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Old 04-17-2015, 08:57 AM
 
4 posts, read 3,668 times
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Hi,
I'm about to lock my interest rate for a home loan of 198K - 30 Years, in Houston, TX.
It will be at 4.25% with 0 points.

Do anybody know what "0 points" means?
and, does this seem like a good rate?
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Old 04-17-2015, 09:01 AM
 
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"Points" are an up-front fee you pay for the loan, sort of like prepaid interest, and are non-refundable if the loan is paid off early.

If you have good credit and your DTI ratios are below 28/36, that rate is a bit on the high side.
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Old 04-17-2015, 09:09 AM
 
Location: Herndon, VA
1,913 posts, read 1,809,183 times
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For 0 points and 30 years I don't think it's all that bad. It could be an eighth of a point lower maybe, but if he's comfortable with the lender I would take it.
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Old 04-17-2015, 09:19 AM
 
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That rate seems terrible, unless your credit scores aren't great. I locked in mid Feb and got 3.875 w no closing costs. If I'd paid the closing costs I could've gotten in the 3.675- 3.7 range. I think rates are pretty much at the same levels now that they were then.

To answer your question, a point is a fee you pay to get a better rate. 1 point is equal to 1% of loan value. Most of those offers in the mail with fantastic rates have at least 1 point in the fine print.
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Old 04-17-2015, 09:23 AM
 
Location: Mount Laurel
4,146 posts, read 8,378,442 times
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It all depends on your credit. Good and excellent credit, should be below 4% for 30yrs. What's the APR with the 4.25% quote?
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Old 04-17-2015, 09:46 AM
 
16,489 posts, read 17,513,441 times
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Well considering youre not paying points I say thats ok. I would try and search for a lower rate if you have the time. Even if it means paying some points but thats really up to you. . Youre house price is higher so might as well borrow the money as close to free as you can.
And if you do get a cheaper rate i would base the payment off the 4.25 and pay that difference to principal every month. I think you can beat the interest game by paying a bit extra every month if it doesnt hurt you

Last edited by Electrician4you; 04-17-2015 at 09:58 AM..
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Old 04-17-2015, 10:17 AM
 
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There might be prepayment penalties too. Always read the fine print!
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Old 04-17-2015, 10:20 AM
 
Location: Austin
7,077 posts, read 16,889,211 times
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It's not just about credit, it's about down payments. The par rates are for borrowers with stellar credit AND a large down payment. If he's only putting down 3 or 5%, then 4.25% is probably a very good rate, especially with 0 points.

You can't judge a rate without knowing all the information behind it. And comparing a rate in February to today's rate is ridiculous as rates change daily (except at credit unions).
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Old 04-17-2015, 10:55 AM
 
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Quote:
Originally Posted by FalconheadWest View Post
It's not just about credit, it's about down payments. The par rates are for borrowers with stellar credit AND a large down payment. If he's only putting down 3 or 5%, then 4.25% is probably a very good rate, especially with 0 points.

You can't judge a rate without knowing all the information behind it. And comparing a rate in February to today's rate is ridiculous as rates change daily (except at credit unions).
It's not really ridiculous if you follow rates, and they are about the same(like I noted). So you kind of can compare rates from different time periods. Top tier rates right now are in the 3.7 range, which is basically where they were in mid Feb. Obviously the OP isn't getting a top tier rate for some legit reason, I would hope, or his lender is screwing him.
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Old 04-17-2015, 11:40 AM
 
Location: New York
2,251 posts, read 4,161,023 times
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Quote:
Originally Posted by FalconheadWest View Post
It's not just about credit, it's about down payments. The par rates are for borrowers with stellar credit AND a large down payment. If he's only putting down 3 or 5%, then 4.25% is probably a very good rate, especially with 0 points.

You can't judge a rate without knowing all the information behind it. And comparing a rate in February to today's rate is ridiculous as rates change daily (except at credit unions).
Falcon is on point!!!

You can't judge a rate without knowing all the information behind it.
  • If OP is planning to live in the property for a long time. It is better to show closing costs for a lower interest rate. Over lifetime of loan - less is paid in interest.
  • If OP is planning on living in the property short term. Then it is better to roll points (costs) into the interest rate. Over to lifetime of loan - more is paid in interest.

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