Boise First Time Buyer ask about Buying Down the Rate

Most Iaho first time home buyers in Boise ask about paying an extra point to buy down the their FHA loan interest  rate, but are not sure how it works and is it a good idea?

In all of the examples on this site, I will be referring to a basic Idaho first time home buyer loan which is usually a FHA loan.  Guild Mortgage of Boise, offers all types of financing for all types of buyers.  This site is dedicated to Boise IdahoFirst Time Home Buyers.   

Stop and print out my sample good faith estimate.  It makes it much easier for first time buyers to follow along.

All interest rates are at a certain cost that changes everyday.  The cost is in the form of “points”.  

For example, on day the rate of 6% may be a 1/2 point and another day .75 or 1 point.  On the day a buyer decides to lock their rate, they can ask; what is the rate at “one point” and how much lower will it be if I choose to pay another point?

A “Point” is equal to 1% of the loan amount.  For example with a $100,000 loan amount, one point would be $1000.

There are 2 different kinds of points listed on a Good Faith Estimate; origination fee (line 801) and discount points (line 802). 

All FHA loans usually have a one point origination. 

If a buyer chooses to pay an additional discount point, the rate will usually be about 1/4% less.  With a $100,000 example, the additional point would be $1000.00.  When the rate is reduced by 1/4% the payment would go down approx $16.00 per month (100k example).  With a $16.00 savings per month, it would take about 62 months (5 years) to recoup the $1000 cost for the lower rate.  1000 divided by 16 equals 62

Boise Idaho first time home buyers usually ask: “How do know if it is worth it or not to pay additional points?”  If a first time home buyer plans on keeping the home for over 5 years, then it may be worth it.   Some people are not sure and usually go with just one point origination fee and keep the extra cash for new home furnishings.

Here is a sample GFE based on a $100,000 at a 6% 30 year fixed rate with the buyer paying an additional point. 

TAKE CONTROL AND UNDERSTAND YOUR GFE! IT’S YOUR MONEY!

I will be happy to email any GFE scenario with your specifics.

Check today’s rates for Boise First Time Home Buyers

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Guild Mortgage –  Boise Home loans – Craig Ballhagen 208-713-3309

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