Rate/point rounding

[homebuyer360]

Question. If a rate is 2.75 with .761 points and a buyer buys 1 full point, will they reduce the rate a little to account for the .239 difference? So, the 2.75 rate could end up like 2.69? Or will they only allow the partial .761 point?

[NC_Mtg_Loaner]

Discount points, or their percentage reflect the cost to obtain whichever rate you are being offered.

Using your example let's assume a hypothetical $100,000 loan amount.   .761 points = $761 to obtain the rate of 2.75%.   Conversely, you might see the rate of 3.00% at par value meaning no points being charged or even a lender credit issued of .761 points to accept a higher rate of 3.25% where you the consumer can take that $761 and reduce your closing costs. 

[homebuyer360]

Thanks for that. But I need to know about the rounding. I'm being given 1 point for free and I wanted to know how that will affect the rate in the given scenario.

So, if a 100k loan and .761 used to reduce rate, can I use the other .239 or $239 as a credit towards closing?

[JVille]

To clarify is someone (Seller, Lender, ?) giving you an amount equal to 1% of your loan amount to Apply toward discount points and/or closing costs? Example $100,000 loan and you have been given $1000/or 1% of your loan amount to buy your interest rate down? I’m pretty sure this is what you are saying, except in your case it’s only costing $750 (Example) to reduce your rate and you want to know what happens to the other $250? If this is your question (and this scenario happens in a huge percentage of mortgage loans) the excess funds are Generally credited towards other loan fees or expenses. And will show up as a credit at closing of escrow. Which means you will need $250 less of your own money to close.
This would be an excellent time to confirm that the credit is being fully used to Lock in the Interest Rate and any balance of funds will be a credited to offset your closing costs.
I hope this makes sense, it’s late!

[homebuyer360]

Yes, that makes sense. I just needed to know that the difference was accounted for somewhere in the final numbers. Thanks.

[JVille]

Please CLARIFY with your lender that the balance of your Seller Concession/ Credit will be applied to other buyers closing costs and show as a credit to you at COE.
Unless your contract says UpTo 1%