What are basis points?

Real Estate Agent with Long & Foster Real Estate Inc 610-225-7400 PA License - AB067198

What are basis points?

Buyers today, especially first time buyers have lots of questions. It is interesting to see what questions they come up with.

Why do we all use so much jargon? A client today emailed and asked me the above question after having emailed our mortgage provider and asked several other questions, basically about locking a loan. The mortgage provider's reply included the term "basis points". Why not just say so much per cent? Why use a new term the buyer may not understand. This is why the consumer is confused, we change and intermix terms, and depending where you are different terms can refer to the same thing.

For example, down money, earnest deposit, hand money, flesh in the game, first deposit are examples given recently by an attorney for the same amount of money given with the agreement of sale. No wonder our buyers are confused, he sees these all within one state, maybe yours has different phrasing?

So, I explained basis points are a way to calculate how much will be charged for a lock for example, so 100 basis points equals 1%, 50 basis points equals 0.50%.

I know what question I am adding to my FAQ's as soon as I can.

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Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Nick and Trudy,

We have always been fans of jargonless communication.  Einstein said, that when you know your subject, you can explain it simply to anyone... A

Oct 06, 2014 09:16 AM #1
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Nick & Trudy - there is so much industry jargon, I try to avoid it and explain things in terms of "points" since that's so often what's seen in advertising (after, of course, explaining what "points" are).  I've found buyers appreciate when a lender can make life easy for them - they tend not to care about my mental mortgage glossary. 50 "bips" = 50 basis points = .5 percent = 1/2 point.  No wonder people think the mortgage process is confusing!

Oct 06, 2014 11:18 AM #2
Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

Ron & Alexandra Seigel, it is so easy to slip into jargon because we are doing this every day. It is only when a client ask questions or says what does that mean you realize it sometimes.

John Meussner, I think points can also be hard to understand if not explained and as it all related back to percentage, maybe that is the easiest way to explain it.

Oct 06, 2014 11:12 PM #3
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Nick Vandekar, 610-203-4543

Tredyffrin Easttown Realtor, Philly Main Line
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