Just Ask…Buying down the rate is “discount points” that get paid to the lender. You are giving them pure profit up front, in exchange for a lower rate and payment for the life of the loan..You CANNOT be overcharged in rate AND buy down the rate, it just isn’t possible.
Many mortgage folks will not discuss buying down the rate with you, because they will not get a penny of commission from the lender.
The buy down is different on every loan, and isn’t a set amount.
It might cost 5/8ths to buy the rate down 1/8th, which means that it will take well over 5 years to make pay off, but for someone who ends up keeping the loan for 10 years or longer, it will save them a small fortune. The buy down fee is the same dollar amount whether you keep the loan 2 years or 30 years.
It is possible to get a 30 year fixed in the mid 5’s today, it just isn’t cheap.
I would have liked to have been a fly on the wall with the discussions that you had.
The loans aren’t a rip off… It’s many of the people “selling” them that are the rip offs.
It’s not necessarilty foolish. It depends what your needs are and what you qualify for.
There aren’t really “subprime loans”…. there are subprime BORROWERS and lenders who lend to subprime borrowers.
Prime borrowers can get similar loans. ARMS, 2 YR, 3 YR, Option Arms, etc, The big difference is that virtually all subprime borrowers get a prepayment penalty.
Sometimes a prime borrower can get a better deal by taking a loan from a subprime lender, with a prepay.
Finding someone to trust isn’t easy, but it is possible.
The back end commission will probably ONLY show up on one line of the final “estimated closing statement” as YSP POC
and be off to the left of the 2 columns of numbers.
THIS IS ONLY TRUE WITH LOANS THROUGH BROKERS.
Mortgage brokers were cutting into banking business profits, so the banking industry lobbied so that brokers have to disclose back end commissions BUT THE BANKS DON’T.
It gives the illusion that banks or direct lenders charge less, which isn’t necessarily true. When banks compete, you DON’T always win. They could be cheaper, but they might not.
The ONLY way that gets paid is because the borrower was charged a higher rate than they qualified for and the lender is rewarding the mortgage pro for screwing his client (often a friend or family member who was promised a no cost loan) Isn’t that special ??
