My seller client and I have a closing scheduled for tomorrow, so we reviewed the settlement statement today.
I have reviewed settlement statements on behalf of my clients for years. It's best to review them in advance so any corrections can be made before we arrive at the closing table.
I'll verify that the seller's portion of the closing costs is properly stated, the taxes and HOA fees are pro-rated between buyer and seller, loan payoff is accurate, the real estate commission correct, etc.
On this particular transaction, the seller's summary was simple. Everything was in perfect order and reflected as per the terms of the sales contract.
Then my eyes glanced over to the buyer's column.
I couldn't believe my eyes!
The outrageous fees charged by this out-of-state lender
made me do a double-take.
The buyer is being charged SEVERAL THOUSAND DOLLARS in POINTS (around 3%), in addition to a hefty origination fee to obtain a loan that, when all the adjustments are made, is still comparable to "the going rate" with local lenders.
Considering our current record low interest rates, it doesn't make sense to spend thousands of dollars paying "points" to buy down the interest rate even further.
For those who don't know what "points" are, here is a brief description:
Let's say your loan amount is $250,000 and the prevailing interest rate is 4.25%. The lender can lower your interest rate if you pay a "point", which is 1% of the loan amount. In this case, you could pay an additional $2,500 to lower the interest rate by .25%.
Is it beneficial to pay "points" to buy down a mortgage? For some people, perhaps. You can calculate whether paying points to lower the already historically low interest rate is right for you, by dividing the cost of the buydown ($2500) by the monthly savings. If you stay in the home longer than six years, you could realize a savings. If you sell before the break even point, it's money you won't get back.
Understand, I am not the buyer's representative in this transaction. Another agent brought the buyer to the table. I do not know the relationship between this Realtor and the buyer; nor do I know if the LENDER supplied the Realtor this lead through a business referral.
If I were representing this couple, we would have had a long discussion regarding "points" and whether or not it was a worthy expense.
Better yet, I would have referred them to one of my LOCAL, trusted loan originators who would have discussed their financial needs and future plans and together THEY could formulate the best course of action.
When considering a home purchase,
choose a reputable lender to finance your dream home.
Image #1 courtesy of phanlop88 at FreeDigitalPhotos.net
Image #2 courtesy of mapichai at FreeDigitalPhotos.net
Written and Published by Pat Starnes REALTOR
Pat specializes in Residential and New Home Sales
Primary Service Area:
Brandon, Pearl, Ridgeland, Flowood, Madison and the Ross Barnett Reservoir area
Pat Starnes, Broker Associate
Front Gate Real Estate, 6700 Old Canton Rd., Suite C
Ridgeland, MS 39157
601-991-2900 - Office
601-278-4513 - Cell
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