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Old 11-09-2013, 05:59 PM
 
58 posts, read 74,717 times
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Hi Folks, I entered into a contract to purchase a property and my realtor is offering 2% of his commission back to me since I did all of the research, scouting, negotiations etc with the Seller.
I know that the rebate can be used for covering closing costs and should be declared on HUD statement. In my case, Closing costs are paid by the seller. My questions is whether I should use the rebate against the upgrades to bring down the final purchase price or to use it to buy points to lower my mortgage rate(I think the Money paid for points is Tax exempt).
Considering that the rates might move up after the latest positive employment report and the FED possibly scaling down the stimulus, which approach do you think is beneficial . TIA and Have a great weekend
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Old 11-10-2013, 11:09 PM
 
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What state do you live in?
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Old 11-11-2013, 08:25 AM
 
Location: Southern California
4,350 posts, read 4,931,746 times
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Quote:
Originally Posted by pattyms81 View Post
Tax exempt
There is a difference between a tax credit and tax deductible, I don't know how you use exempt, but you should consult a professional like an accountant.

There is a point of diminishing return on paying points so don't pay too much. Being the end of the year, you might want to pay some discount 'points' if you don't have any deduction. If you think rates are going up and you won't be selling or refinancing in the next 4 years, and you plan to have the mortgage for at least 10 years, I think it is okay to some discount points. You wont see your monthly payment change a lot , your saving comes in a reduced remaining balance.

You'll really need to talk to an accountant about these 'points' and if you can benefit from it. You can always do a mix between paying upgrades and points.

Does paying 2 points drop the rate from 4.5% to 4, or its is more like 4.375 to 4.25?

When looking at your savings for the points versus no ppints, consider both the difference in monthly payment and the difference in loan balance as your total savings.
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Old 11-11-2013, 09:34 AM
 
Location: Los Angeles
187 posts, read 251,200 times
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Majority of my clients take it as a reduction in purchase price (once closing costs are offset). Great work!
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Old 11-11-2013, 07:18 PM
 
Location: Plano, Texas
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buy downs do not make much sense now. The cost is too high for very little benefit. I would use the credit to reduce purchase price.
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Old 11-11-2013, 07:59 PM
 
Location: MID ATLANTIC
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All of the accounting is to be on the HUD I. How you take the 2% rebate (sales price, closing costs, points, contracted repairs/improvements) is up to you, but you and the seller will be signing there were no side deals outside of the HUD - the agents (and loan officers) can lose their licenses for accounting (money changing hands) outside of the HUD. (At one time, post closing rebates mailed to buyers were allowed, but I believe the CFPB and Dodd/Frank has shut that down in every state).

The 2% rebate is quite common in my area when agents are written into a new home contract for the purchaser and then handling the sale of their existing home. Some even market for that scenario.
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Old 11-14-2013, 05:28 AM
 
58 posts, read 74,717 times
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Quote:
Originally Posted by Pfhtex View Post
What state do you live in?
Charlotte, NC
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Old 11-14-2013, 05:32 AM
 
58 posts, read 74,717 times
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Quote:
Originally Posted by thelopez2 View Post
There is a difference between a tax credit and tax deductible, I don't know how you use exempt, but you should consult a professional like an accountant.

There is a point of diminishing return on paying points so don't pay too much. Being the end of the year, you might want to pay some discount 'points' if you don't have any deduction. If you think rates are going up and you won't be selling or refinancing in the next 4 years, and you plan to have the mortgage for at least 10 years, I think it is okay to some discount points. You wont see your monthly payment change a lot , your saving comes in a reduced remaining balance.

You'll really need to talk to an accountant about these 'points' and if you can benefit from it. You can always do a mix between paying upgrades and points.

Does paying 2 points drop the rate from 4.5% to 4, or its is more like 4.375 to 4.25?

When looking at your savings for the points versus no ppints, consider both the difference in monthly payment and the difference in loan balance as your total savings.
Thanks for your response. I am not planning to live in that house for more than 5 years. Moreover, 1/4th of a point is costing around $3500 which really didnt make that much sense to me. I would rather use that to bring the purchase price down. Can you recommend amortized payment calculators that will give me details of monthly payments and Loan balances.
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Old 11-14-2013, 05:35 AM
 
58 posts, read 74,717 times
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Quote:
Originally Posted by calbear629 View Post
Majority of my clients take it as a reduction in purchase price (once closing costs are offset). Great work!
Thanks calbear. Most of my friends have done that too.
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Old 11-14-2013, 05:36 AM
 
58 posts, read 74,717 times
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Quote:
Originally Posted by VictorBurek View Post
buy downs do not make much sense now. The cost is too high for very little benefit. I would use the credit to reduce purchase price.
Thanks!
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