Discount points are based on? LOAN amount NOT sale price.Example:Sale Price:

Discount Point Flashcards

Who can pay for BUYDOWN?Anyone:Seller, builder, borrowers parents

BUYDOWNLowers interest rate during initial years of loan for buyer - help buyer qualify for loan.Similar to discount points bc one pays extra money up front to lower interest rate.Discount points are based on?LOAN amount NOT sale price.Example:Sale Price:

$80,000Down Payment: - $10,000Loan Amount =

$70,000lender charges 2 discount points$70,000x 2%= $1,400 for discount points paid DISCOUNT POINTSPoint = PercentBORROWER pays DISCOUNT POINT money to the LENDER; to get a LOWER interest rate.Money charged upfront is referred to as discount points.If borrower doesn't want to pay for discount points?Borrower can look at owner/seller financing; they do not charge discount points.Why does a lender charge discount points? To increase the EFFECTIVE YIELD on the loan. Meaning: lender makes more money by charging and collecting discount points.Owner Financing (Seller Financing)A method in which a buyer borrows from and makes payments to the seller instead of a bank. This can be done when a buyer cannot qualify for a bank loan for the full amount.LOCK-IN COMMITMENTA lender guarantees a borrower a fixed interest rate and a fixed amount of discount points for a certain time period.Example:lender might say to borrower:Next 2 months you are locked in at 6.5% interest with 1 discount point.As long as you purchase a property and close within the next 2 months you'll get the 6.5% interest rate and 1 point, doesn't matter how interest rates look within two months.LOAN ORIGINATION FEE(costs for initiating loan) A fee charged for origination and processing of a loan.What is a Discount Point?1% of the loan amount for each discount point to be used for interest rate reduction.