What is a rebate/credit?
A Rebate by definition is; a partial refund to someone who has paid too much money. A better term is Lender Credit, which far more accurately conveys what is really occurring in the modern mortgage marketplace. Borrowers today have many more choices available for mortgage financing; lets start by understanding the meaning of Par Pricing, which is the rate available to the borrower without any origination or discount points paid for a specific rate of interest. The borrower would only pay standard lender fees and closing costs.
If a borrower selects a note rate that is lower (better) than Par pricing, he will have an additional cost in the form of Discount Points (or portion thereof), which is a percentage (%) of the loan amount, buying down the interest rate for the whole term of the mortgage.
Conversely, is the borrower selects an interest rate that is higher (worse) than Par Pricing, he will receive a Lender Credit, that will act as a cash contribution toward closing. As the interest rate goes higher, Lender Credits will increase to a point where there is no cost left to pay in the closing of the transaction, hence the term; No Closing Cost Transaction.
Lender Credits can be substantial, and have the capability of paying for any and all Lender, Escrow, and Title fees in purchase or refinance transactions, and may also contribute the establishment of the borrowers Impound Reserve account, if they select, or are required, to have one.
Lender Credits may not be funded to borrowers in the form of cash disbursement at closing or in any way be applied to down payment requirements of purchase transactions.
Lender Credits have made modern day financing affordable, and far more convenient. See Empire’s Instant Mortgage Rate Quotes.
- What is an ARM?
- Should I consider a loan with private mortgage insurance (PMI)?
- What is the minimum down payment required on a purchase mortgage?
- What is the maximum percentage of my home’s value that I can borrow on a refinance loan?
- What is the maximum debt-to-income ratio allowed?
- Is paying off an existing second mortgage or home equity line considered cash out?
- Can I keep my existing second mortgage or home equity line and refinance my first mortgage?
- Can Empire of America finance the purchase of a property through a short sale?
- Am I able to refinance a property that was recently listed for sale?
- What is the difference between a conforming loan, a super conforming loan and a jumbo loan?
- Can I apply before I find a property and get pre-approved?
- What is a subordination agreement?
- What is a three-day right to cancel?
- What is title insurance and why do I need it?
- What is prepaid interest?
- What is the difference between an Interest Rate and an APR?
- What should I do if I’m not sure about the annual real estate taxes?
- What steps should I take if I become a victim of identity theft?
- How can I obtain a free credit report?
- Do you have any programs that don’t require income documentation?
- What supporting documentation is required?
- How quickly can you close my loan?
- What is your rate lock policy?
- Are any fees collected when I lock?
- What if rates drop after I’ve locked?
- What happens if the loan process takes longer than my lock period?
- Can I choose a different program or rate after I’ve locked?
- Can I relock my rate if I cancel and reapply?
- If rates fall after I’ve locked, will you lower my rate?
- Should I lock or float my rate?
- What is an escrow/impound account?
- What are included in your closing costs? What are pre-paids & are they different from closing costs?
- Why do you charge a Lender Fee?
- Should I pay discount points?
- Can I prepay the loan without a penalty?
- What is your minimum credit score requirement?
- How can you offer such low rates?
- Is there a fee or any obligation if I apply?