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Points: Buying & Selling

One of the first questions lenders hear from prospective clients is DO YOU CHARGE POINTS? While the meaning behind the question is fair, learning what points are will help you understand an important piece of the mortgage process.

To begin, let’s start with a definition:

Points – Fees paid to or received by the lender, which directly impact your rate, either by lowering or raising it. One point equates to 1% of your loan amount.

Using the above definitions, we can now better understand that points directly affect your mortgage rate. The act of buying points refers to paying fees upfront to secure a lower rate, while selling points is just the opposite. When you sell points, you are accepting a higher rate in return for credit from the lender to cover some or all of your closing costs.

Is buying or selling points right for you? Depends upon your particular situation. Take a look at the example below:

$700,000       Loan Amount

       4.25%     Standard Rate

     $3,443     Monthly Payment

Now let’s take a look at what happens when we buy 1 point (or 1%), which reduces the rate by .25%.

$700,000       Loan Amount

       4.00%     Standard Rate

     $3,341     Monthly Payment

     $7,000      Points Charge (1% of loan amount)

         $102      Monthly Savings

             68      # of months to break even ($7000/$102 = 68)

Does it make sense to buy points in this case? Generally speaking, I would say NO. 5+ years to get your money back is much too long. A similar calculation can be done regarding selling points here to determine if it makes sense, given your situation.

I hope this helps to unravel the mystery surrounding points. Please reach out should you desire any further clarification regarding how points work, or want to walk through your mortgage options with one of our loan officers.

Levels of Qualification

Not All Approvals Are Created Equal

Is there really a difference between a pre-qualification, a pre-approval and a Platinum Approval? Absolutely! Let’s take a moment to explore the differences.

 

Pre-Qualification
This is the most basic form of approval and in all transparency, it’s not really an approval at all. Rather, a pre-qualification typically amounts to no more than a peripheral conversation between the buyer and a lender to estimate the amount a buyer can borrow. It does not involve a review of income and asset documentation and does not involve a credit report being pulled. Most sellers would scoff at such an “approval” if a buyer made an offer on their property with this level of commitment.

 

Pre-Approval
The pre-approval has become the gold standard of the industry. The process includes a lender’s evaluation of the buyer’s income, assets and credit. Through careful examination of this info, the lender will produce a conditional loan approval, Typically a buyer will need a loan contingency when making an offer so that they can “get your ducks in a row” prior to putting their deposit on the line with the seller.

 

Platinum Approval
Created to combat the recent lack of inventory and the resulting stiff competition facing many buyers, o2 Mortgage offers the Platinum Approval, which not only an in-person pre-approval takes place to guide clients through options and determine their level of affordability, but also consists of having their file put in front of an underwriter as if the buyer were already in contract. This allows buyers to confidently make offers without a loan contingency. This makes their offers more competitive and enables them to get into contract on the house they fall in love with.

 

Purchasing a property can be complicated. We have designed our approach to loans so that we can be your partner in the process. When you are ready to make the leap into the homeownership market, let us help you with your approval.

Boost Your Credit

Looking to boost your credit score? Here are some actions you can take to make an impact quickly!

 

1. Even the score. Any inaccuracies in your credit history can lead to an unfair score. Check your report at least once per year to confirm the accuracy of the information being reported. If you do find something that looks wrong, you can file a dispute with the major credit bureaus. Be sure to have your bank statements and receipts handy to show as proof as they may request it.

 

2. Know your limits. Make sure your report matches up with reality. Sometimes companies may be slow to update a recent increase to your credit limit or the amount you have paid off. Either omission could impact your score negatively. Also, make sure that your credit card issuers are reporting the correct limits on your accounts to the three major credit bureaus. A credit card company that fails to report your available limit can negatively impact your credit score.

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3. Do not close out a card. As much as simplifying might feel good, a sudden drop to your credit-spending power does not look good to the credit bureaus. Try to keep your longest standing credit cards active, even if that means only swiping them once per month to buy gas.

 

4. Pay your bills on time. Obviously, no one wants or intends to be late on credit payments. Considering your on-time payments (or lack thereof) make up for 35% of your score, we cannot stress enough the importance of paying on time.

 

 

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5. Create some balance. While paying down installment debt (car, school, mortgage, etc.) will definitely boost your credit score, paying down or paying off revolving debt, such as credit cards, can cause a quicker spike in your credit score. The trick is to get and keep your balances below 30% of your credit limit on each card. For faster results, attack those cards with balances closer to their respective credit limits first, as opposed to those cards with simply the highest debt.

 

“How do you want to hold title?”

Once in contract, this will be a question that you will have to answer. In laymen’s terms, they are asking in who will be the owner(s) and what rights will each have with regard to the property, both during their life and after they die (heavy, right?). There are 3 common ways to hold title and each option comes with its own set of pros and cons. Here is some information that hopefully will make it a little easier to understand each of the most common options:

1. Community Property With Right of Survivorship

This choice would be for spouses or domestic partners and would provide equal division of interest and possession. Additionally, title would be in the name of the individual owners. If either person passes away, the decedent’s interest passes to the survivor.

2. Joint Tenancy
This choice could include any number of persons and would provide equal division of interest and possession. Also, title would be in the name of the individual owners. If any person(s) passes away, the decedent’s interest is passed onto the survivor(s).

3. Joint Tenancy in Common
This choice could include any number of parties and the parties involved could choose any number of interests, equal or unequal. Title would be in the name of the individual owners and each interest would be willable and saleable.

* Trust
This choice could include any number of beneficiaries of the trust and beneficial interests under the trust could be equal or unequal. Possession would be according to the trust agreement and title would be in the name of the trustee, “as trustee”.