am closing on my house in 3 weeks. Wells Fargo will charge me 1 point (1%) in an origination fee but my mortgage broker will charge me only 1/2 point (1/2%), but makes it up in other fees. I have until tomorrow to decide which way to go.

At any rate, (no pun intended), no, you're not being gouged at 1%. It's pretty much the industry standard here in the midwest.

You may want to look at other fees listed on your good faith estimate though and make sure that the "junk fees" are limited (they exist with virtually every lender) and be aware which one's might be negotiable or fully waved if you question them.

http://www.rateempire.com/buying/closingcost.html

[Anonymous]

So I was reading this whole deal about closing costs because that stuff has me stumped. I GUESS THAT'S WHAT THEY'RE MEANT TO DO.

According to that page, I could expect my fees, including taxes, to be about 2% to 3% of the selling price. So if I were to purchase a house right at $300k then my fees would be between $6k and $9k.

My question is: Will this extra cost be rolled into my loan or will I be expected to pay this out of pocket with no loan?

[Anonymous]

My sellers are paying up to $6,000 towards my closing costs (not to mention dropping the price $40k) which covers everything with a little of my earnest money left over. I will walk out of the closing with around $500 in my pocket.

In this market it's almost a given to have the seller pay at least a portion of the closing costs, particularly if you're at or near their asking price. If you come up short on these funds a mortgage broker may roll them into the loan but will charge a "yield spread premium" to offset the costs. This results in a higher interest rate for you.

Those "no closing cost" ads you see are deceiving as they never include prepaids (taxes, insurance, etc) and rarely ever cover other items considered "paid outside outside closing" such as the appraisal, title work, recording fees, etc, etc.

http://en.wikipedia.org/wiki/Yield_spread_premium

[ShanetheMortgageMan]

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mplsmelo50 wrote:

The previous post is referring to loan DISCOUNT points. The original poster is referring to ORIGINATION POINTS. These are two totally different charges. The latter is the amount of money the lender charges you for securing the loan. It is a mandatory charge due at closing. 1% is perfectly normal (and reprsents 1% of the homes selling price).

I am closing on my house in 3 weeks. Wells Fargo will charge me 1 point (1%) in an origination fee but my mortgage broker will charge me only 1/2 point (1/2%), but makes it up in other fees. I have until tomorrow to decide which way to go.

At any rate, (no pun intended), no, you're not being gouged at 1%. It's pretty much the industry standard here in the midwest.

You may want to look at other fees listed on your good faith estimate though and make sure that the "junk fees" are limited (they exist with virtually every lender) and be aware which one's might be negotiable or fully waved if you question them.

http://www.rateempire.com/buying/closingcost.html

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While they are labeled 2 different things... they are basically the same.  They are both used to buy your rate down.  Don't pay the discount fee, you get a higher rate... don't pay the origination fee, get a higher rate.  Pay the discount fee, get a lower rate... pay the origination fee, get a lower rate.  Same affect for the homeowner.

[Anonymous]

"Don't pay the origination fee and get a higher rate". ?????????? Umm, it's more like "Don't pay the origination fee and you don't get your loan or house". The fee may be negotiable but paying it isn't. It's an administrative fee, the cost charged to you, the buyer,  for taking out the loan and has nothing to do with the interest rate.

Wells Fargo charges me 1% origination fee with an interest rate of 6%. My broker charges me 1/2% origination fee also @ 6%. Both are using the exact same mortgage product (USDA Rural Development Program). The broker makes up for his lower origination fee by adding a yield spread premium of .75%, or, in my case $1.462 This is the amount that he collects from the lender above and beyond the origination fee as an incentive to charge me a slightly higher rate over par. Without the YSP I could probably get the loan at around 5 7/8%.

Do not confuse discount points with origination fee points. Semanticallythe term may be the same ("points") but by definition they are two very different animals.

[ShanetheMortgageMan]

I've been in the business for 7 years, I think I know how mortgages work.  Origination isn't mandated... 50% of my loans don't have origination in them.  I make it up by what you've already explained, yield spread premium.  Lenders do the same thing, except they get SRP (service release premiujm).  Discount & origination are both tools to get a lower rate.  Discount & origination are 2 different things, and have their respective places on the HUD, but they are both used to get a lower rate... as you and I have already pointed out.

[Anonymous]

Thanks for all responses

My plan has changed, I am going with a fannie mae product in a healthy neighborhood loan which I am

[Anonymous]

Thanks for all responses

My plan has changed, I am going with a fannie mae product in a healthy neighborhood loan which I am a little leary of only becasue of how money is dispersed.

But bottom line I am going to get a loan for refi/rehab at 1 point below prime.

If  prime is 5.81 today, does that mean I am getting a 4.81 interest rate?

Thanks.

Message Edited by zman on 12-03-2007 06:46 AM