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 How do you "buy" a better rate?
Do you plan on keeping your loan/home for a while? Then it may make sense to "buy" a lower interest rate by paying one or more "points."
Even if you are unsure of how long you plan to keep your mortgage before you move or refinance, paying points now for a lower rate may make sense. For example, do you have a high-paying job now but you think you might change careers in the next few years? I will help you sort it out. It is part of finding the right loan for your means and goals.
A point -- which equals one percent (1%) of the total loan amount -- is an up-front fee that lowers your monthly interest rate and total interest due over the life of the loan. So, a one point loan will have a lower interest rate than a no point loan. Basically, when you pay points you trade off paying money later in favor of paying money now. You can pay fractions of points, meaning there are many points packages that can make a loan's terms more favorable if that is what is right for you.
There are a variety of rate and point combinations available. When you look at different loan programs, don't look just at the rate -- compare the whole package.
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