Understanding Discount Points

What is a point?

A point is equal to one percent of the total amount of a mortgage. That is, one point on a $100,000 mortgage is $1,000 (one percent of $100,000). Generally, you will pay all points at closing. goexim.com offers mortgages with several combinations of points and interest rates. Generally, the lower the interest rate, the more points you will pay at settlement. (Interest rates affect your monthly mortgage payment, while the points affect the amount of cash you must have at the settlement.)

For example, if a loan with the current market interest rate has two points, a loan with an interest rate that's one-half percent higher than the market rate may have no points. Your choice among the various interest rate/points options will depend on how much cash you have available for the closing and settlement.

What interest rate will you pay?

As you discuss different mortgages with your Moving Solutions Consultant, there are other conditions and terms that you should keep in mind. The most important of them is how and when the actual interest rate you will pay is determined.

We will quote a rate and fee at the time you apply for a loan, and then guarantee-or lock-the quote for a specified time (generally 120 days if you have not selected the property. However you may opt to not locking this rate until you have selected your property). While this protects you from paying more for your mortgage if interest rates rise, it also means you will pay the quoted rate even if interest rates fall.

Lock periods usually run from 10 to 120 days. The longer the period of the lock the higher the fee or rate will be. You will want your lock period to be long enough to get you through closing and settlement.

Ditech.com will give you the option of letting the interest rate for your mortgage float, so the rate can change between the time you apply and the time you close (the rate is usually set after some specified period, but before the actual closing).