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Posts from the ‘Lending a Hand’ Category

14
Jan

Understanding mortgage pricing: a brief guide to “points”, “par” and “rebate”

One of the most misunderstood parts of the mortgage process is the pricing. In this guide, we attempt to clearly (and quickly) explain how the mortgage pricing works.

To follow mortgage rate movement, we offer the CCL Rate Tracker, a twice-per-month email with 10 loan options and 3 cost options. Subscribe with an email to [email protected] with the words “Rate Tracker” to follow along. 

There are two main types of payments that the borrower will make.

 

Closing Costs

Under new government regulation, loan officers charge a fixed percentage for any loan, which is commonly referred to as “points.” This charge is fixed prior to each loan and the process is very transparent. Central Coast Lending has one of the lowest charges in the industry (for more on our pricing, call 805.543.LOAN).

  1. Points refer to the percentage paid by the borrower for the mortgage rate. For example, “1 point” corresponds to a cost of 1% of the total loan amount. For a loan valuing $417,000, this would translate to a $4,170 payment (for 1 point).

The other component of closing costs refers to charges for items like the appraisal, the escrow process, and a handful of other costs. Combined with the payment to the loan officer, this handful of charges amount to your “closing costs.”

 

Rate Cost

For the latest real estate and mortgage news follow us on Twitter @CenCoastLending and Facebook Central Coast Lending to stay informed. 

In addition to the “closing costs” mentioned above, every mortgage rate has a “rate cost” associated with it.

  1. The 30-year fixed mortgage, for example, will have a handful of rates available, such as 3.000%, 3.125%, 3.250%, 3.375%, and so on.
  2. Just like for goods in a supermarket, each mortgage rate has a “cost.”
  3. This cost is also expressed as a percentage of the total loan amount.
  4. The actual price paid for a mortgage rate varies on a sliding on a scale from “cost” (you pay) to “rebate” (lender pays).

The “rate cost” ranges from paying “points” for the loan, or receiving a “rebate” to go towards paying your closing cost. Sometimes the option is cost-neutral, or “par”.

Rate costs very based on each lender. As a mortgage broker, this gives us a competitive advantage – it allows us to shop around lenders to find the best rate and term that works for you.

Central Coast Lending will help you find the right mortgage/cost combination for your finances.

 

Final Payment

Once you combine the net “closing cost” and the net “rate cost” you get your final “points” payment for the mortgage closing.

When we write that “rates improve”, we are referring to the “rate cost” (by the lender) that is moving, which is reflected in a lower APR.

Questions? For more information, please don’t hesitate to call (805.543.LOAN) or email ([email protected]) for a free, confidential discussion about your finances and mortgage rate pricing.

18
Apr
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Lending a Hand: Documentation Difficulties

We are in a new time of loan processing. In years past lenders required less documentation, allowed for substitutions of required forms, and readily made exceptions.  Today, we find that lenders are the exact opposite – lenders require fully documented files and rarely make exceptions. Following are few tips to avoid documentation troubles. Read more »

5
Apr
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Lending a Hand: Appraisals Present Challenge for Borrowers

Have you ever had somebody snap at you: “if you aren’t part of the solution, you are part of the problem!”? This could happen when your spouse asks you to mow the lawn, and instead you decide to remodel the landscaping, beginning by ripping up the grass in its entirety.

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4
Apr
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How to improve your credit score to qualify for a mortgage

Part of the mortgage qualification process involves credit score. Loan programs have minimum credit score guidelines, and your credit can affect the interest rate you are able to obtain. An ideal situation will have a strong credit score, but we realize that every borrower has unique circumstances. If you find yourself needing to rebuild your credit score, check out this handy guide I put together. Read more »

5
Mar
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The Mortgage Process Explained: The Floating Rate Lock

Lending ain’t easy. Lately, we have seen tightened lending standards and an increasingly rigorous loan process. In our quest to make every transaction as quick and painless as possible, we decided to address these difficulties as part of an ongoing series called “Lending a Hand.”  This series will prime you the challenges you might encounter during the loan process. Today’s article: The Floating Rate Lock.

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28
Feb
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The Mortgage Process Explained: The Rate Lock

Lending ain’t easy. Lately, we have seen tightened lending standards and an increasingly rigorous loan process. In our quest to make every transaction as quick and painless as possible, we decided to address these difficulties as part of an ongoing series called “Lending a Hand.”  This series will prime you the challenges you might encounter during the loan process. Today’s article: Rate Locks.

Read more »

27
Feb

How to Read a Rate Sheet

An average rate sheet will have ten or so rates listed on it and next to those rates will be an associated cost or rebate (money the bank is willing to pay for closing cost etc.).  In other words, the lower the rate, the higher the cost, and the higher the rate, the lower the cost.  A good deal of the recent regulation aimed at the mortgage industry as a whole is meant to specifically make sure that clients are aware of these options.

Which rate you choose, particularly on a refinance that will not require that you come out of pocket with money, should be a mathematical decision based upon the likelihood that you will still own the house and be in the loan at the point where you see financial benefit from the lower monthly interest cost.  It is relatively simple to figure out the break even point on each rate and set of closing cost.  On a purchase people are often limited by the cash they have on hand.  Still the use of those funds is something that everyone should examine closely on every transaction to insure that they are maximizing the use of their money with in their time frames.

2
Feb

Roof Tax Credit

On our recent January 14 Mortgage Matters show, we welcomed Dan O’Hare from GBP&B Public Accountants on the show and we got to talking about tax credits. Below, Dan follows up with a question about  a “roof tax credit.”

“The roof tax credit does exist and it falls under the Personal Energy Property Credit rules and is claimed on IRS Form 5695. The credit is limited to 10 percent of the cost up to $500 of metal roofs with appropriate pigmented coatings and asphalt roofs with appropriate cooling granules that meet ENERGY STAR requirements. Note that installation costs do not count towards the cost.”

You can see Dan O’Hare’s profile HERE.

27
Jan
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The Industry: When (and how) to Refinance

In his weekly column, Central Coast Lending co-owner and broker Jason Grote takes a look at refinance and uses an example to expand on the question – when does it make sense to refinance? Jason explores the idea that it could make the most sense to lower your rate term and increase your monthly payment.

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20
Jan
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The Industry: When to Pay Points for a Lower Rate

In his weekly column, Central Coast Lending co-owner and broker Jason Grote takes a look at interest rates and expands on the question – should I pay the points for a lower rate? Read more »