*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for certain loan products and/or discuss your options. The interest rates presented are for illustrative purposes only and does not necessarily reflect current rate market.
Mortgage Loan officers will use different terminology to help a borrower to understand the loan process better. Sometimes though, some of the terminology can be confusing and unfamiliar to those who haven't bought a home before, or who haven't bought too many homes in the past.
One of the terms that a Loan Officer will use from time to time is a "point" when referring to interest rates.
What does this mean? Do you have to physically "point" at which rate you want? Is there a "point" when a borrower is not allowed to buy the rate down any more?
What a "point" means when it comes to mortgages and interest rates is usually 1%. If a borrower is looking to buy down their rate "one point", and the par rate is currently at 7%, that means that a borrower is looking to buy their interest rate down to 6%.
So what about a half a point, or one and a half points. Does that mean the same thing?
Yes. If a borrower wants to buy down their rate a half of a point, that means that at a 7% par rate, they're looking to buy down to 6.5%. If they want to buy their rate down one and a half points, that means that they're looking to buy their rate down to 5.5%.
What about 2/1 buydown's?
You're still likely to hear the term "point" when it comes to 2/1 buydown's as well. Put simply, a 2/1 buydown is where a seller will "buy down" a borrower's interest rate two points for the first year of the new loan, and one point for the second year of the loan. For more information on 2/1 buydowns, check out an article I wrote on them here.
For questions when it comes to deciphering mortgage terminology, or if you're interested in rate buydowns, please contact me today! I'd love to help you understand your options and what it will take to purchase a home.
*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for certain loan products and/or discuss your options. The interest rates presented are for illustrative purposes only and does not necessarily reflect current rate market.
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