Should I pay points/origination…CONT’D/Part II

Should I pay points/origination?
If you haven’t read part I of this Blog, please click on this hyper link…Part I or scroll to the Blog title previous to this one below.
…YES!!! Pay points.
First off, somewhere in the time continuum’s past, the word “point” became a trigger word that people hear and focus in on. The way I see it, it’s a block for understanding how to shop or understand how to effectively shop your loan. I can tell you this, as a long time loan officer, when I hear a client ask about “points” or mention that their father, brother, uncle, or spouse asked them to ask about “points”, I right now know there is a possibility I will have a hard time explaining mortgage and explain how to structure a loan for this person because they are “cursed” with the “point block”.
That being said, if it makes since, pay points! Lots and lots and lots of points! OK, I’m exaggerating…but yes, pay points when it makes since. The interest rate that families are getting today, at this point in time, they will unlikely be able to refinance into a lower rate that makes since for the duration of that loan’s life. So, there is no fear that they pay up front money to get the best rate and then rates drop months or a year later and now they refinance again and double the cost that they are trying to make up for the savings of the refinance.
There is a less obvious reason to pay points now, and many/most loan consultants won’t “go there” with their client, lenders, investors, and banks are being really greedy with their incentives that pay the commissions and overhead for their loan officers. (I also don’t “go there” with many clients because some clients are not interested in how or why, they are only interested in, “what’s in it for me”. I try to profile clients that care about me as a business relationship, not a slave that happens to have the key to the door that they have to get through to get a loan.) It used to be easy to go to a client and say, “George, I can offer you 5.5% with no origination/points, or I can offer you 5.375% with you paying .5% in origination/points, or 5.25% with you paying a full 1% origination/point.” Reason being, the lending establishments would pay much larger incentives to loan officers that would offer .125% above the rock bottom lowest rate and then every .125% increase to the next and so forth as the rate that is offered moves up. Well now, we loan consultants would have to literally move an interest rate that we offer where the borrower has to pay 1% origination up .5% or .875% to be compensated enough to waive the origination/point…that blows the deal for a refinance because the payment increases to much.
What does that mean to me, the refinancing borrower or home buyer?That means that you need to ask your mortgage consultant for the lowest rate possible and ask him what kind of origination and discount must be paid for that rate. If you want your lender to waive origination/discounts/points, you are setting yourself up for trouble in this market.
Good luck! Go and buy a home or refinance to help your country through this recession.