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leeelliot61 · Joined: 13 Sep 2009 Posts: 188 0.01 Dollars($)

What is the diffrence between points and pre-paid?

savior70 · Posted: Tue Oct 06, 2009 5:10 am Post subject:

Hi,

Points are of two types- one is the origination points and the other is the discount points. Origination points are paid to the lender for originating the loan, while discount points are paid in order to get a lower interest rate. These points are negotiable. Pre-paids are items paid in advance, before or at the time of closing on a loan. These are fixed and must be paid before completing the mortgage transaction.

marklavender1 · Joined: 13 Sep 2009 Posts: 120 -0.14 Dollars($)

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gmakerley · Posted: Tue Oct 06, 2009 7:57 am Post subject:

not at all, mark. please brush up on your terminology.

jveenstra · Posted: Tue Oct 06, 2009 9:17 am Post subject: Prepaids

As noted above, PREPAID items by the sound of the word can be items that are prepaid before closing---often the appraisal, sometimes an application fee, etc.. These are not really PREPAIDS, they are POC items--PAID OUTSIDE OF CLOSING

The term PREPAIDS refers to a category of items paid at closing that will be recurring throught the life of the loan---tax escrows, home insurance escrows, private mortgage insurance escrows, interest on the mortgage from date of closing to the end of the month, flood insurance escrows. All of these are paid at closing and all of them will be paid throught the life of the loan.

One time costs are CLOSING COSTS at closing. These are items that you pay one time and never again throughout the life of the loan.
Everthing you pay is noted on the Good Faith Estimate. The Good Faith Estimate adds up the PREPAIDS and the CLOSING COSTS and discloses them a such.

Discount points and Origination Points are both counted as costs. Discount points in affect "pre-pay" some of the interest and get you a lower interest rate. They are included in the COSTS on the Good Faith Estimate, not the PREPAIDS (even though they are prepaying interest)

millerja9 · Joined: 19 Jun 2009 Posts: 100 0.00 Dollars($)

Paying the prepaid items are must be paid. It is independent of lender. This is independent transaction. This is a non-negotiable. The items are compulsary and its depends on loan type and conditons of loan.It is also depends upon somewhat financial aspects.

I will expalian t with example. There is loan requirement from your side and you applied for FHA loan for this you have escrow account. you have to pay property taxes and hazard insurance to the lender along with your principal and interest payment. But for convetional loan it may not be situation.Thus in this case you'll have certain pre-paids associated with that FHA loan that wouldn't be associated with a conventional loan.

Points are also called as Loan Origination fees. These can be negotiable and non-mandatory items. You can pay to the entity arranging financing for you. This "fee" is charged as the total or partial compensation. This is as good as you are paying particular interest rate.

millerja9 · Joined: 19 Jun 2009 Posts: 100 0.00 Dollars($)

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