I need help with a first time mortgage loan. I applied with BOA, on their 'no fee' mortage loan, they offered me 5.25%, but that included buying 3.719 points for appx $9k. What is the purpose of these points? Should I go with this deal or shop around a little more? How will shopping around affect my credit score - inquiries?
http://www.directlender.net/mortgage_loan_terms.htm The IRS considers mortgage points prepaid interest.
I would recommend lending tree, I used them when I got my loan a long time ago. They hooked me up with a few companies, you get a two week period where you can get all the quotes you want with minimal impact (just the initial iquiry, similar to a car loan) it would behoove you to call as many places as possible before that window runs out. Apex brings up a good point, if you have a credit score below 660 which is subprime territory, then you look better going FHA, FHA costs a little more up front but it will save you money down the road big time.
In essence you are paying a 8.969% rate, the difference is you're paying the 3.719% interest before the loan starts. Points are "prepaid interest", short and simple. Be careful of wording on lending products, notice that points are not a "fee". Always look at the total cost of the loan. As Apex suggested, FHA would be the best place to start looking at a mortgage. You should also ask your friends/coworkers for references for a GOOD mortgage broker as well.
If you can't find anyone, I'll send you a few referrals. Good people and in case anyone is watching, no, I don't make a dime off of it. They will push FHA so long as it's possible.
I also have a couple of contacts, and no, I don't make anything off of referrals either. I just try to help out others as a few have helped me along the way.
