What are discount points? WHat is the difference between stated or full doc and ratio. What is the norm when dealing with these. all advice appreciated
Hi
Discount points are an optional fee that you can pay to bring your interest rate down, 1point=1percent of the loan ****Must Reach have more than 6 posts before posting URL's***. The rate for a loan on a property valued at say $250,000 may be %5.5 for the life of the loan, however you may opt to pay a point ($2500) to bring the rate down to %5.25, or a half point ($1250) to bring down the rate to %5.375 for example.
Good for longer term hold. Divide the discount fee/point by the monthly savings you would get on your payments and that will give you the number of months it will take to recoup the discount point. If you won't be in that property that long then it doesn't make sense.
note-different from the "points" mortgage broker will/may charge you as a fee to them.
(your broker gets paid by the bank at escrow closing anyway(called a yield spread premium, the lower a rate the broker gives you for your loan, the less yield spread that the bank pays them at closing) so find one that will give you a good rate but will not charge you points.)
Full doc loan means you bring all your info to the table to qualify- Tax returns, W2s, pay stubs, list of assets, 2 months of bank statements.
Stated income is when your credit is good enough (mid 700s), or you are putting a down pmt of %20 percent or more, you can state that your income is whatever you say it is on the aplication and not have to prove it with documentation. The lender figures you are responsible enough to have an A credit rating in the first place and you aren't going to jeapordize that by overstating income and buying too much house, or alternatively if you have %20 percent of your own cash in the property, you arent going to default and walk away from a bundle of your hard earned money.
You may pay a higher interest rate for stated loan.
ignor above where it says ***must have 6 posts blah blah. I guess if you mistakenly type a period between 2 letters it decodes it as****Must Reach have more than 6 posts before posting URL's*** address
Hi
Discount points are an optional fee that you can pay to bring your interest rate down, 1point=1percent of the loan ****Must Reach have more than 6 posts before posting URL's***. The rate for a loan on a property valued at say $250,000 may be %5.5 for the life of the loan, however you may opt to pay a point ($2500) to bring the rate down to %5.25, or a half point ($1250) to bring down the rate to %5.375 for example.
Good for longer term hold. Divide the discount fee/point by the monthly savings you would get on your payments and that will give you the number of months it will take to recoup the discount point. If you won't be in that property that long then it doesn't make sense.
note-different from the "points" mortgage broker will/may charge you as a fee to them.
(your broker gets paid by the bank at escrow closing anyway(called a yield spread premium, the lower a rate the broker gives you for your loan, the less yield spread that the bank pays them at closing) so find one that will give you a good rate but will not charge you points.)
Full doc loan means you bring all your info to the table to qualify- Tax returns, W2s, pay stubs, list of assets, 2 months of bank statements.
Stated income is when your credit is good enough (mid 700s), or you are putting a down pmt of %20 percent or more, you can state that your income is whatever you say it is on the aplication and not have to prove it with documentation. The lender figures you are responsible enough to have an A credit rating in the first place and you aren't going to jeapordize that by overstating income and buying too much house, or alternatively if you have %20 percent of your own cash in the property, you arent going to default and walk away from a bundle of your hard earned money.
You may pay a higher interest rate for stated loan.
ignor above where it says ***must have 6 posts blah blah. I guess if you mistakenly type a period between 2 letters it decodes it as****Must Reach have more than 6 posts before posting URL's*** address
thanks for the info. THis site is great!!!!