Full Disclosure of Back-End Basis Points

One of the questions I often get is whether or not it is worth it to buy down your rate or keep the cash? In most circumstances, buying down your rate just doesn’t make sense. It does not really save you a ton and if you’re moving into a new home you are likely to need the cash for other things. If you have a client who is wondering what is the right answer for them, make sure their lender is providing full disclosure IN WRITING around the costs to buy down the rate and if any lender credits are available. If a lender is only speaking to it verbally, there’s a problem. 

Back in the day, before the Dodd-Frank Act, lenders used to commonly make a basis point on the front of a loan and on the back.  Post Dodd-Frank, lenders should disclose how much it would cost to bring a buyer’s interest rate down and if there are any lender credits available to them. Armed with that, byers should be in a position to make a better decision. This can be a tricky topic–feel free to reach out to me anytime with questions!

 

Geoffrey Davis – Mortgage Loan Consultant 

NMLS #206192
First United Bank & Trust

D: 214-529-9622

F: 855-239-6079
6401 S. Custer Rd.

McKinney, TX 75070          

 

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