How does buy down points work (loan, credit, mortgage rates, rate)

[Sam_Bend]

So we just locked our rates and our lender has used our realtor credit for buy down points.

I wanted to know if she is giving us the right rate after buy down.

Buy down is total 3.2 % of mortgage. And our rate comes to 4.125%
Given current mortgage rates does this sound right?

From what I read, 1 % of loan price comes to 1 point(.25%) reduction in mortgage?

pls help

[Pfhtex]

First, there is no set Exchange Rate. It's all market, and lender-specific.

Also, I question whether your realtor is providing 3.2% of the mortgage toward points.

In many cases, it would take 3 points to get to 4.125%, but there are many variables that make it impossible to answer.

You would need to mark out your name, address, etc., and post the Itemization of Amount Financed, or Loan Estimate, or something, for anyone to help.

[KayAnn246]

What are the max points you can buy down on a VA loan?

[Fedupwiththis]

Man I'm glad we refi'd during Brexit, sitting at 3.5% over here.. One of the most important factors of buying down points is the length of time you're going to own the home. Buying points is a long term winning position, but if you end up selling the house inside of 4-5 years you're probably throwing money way. Do the math, figure out how long you'll need to own for the points to start paying themselves off. If you end up keeping the home as a rental you'll be in good shape.. you also have to ask if you think rates will ever drop again into the 3s because then you could always do a "no cost" refi like we did.

Point being, there is a lot to consider before just deciding buying down points is the best course of action.

[SmartMoney]

Generally, yes, it makes sense for the buydown to pay for itself while in the home, but one size never fits all. This is a very personal and individual decision for each owner or buyer. For example, when working with a single mom with tons of equity, she was finding herself strapped for cash at the end of the month. If we looked at the cost:benefit ratio, it is not something I would have done being a single with no dependents, but to her, her debt restructuring made the difference of eating mac and cheese every meal vs. eating well. Everyone's mileage will vary.

The other thing we are seeing is everyone tends to approach their purchase as this will be their forever home. Rarely is that the case, and rarely is the mortgage forever. Do consider a long term ARM, 10 or 7 year fixed. These are not the evil ARMs of the past. The only borrower that should not consider the ARM is someone that barely qualifies using the ARM product. But again, one size doesn't fit all. If there is a two income couple, but one currently is not working, but will be in 5 years, this is the ideal candidate, even if you barely squeak by on the ratios.

The down payment is also very important when making a decision on a loan and thinking you will refi in the future. You need to understand there is a "no cost refi," where all your closing costs are put into the rate. The other "no cost" refi is where all the costs are rolled into the value of the home. Neither are a true no cost. You are paying either through your rate or through your equity. If you are putting little down at time of purchase, refinancing at no cost via either method will be challenging (little down defined as < 20%).

[SmartMoney]

Originally Posted by KayAnn246

What are the max points you can buy down on a VA loan?

There are different kinds of buydowns. On a temporary buydown, generally 2% below the note rate.
There is no max on a VA permanent buydown - it will be whatever the lenders you talk to offer.