Just Pay the Points, Don't Play Games with your Lender, Negotiate the Points in!

Mortgage and Lending with Sunstreet Mortgage LLC. Licensed Mortgage Professional NMLS# 222004

I was reading a post a colleague of mine wrote and it reminded me of something that happens all to often in lending. That darn Investment Property/ Primary Residence/ Second Home game. You know the one I'm talking about, the client is going to buy a home that is to close to their primary residence to be a legitimate owner occupied property or they are going to move into it after they fix it up but in reality they are not going to do that they just want to avoid paying higher rates or fees or they are stepping down in square footage and value to a fixer upper and moving into that home and will sell their other home later, yes that game.

Here is a solution: JUST PAY THE POINTS! Truth is a lender is guilty of fraud for knowingly representing a properties use for something other than what it is really intended to be used for. If you are flipping a property or your client may be flipping a property then use the highest rate you can to avoid paying any points if possible but if you are holding it rental income for several years have your lender factor how long it will take to recapture your costs compared to the reduction in rate for paying points.

Second solution is to factor the points into the deal. On investment property the seller can pay up to 2% of a buyers closing costs. Since you are negotiating a deal, try to negotiate the points as well. Ask the seller to pay the 2%. It's a real help and may take some of the pressure off you to play the game. The game of investment property/ Primary Residence / Second Home. That's one game I can do without. I hope you can too.

Call me for help relating to any home lending questions.

Michael Rohde

Sr Loan Officer



Comments (3)

Patrick Randles
Nova Home Loans - Tucson, AZ

I like the concept of getting the seller to pay the points, thus allowing the buyer to ignore the fact that rates on investment properties don't look so good when compared to primary residence rates.

Aug 20, 2009 04:18 AM
Sandy McKee
Sunstreet Mortgage - Tucson, AZ

Most people act surprised when you tell them that the rate is higher and points my be charged. I too think that we should spread the word about having seller pay points! Bravo Mike

Aug 20, 2009 05:51 AM
Michael Rohde
Sunstreet Mortgage LLC. Licensed Mortgage Professional - Tucson, AZ

Hi Patrick--- Thanks for agreeing. I really think investors and agents miss the boat sometimes looking for the best deal on the property but not realizing that they could just build in a couple points to defray costs instead of trying to hood wink the lender. They could take the pressure off.


Sandy-- You hit it on the head. They do act surprised. The either didn't know of sometimes their agent sets them up ahead of time by stating how they should approach the lender to skirt the issue. It's few agents but there are some out there. That's part of the overall education process. In management as you very well know we call it an "area of opportunity" Take Care.

Aug 20, 2009 08:02 AM