Michael Holigan: On any given day in most newspapers, you can shop for interest rates. Because rates are based on the bond market, there's no great difference from one lender to the next. But you can still find a deal.
Andrea Peters: My interest rate was seven and a half percent and I thought, from what I understand, that that was a real good interest rate.
M.H.: Andrea is a single professional who just bought her first house. She didn't want an adjustable rate mortgage, balloon, or anything exotic. She wanted a fixed loan with a low rate. Like many other home buyers, she found it.
A.P.: I think the biggest thing was to research and make sure that you were getting the best, lowest interest rate, you know, and I didn't realize how important that was until I started looking.
M.H.: Tom and Stephanie Somers had to pay points to get a low interest rate. The concept of points can be very confusing.
Stephanie Somers: And we still didn't know what a point was based on, was it...who determines how many points, it was...and we still don't know.
M.H.: A point is 1% of the amount of your mortgage loan. An origination point is charged up front by the lender to cover their fees and services. You can also pay discount points at your own option, to lower down your interest rate for the full life of your mortgage. Sometimes you can even get the builder or the seller to pay those moneys for you. Say you're purchasing a $100,000 home and you decide to put 5% down. A point on the $95,000 balance would cost you $950. A lender may ask you for as many as two to three points to lower the interest rate by half a percentage point. You could easily find yourself paying as additional $2,000 more up front. The good news is that half a percentage point would decrease your payments from $697 a month to $644. And while that only represents a savings of $33 a month, over the life of the loan it will add up to almost $12,000. The points are tax deductible and they give you a much lower monthly payment. This makes it easier to qualify and you can afford a lot more home.
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Episode 29 1996 - 97 Season
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