1. What are Points?
   When an interest rate is quoted to you, it is composed of three parts. For example, your lender will quote you something like, 8½%, 1½%, plus 1. The "8½%" is the interest rate your mortgage note will carry. This is where you will make the payments amortized over the years you selected (15-30 years). The second part (1½%) is the "discount point", and represents 1½% of your loan balance. This money is paid at the closing directly to the investor who lends the money. This gives the investors what they want to earn on what they lend you, along with the 8½% you pay every month. The last past (1%) is the origination fee. It is 1% of the loan balance and is collected by the lending company. This amount can vary, of course.

2. Can I benefit from discount points?
   Yes, you can. The new IRS rule allows the buyer to deduct the discount points (which is interest paid up-front to secure a lower interest on the entire loan) paid by the buyer to the seller. The new tax benefit is retroactive to January 1, 1991, and you may be entitled to a refund from the IRS. First of all, you need to find a copy of you HUD-1 Settlement Statement. If you can't find it, the real estate broker, attorney, or title company that you used at the time of the purchase may have a copy. If the seller paid any discount points you may want to file an amended return for that particular year since you are entitled to the deduction of this interest. Then, contact your CPA and make sure that it will be to your benefit to amend your returns.

3. What is a "no-closing-costs loan?"
   If you pay no closing costs, then usually you will end up paying more interest, because the lender will pay all the fees that are required at the time of the closing. But you have to pay for this privilege by agreeing to a higher interest rate for the term of the loan.

4. What is the difference between a mortgage banker and mortgage broker?
   A mortgage banker generates the loan, servicing it and collecting the monthly payments for the investor. He is paid a percentage for this service. Many mortgage bankers also act as mortgage brokers, if they can get you a better mortgage from somewhere else. A mortgage broker generates a loan to sell to someone else for the servicing part. He usually does not close the loans in his name, or with his money.

5. Who is an underwriter?
   An underwriter makes sure that all the documentation in your file is complete, and he determines if your application fits the investor's entire guidelines and requirements. He also determines if you will get a mortgage or not, depending upon your credit file, or your credit-worthiness.

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