This means that the lender will credit the borrower the points and apply these toward the settlement costs. Buyers perceive that they are paying a higher interest rate - but getting something for nothing in return. They are mostly pegged at 8.25 percent, 8.75 percent, and 9.25 percent. On the average, the lenders are offering the 8.25 percent loan at 3 points, the 8.75 percent loan at 1 point, and the 9.25 percent loan at -2.00 points. They do this by crediting the negative points toward the settlement costs.
Borrowers usually choose no-cost loans for one of two reasons.
Either they are short of cash or they expect to dump the property in a short time frame, wanting to minimize their up-front cash outlay. But these no-cost loans often cost borrowers more than you would expect. Compare the rates online to get the best quotes. Then, look in detail at the points. If there are overages, ask to have them credited back to you.