Points... or no points? Lock or no lock? That is the question

How do they work? I mean I can get a rate of 4.875 with 1 point
or
5.0 with .625%
or
5.125% with 0 points

My DH is saying its only a small under 100 dollar difference per month or so... why bother using our savings up front.

Thoughts?!?! Help??!??!?!

Ooooo and what about locking in? When should we?

Re: Points... or no points? Lock or no lock? That is the question

points are just interest paid in advance. Choose the one that fits you best.
To lock or not to lock. Not until you are in contract. Then you have to start watching the bond market. I also put out weekly news letter on mortgage rates and what to watch for.

If you want the newsletter send me a forum with your e-mail and I will ad you to my list.

Arthur

Re: Points... or no points? Lock or no lock? That is the question

This is a great blog with advice every day on whether you should lock or wait: Mortgage Rates

Obviously, you can't lock until you have signed contracts and have gone through the first stage of approval from the bank.

As for buying points, you have to do the math. To use simple numbers, if you have to pay $1000 for the rate reduction, and it saves you $50 a month, then you make your money back after you've been in your house for 20 months. After 20 months it's all profit. If you don't hit "profit" for 5 or 6 years and you know that you won't be in your starter home for that long, it doesn't pay to buy points.

FWIW I agree with your DH that it's better to keep the money in savings and pay a little more each month. That's what we did.

Re: Points... or no points? Lock or no lock? That is the question

So locked and paid down points. The main thing you need to ask yourself is, will this be your forever home? If your answer is no, then do not pay down points. As for locking, you can lock maybe as it gets closer. Most brokers will tell you to wait a little bit to lock. It all depends on the type of person you are. Will you watch the rate daily? Or will you just wait it out to see what you get? If you are going to watch them and will get annoyed if they go up, and you didn't lock... then LOCK !
Things to consider about locking are how long it is good for, what happens if the lock expires and how much, if you can, extend the lock.
HTH !

Re: Points... or no points? Lock or no lock? That is the question

Thank you all so much!

We are in the final stages now,..I just fell that if I say LOCK...then we will have something happen!

Re: Points... or no points? Lock or no lock? That is the question

If you lock in, ask the mortgage broker if you can "re-lock" (not the right term)
if the rate goes down. Many will let you, as long as it's not right before the closing.

I worked with a great mortgage broker at Wells Fargo if you want her name/number.

Good luck!