Mortgage Blog

How much rate lower can 1 points buyer?-- Knowledge Base

March 3rd, 2011 9:20 AM by Eric Fang

1 points is 1% of the loan amount.
1 points can not buy 1% lower rate.

This 1 points is related to the investor
pricing, or YSP(Yield Spread Premium), which
is the percent of the commission we get from
the lender.

Usually because of the spread of the rates for fixed
and ARM is different, 1 points can buy down 0.25%
to 0.375% lower rates for fixed program; and
it can buy down around 0.5% lower rate for ARM.

It does not work exactly that way, it still depends
on how investor pays for each rate. But it's the
general idea for most common rates and programs.

That's why some buyers want to have ARM
rate and willing to pay the closing cost nowadays
since they can get relatively more benefits
(lower rates) than no cost loans.

Posted in:General
Posted by Eric Fang on March 3rd, 2011 9:20 AM



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