Understanding all the aspects of a Real Estate purchase in Steamboat Springs is what we do well at Buyer’s Resource. From the inspection period to the title work and all the minor nuances are important aspects to appreciate and understand. One of the most important is, of course, lending. Even though interest rates are at historic lows there are still ways to save, possibly, thousands of more dollars through the term of the loan. One of these is through Origination points.
Origination points are often misunderstood. Points are nothing other than interest paid at the time of closing to obtain a lower interest rate on a loan. One point is equivalent to 1% of the loan amount. If you are going to borrow $300,000 on your loan, one point would equal $3,000. This generally generates 1/8 to 3/8 of a percent lower interest rate, depending upon the loan program. As always, current market conditions dictate what the best choice will be at the time you want to buy a home.
When deciding whether or not you should pay points, take into consideration where interest rates are at when you seek financing. Compare that to historical market trends. When interest rates are low it makes more sense to pay points, particularly if you think you will be living in the property for an extended period of time. When rates are higher then historical norms it probably isn’t prudent to pay for points because there is a strong likelihood that the interest rates will come down again will bring up the opportunity of refinancing. If you refinance too early then you would lose the money that you spent buying down the points.
Another strategy when negotiating the price of a property and you have reached an impasse is to pay a little more for the home and have the Seller buy down the interest points. This could be a win-win situation as the Seller gets the higher dollar amount while you, the Buyer, could save the extra money that you have paid for the property over the length of the loan. In some cases it may even help a Buyer qualify for a higher loan amount.
