Should you Pay Closing Costs?

re: Should you Pay Closing Costs?

kay harvill — Tue, 23 Dec 2008 18:22:06 GMT

Thanks for a great column that I can share with my borrowers. I try to explain but you did it so through. Thank you, Jharvill@amerisave.com Best Rates or we pay you $500 We need loan originators!! www.kayharvill.com / go to "about us" ; make up to 88% commission; great company; average refinances 4-10 a week!!!

re: Should you Pay Closing Costs?

Victor Burek — Tue, 23 Dec 2008 10:14:04 GMT

great point Curt.

re: Should you Pay Closing Costs?

Curt Sandfort — Mon, 22 Dec 2008 18:34:12 GMT

Mike, you and I are on the same page with the low spreads between ysp's. I am telling my clients that paying closing costs and "buying down" their rate is currently "on sale". That means that you get more for your money when paying the closing costs yourselves than you traditionally would have.

re: Should you Pay Closing Costs?

Craig Lipkin — Mon, 22 Dec 2008 14:45:16 GMT

As a general rule of thumb it will take you approximately 52 months to break even if you can reduce your rate by an eight for half a point. This considers that you could earn about 3% interest on that money if you didn't spend it to reduce the rate.

re: Should you Pay Closing Costs?

Victor Burek — Mon, 22 Dec 2008 12:38:32 GMT

Chuck, you are absolutely correct, if you believe rates are moving lower. Today, rates are at historic lows, and yes they will be lower next year but not 2% lower then todays rates. In todays environment, it makes even more sense to buy the lowest rate available.

re: Should you Pay Closing Costs?

Bill Black — Mon, 22 Dec 2008 08:22:54 GMT

Getting the rock bottom rate is also benefiting the borrower by lowering the monthly income. Especially on Jumbo loans- the difference in a 6% to a 5% could be around $400 a month and almost $1000 worth of income so as long as self employed stated income is not around these creative moves should help qualify the borrower. Bill Black CMP www.aofdowntown.com Vancouver, Wa. Lending Professional

re: Should you Pay Closing Costs?

Chuck Spellman — Mon, 22 Dec 2008 06:02:10 GMT

Victor - Isn't there an argument for taking a "no cost" rate if you believe it's fairly likely that rates are going to decrease further at some point in the future...allowing for a chance to refinance again down the road? You may say then why not just wait for the (hopefully) lower rates and then pay closing costs and perhaps points as make sense depending on the time one is expecting to stay in the home. But let's say there are compelling reasons to take the proverbial bird in the hand...such as the existence of a current loan that has a (low) fixed rate for only fixed for a few more years...with a longer horizon to stay in the home.

re: Should you Pay Closing Costs?

Danielle Smith — Sun, 21 Dec 2008 20:49:20 GMT

Thanks, Victor. We just locked a 30 year fixed at 4.5 with one point. The one point made the rate go from 4.875 to 4.5.

re: Should you Pay Closing Costs?

Michael Spencer — Sun, 21 Dec 2008 18:37:05 GMT

Mike/Victor: In your comments regarding points, are you referring to discount points or origination points? I'm set to close on a refi first week of Jan, locked at 5.1 on 30-yr with no discount points. We plan on staying in our current home at the least five years but likely staying long term. I'm wondering if paying extra for a discount point to lower my rate is worth considering.

re: Should you Pay Closing Costs?

Victor Burek — Sun, 21 Dec 2008 15:23:22 GMT

Thanks for the input Cody. You are right when you say no such thing as a no cost loan. Consumers pay the costs one way or another.

re: Should you Pay Closing Costs?

Cody Sorenson — Sun, 21 Dec 2008 01:39:29 GMT

On the second to last sentence in the first paragragh you write "There are costs, but what it actually means is someone else is paying the costs for you." In reality it should say "There are cost, but what it really means you are payingthem through a higher interest rate." or "There are cost, but what it actually means you are oaying for them over the time you hold this loan." There is no such thing as a "No Cost" loan. You pay it one way or another it is just what is the best for you to decide. In California the Dept of RE forbids the term "No Cost" in advertisements. Yet if licensed through Dept of Corp or work with a bank you can use the term no cost. The balance of the article is very good

re: Saturday 12/20…Should you Pay Closing Costs

Victor Burek — Sat, 20 Dec 2008 22:10:15 GMT

I agree with you totally, Mike

re: Saturday 12/20…Should you Pay Closing Costs

Mike King — Sat, 20 Dec 2008 20:17:24 GMT

Victor, Great post, with all the smoke and mirrors out there with advertising this was timely. I would also comment that with the current market at the spreads for ysp being very low that in todays market it makes more sense than ever to pay points.