Origination and discount points

Metro Detroit real estate

& Michigan Mortgage closing costs

Now you bought a Metro Detroit home and you want to know about the mortgage closing costs.  When you sit down at the closing table you will be looking at the HUD settlement statement.  On the second page at the top of the page there are two fees called origination and discount points.

I usually say if you have good credit you should not be paying origination or discount points.  The only reason you would be paying points is if you are buying down the rate or getting a rate below market rate.

Origination and discount points are basically where a loan officer makes extra money.  Usually a loan officer gets paid a small percentage of the loan amount.  A loan officer makes between a half percent to 2 percent of the loan amount.  Though some loan officers want to make more.  They may want to make 3 -6% of the loan amount.  How they do this is by charging origination or discount points.

An educated borrower should not pay origination or discount points as far as I am concerned.  Though I will state here that there are cases where it is necessary to do that.  If the loan officer has to lower the rate in order to get you qualified for debt ratio.  You may have to have the absolute lowest rate in order to get the payment down in order to qualify for the loan.  That is one case where paying points makes sense when buying a Metro Detroit home.

Usually it takes 5-7 years to break even when buying points.  So if you buy a Metro Detroit home, buy points, you have to stay in the house at least 5-7 year to break even on the money you paid for the points.  For more on Livonia real estate or to search Michigan homes for sale feel free to go to my other website www.RussRavary.com

My quote of the day:

I like to see a man proud of the place in which he lives.  I like to see a man live so that his place will be proud of him.  ~Abraham Lincoln


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