Lender's credit? (loan officer, interest rate, fee, rate)

[Laeture]

What's a lenders credit ?

[dad2jules]

Your loan officer is taking a portion of their fee paid directly to them from the bank and paying some or all of your closing costs with it. This is how no closing cost loans are done.

[SmartMoney]

Think of a lender's credit as negative points.

If you have a 200K loan amount and are getting a 1 point lender's credit, the lender is giving you $2000 towards your closing costs.......and only towards your closing costs (and prepaids). Under no circumstances will that credit go towards down payment or in your pocket. It's also counted against the total concessions a loan program allows. For example, if you are limited to a total of 3% (seller's) concession, any lender concession is counted in that maximum concession.

Obviously, interest rates that allow for a lender credit are higher than interest rates without a lender credit.

[jboy]

So in essence, a lender's credit is a fee to the buyer or person who is re-financing?

[TimtheGuy]

Originally Posted by jboy

So in essence, a lender's credit is a fee to the buyer or person who is re-financing?

Not a fee. A borrower is accepting a higher interest rate for lower costs.

[f113]

That is the amount that add to the closing cost which the borrower has to pay for. That is what I see on my GFE

[acegolfer]

All else being equal, higher lender credit is good for the borrower.

[Nikon5400]

Are there any drawbacks in taking lender's credit?

I'm offered $1,7xx.xx lender's credit for 0.125% on a 15yr fixed loan (loan amount $270k). This credit will cost me $17 a month, so it'll take bank 8,3 years to recoup this money.

The way I look at it - if I decide to do anything with this loan within 8,3 years (refinance, sell the house, pay off) I'll end up saving money by taking this credit.
So, what are the gotchas?

Thanks.

P.S. Just to be very clear - this is what 2nd page of my GFE looks like
1. Origination charge $0
2. Your Credit or charge (points) for specific rate chosen
-2nd checkbox checked. Credit of $1,7xx.xx for this interest rate of 3.375%

A Your adjusted origination charges ($1,7xx.xx)

So, essentially I'm getting $1,7xx.xx credit towards closing costs, which are title ($1k), endorsements ($150), misc charges and interest on a new loan (this is refi). If I still have something left from $1,7xx.xx, can it go towards appraisal which I pay out of pocket at the beginning?

[SmartMoney]

Originally Posted by Nikon5400

Are there any drawbacks in taking lender's credit?

I'm offered $1,7xx.xx lender's credit for 0.125% on a 15yr fixed loan (loan amount $270k). This credit will cost me $17 a month, so it'll take bank 8,3 years to recoup this money.

The way I look at it - if I decide to do anything with this loan within 8,3 years (refinance, sell the house, pay off) I'll end up saving money by taking this credit.
So, what are the gotchas?

Thanks.

P.S. Just to be very clear - this is what 2nd page of my GFE looks like
1. Origination charge $0
2. Your Credit or charge (points) for specific rate chosen
-2nd checkbox checked. Credit of $1,7xx.xx for this interest rate of 3.375%

A Your adjusted origination charges ($1,7xx.xx)

So, essentially I'm getting $1,7xx.xx credit towards closing costs, which are title ($1k), endorsements ($150), misc charges and interest on a new loan (this is refi). If I still have something left from $1,7xx.xx, can it go towards appraisal which I pay out of pocket at the beginning?

Yes, provided you can prove you paid it and it cleared your account. You can never pocket a refund you put on credit. That said, do check with your lender. Not everyone does what's allowed and you must state this early on and not at the closing table - it changes the final figures.

[Nikon5400]

Originally Posted by SmartMoney

Yes, provided you can prove you paid it and it cleared your account. You can never pocket a refund you put on credit. That said, do check with your lender. Not everyone does what's allowed and you must state this early on and not at the closing table - it changes the final figures.

Are you referring to appraisal? I know they dictate what this credit can be used for. I think it can be used on the interest on a new loan, and not on the old loan. If this is true, then I'll need to make sure I close at the right time.

Thanks.