Refinance

Glossary

Montrose, CO Office

Moab, UT Office

What are Discount Points?  Points are prepaid interest on your mortgage, charged by the lender at the time of closing. Each point is one percent of the loan amount. For example, two points on a $100,000 mortgage is $2,000. The more points you pay, the lower your interest rate will be, thus lowering your monthly payment. The points you pay are usually 

tax deductible. You should consult a tax professional to evaluate your individual situation.  Points may also be charge on non-conforming loans that are used by borrowers with special needs.  During your pre-qualification interview your loan officer will explain the points  charged on your loan.  These charges will be itemized on your “Good Faith Estimate".

FICO scores what do they represent?  A FICO score is a credit score developed by Fair Isaac & Co.  There are really three credit scores provided by each of the three credit bureaus in the US, Experian (formerly TRW), Trans Union and Equifax.  Experians score is called FICO, Trans Unions uses Empirica, and Equifax calls theirs Beacon.  The phrase "A FICO Score"  has been widely used in the mortgage industry as a generic term, in place of "A Credit Score".  Much like the when "coke" is used to refer to a cola and not to the specific brand name of a large cola company.

Credit scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrowers credit history into a single number.  Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance.  Developing these models involves studying how thousands, even millions, of people have used credit to predict future credit performance by a borrower.

Ordering a credit report through your lender early will give you the opportunity to correct any errors on your report without delaying the closing.