Discount (If Borrower will pay) (loan, interest rate, credit, fee)

[Howie411]

So we locked in a rate with our mortgage company of 3.875 for 30 years (we paid an extra $532 to drop the rate from 3.9XX to the 3,875. The loan was for 374,000. We ended up canceling the contract on the house and found another place about 60k cheaper. We are still closing before the rate lock expires.

When I got the updated documents from the lender today I noticed the Discount fee said $914. When I inquired why it went up I was told first it was a mistake, then I was told because the amount of the loan was less.

Does this make sense and can they even do this?

[TimtheGuy]

Originally Posted by Howie411

So we locked in a rate with our mortgage company of 3.875 for 30 years (we paid an extra $532 to drop the rate from 3.9XX to the 3,875. The loan was for 374,000. We ended up canceling the contract on the house and found another place about 60k cheaper. We are still closing before the rate lock expires.

When I got the updated documents from the lender today I noticed the Discount fee said $914. When I inquired why it went up I was told first it was a mistake, then I was told because the amount of the loan was less.

Does this make sense and can they even do this?

Rate locks are property specific.

[Debsi]

Loan applications are property specific too. You basically started over.

[Howie411]

But according to the new disclosure docs the rate lock still expires April 6th, so its not like I'm paying for a new lower rate (especially with the hire rates today). If I started over I assume I'd be stuck with today's interest rate and then I could buy that down.

[Modification Specialist]

Originally Posted by Howie411

The loan was for 374,000. Discount fee $914.

Trying to figure this out for you?

1% of the loan amount = 1/2% drop in the rate.
1/2% of the loan amount = 1/4% drop in the rate.
1/4% of the loan loan - 1/8% drop in the rate...

Loan Amount $374,000
Rate 3.99%
.0025% of the loan amount = $935.00
Resulting rate 3.865%

$314,000 (less $60,000)
Rate 3.99%
.0025% of the loan amount = $785.00
Resulting rate 3.865%

Show this to your agent and ask them how the came to the amount to lock in your rate....

.

[dad2jules]

Discount or credits are a % of the loan amount so when the loan amount changes so does the corresponding dollar figure.

Heres an example:
Loan 1 is $375k and has $2300 in closing costs or .625% of the loan amount
Loan 2 is $200k and has $2000 in closing costs or 1% of the loan amount

3.875% has a credit of .625 when locked. Loan 1 has all closing costs covered while loan 2 has to pay $750 in closing costs.