What's the difference between Loan Origination fee and Loan Discount? Both of these are expressed in percent of the loan amount. When a mortgage is said to have a 15 year fixed rate with 1 point, is this the discount point or origination fee?
Loan Origination Fee and Loand Discount?
Your question has several elements so first I will give you the general rule of thumb. Points add to the closing costs, discounts subtract from the funded amount of the loan. Points are deductable and discounts are not btw. In the end they both add as a discount means less loan so more cash needed if doing a purchase. In refinance situations a discount is often covered by raising the loan amount to cover itself. So a 100K loan costing 1 point will be funded at 100K and closing costs will have the 1,000 dollars added to the rest of the fees. A 100K loan bought down by a discount point will fund at 99K and be amortized at 100K. Many lenders will just make the loan 101K and the cost is built in. A lender will not directly allow discount points for rate buydown to also be financed so the loan is often made higher with the cost hidden as a limited cash out request.
Loan Origination Fee and Loand Discount?
Normally if a document or a saying as you have put it is 1 point origination fee that has to be paid by the borrower.
You should have your mortgage broker prepare a Good Faith Estimate (GFE) for you this document will reflect all cost that you are required to pay in connection with this loan. If any of the figures change he is required to make another GFE for you until the loan closes
I hope this has been of some use to you, good luck.
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Loan Origination Fee and Loand Discount?
origination is what your being charged,and discount is when they buy the rate down to get you a better rate. If you qualify for a 6% they can get you a discount by buying it down to a 5.75%. this would be better if your planning on staying in the house for a long time. and a gfe means nothing
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