The pricing of a loan simply means to take
into account the full financial picture when you are looking at costs associated with a
mortgage. It’s crucial not to go with just the lowest rate that a lender is providing
or offering. This is because any lender can offer a low rate, but they are going to charge
higher closing costs. The way to make sure, that you’re getting the best complete financial
picture on your loan or paying the best pricing for your loan, is to ask for a good faith
estimate, in addition to, the rate being offered. These are provided in- writing. They’re simply
just a list of estimated closing costs associated with your mortgage. They include origination
points which typically are 1%. Discount points are also a certain percentage of your mortgage.
Typically, you would never want to pay more than 2% in discount points, for any loan.
If you are going to be a homeowner who is going to be in your mortgage for quite some
time, it may benefit you to pay one or two discount points to get the lowest rate. Homeowners,
that are short-term or who are only going to be in their homes for a short amount time,
would want to avoid discount points because they’ll be selling their home in several years.
Just go with a higher interest rate. All mortgage interest on homes is tax-deductible. So people
are willing, sometimes, to take that higher interest rate and not pay the people-points