Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, April 23, 1995                   TAG: 9505080010
SECTION: AMERICAN HOME WEEK                    PAGE: 19   EDITION: NEW RIVER VALLEY 
SOURCE: DENNIS DUNCAN BRANCH MANAGER, CHEMICAL RESIDENTIAL MORTGAGE CORP.
DATELINE:                                 LENGTH: Medium

WHAT'S THE POINT OF POINTS? HERE'S HELP

Generally, a point is a fee charged by the lending institution for obtaining a mortgage loan. A point is usually 1 percent of the amount borrowed. For example, if a buyer takes out a mortgage of $100,000 and pays (1) point, this will be $1,000. Who pays the points is generally negotiable between the buyer and seller.

Certain types of loans such as VHDA may require the seller to pay (1) point. However, most of the other types of loans allow for negotiation. There are also limits as to how much a seller is allowed to pay and still be in conformance with the various loan guidelines.

Sometimes, there will be more than one point charged. Usually, the more points which are charged the lower the interest rate given to the borrower. When this occurs, the points are often referred to as DISCOUNT POINTS.

When this happens, the lower the rate, the higher the points; or vice-versa, the higher the rate the lower the points.

When additional points are paid to obtain a lower rate of interest, this is referred to as a BUYDOWN. There are generally two types of buydowns, permanent and temporary.

How do you get the rate and point quote you want? This is where the average consumer has concerns or questions. Rate/point quotes with any lender will vary depending on how long the quote is to be locked in. The longer the lock-in period, the higher the quote. Unfortunately, very few consumers ask this question when getting quotes.

Lender A may be quoting a (7) day quote and Lender B may be quoting for 45 days. On a new loan application, there is virtually no way one could close in (7) days. The average borrower may select Lender A because of the seemingly lower quote only to be surprised to learn of only getting

their rate protected for (7) days, when going to the lender to formally apply. In fact Lender B's quote could have been better than Lender A's for a 45- or 60-day period.

It is also important to remember that the rate/point quotes are subject to change constantly. Mortgage loans are packaged and traded on Wall Street just like bonds and stocks. If a borrower calls three or four lenders at different times and rates have been going down, the last lender called may seemingly have the best rate. In fact, this may not be true. The first lender's quote most likely has moved down also and may be the best later in the day.

If you do not close within the lock-in period, you might lose the rate and points which you selected. This is exactly what would happen had you selected lender A. Borrowers, should select a lender that will offer a quote sufficiently long enough to meet their closing date. If your transaction does not close by the end of the lock period, then your quote will return to market. This means if rates/points have gone up that you may have to pay a higher rate or greater number of points on your transaction.

Borrowers should also check out the lender and loan officer's reputation for getting the transaction closed on time, knowing all of the various rules and guidelines and as discussed earlier make sure the quotes obtained are for the same lock-in periods. Also, some lenders who quote these low rates may sell the loan before it closes.