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The company we are going with for our home loan is offering us a $3k lending credit. He said it has no affect on the rate. I'm trying to figure out why a bank would offer such a thing. I've bought a house before but never heard of getting a lending credit. Is this something we should question. Anyone with experience with this?
There is an ever-changing sliding Revenue scale connected to rates. Sometimes people want help covering costs, sometimes they really want to bottom out the rate, and pay fees normally (without points.)
Ask what the Lender Credit would be at .125% and .25% lower. There comes a point when we have a good-sized credit, then a meager credit, or a meager cost, then a huge cost to that rate.
Typically banks will eat the meager cost to get deeper into the market and offer their best terms. Or if you have a client who would rather optimize their cashflow, bump the rate up a tad and choose the one that occupies the "sweet spot" between rate and credit.
It would have to affect the rate. I too would ask if the credit would be reduced for a lower rate. Maybe there is the possibility that is their only offering right now? Is this a smaller company?
We are working with a local broker and at the time we wanted a rate lock, there was no option that was both zero credit and zero fee/points--only rates where we had to pay a fee/points, or rates where we got a lender credit. There was very little difference between them though, about $1,000 on each side. A month before there had been that option.
If you can forgo the credit, you are likely to find a lower rate somewhere else. Its best to shop around anyways, not just for rates, but for closing costs (but ensure the lender you choose didn't leave off items or underestimate). We also got a quote from a lender through our home builder that would give us a significant credit, but was then charging us a much higher loan origination fee, such that the credit was almost eliminated! Best wishes.
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