What exactly are points and how do they

affect the loan I get?

 

  You have requested information on

 

“What exactly are points and how do they affect the loan I get?”  Points are the cost to originate the loan.  Within the mortgage industry, the term point equals one percent of the loan amount that you are seeking. For example, on a  $100,000 mortgage, one point would equal 1,000 dollars.  The amount of points that you pay on a real estate transaction will vary on the interest rate that you select.  Generally, the lower the interest rate you desire, the more points it will cost you.  Within the mortgage business this is referred to as buying down the loan.  As a consumer, you have the option to buy down your interest rate, by paying additional points, thus getting you a lower interest rate. You may want to raise the interest rate on a loan that you will be receiving in order to reduce the amount of closing costs  you are going to pay.  This will be determined based upon your savings and reserves to complete your real estate transaction.  Points for a home loan can range from zero to ten depending on the type of transaction, the customers credit profile and the amount of donpayment applied towards the purchase.  The points you will pay on a transaction can only be determined once a qualified mortgage professional evaluates your entire situation.  The loan professional that has made this information available to you specializes in assisting those individuals with obtaining home loans.  Your loan professional in most cases can advice you on the best approach and help you get the house of your dreams!