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Paying discount points<br />
Some buyers opt to pay points on their loan. By paying a portion of the loan<br />
upfront, you can reduce your interest rate proportionately. Each point purchased<br />
could lower your interest rate<br />
by .25%, depending on the lender.<br />
Bear in mind that many people<br />
Sometimes, buyers will have no choice<br />
refinance or move before they<br />
but to purchase points; because of<br />
finish paying off their loan<br />
their specific debt-to-income ratio,<br />
(the national average is seven<br />
the bank may choose not to lend them<br />
years). Thus, if you move before<br />
money at a higher interest rate, so<br />
your lower monthly payments<br />
their only option will be to buy points<br />
earn back the cost of the points<br />
upfront to lower the interest rate.<br />
you’ve paid, you’ve lost money.<br />
Other times, the decision will be a personal<br />
financial calculation. Consider<br />
what the cost of the points would be now; calculate how much that will lower<br />
each monthly payment. You will need to decide if you would rather pay the<br />
cost of points out of pocket now and have a lower monthly payment, or save<br />
your money and pay a higher monthly payment over the life of the loan.<br />
Co-signers<br />
Enlisting the help of a co-signer or co-borrower<br />
allows you to rely on his or her income<br />
in addition to your own in order to qualify<br />
for a larger loan. A co-borrower is featured<br />
on the title, while a co-signer merely takes<br />
responsibility in case of default.<br />
Check with a knowledgable<br />
rav whether you will<br />
require a heter iska. Many<br />
poskim require a heter iska<br />
for any loan with a Jewish<br />
co-signer, even if the<br />
lender is not Jewish.<br />
A co-signer needs to understand that he is<br />
not simply guaranteeing payment in case you default on the loan; he is actually<br />
applying for the loan along with you. Therefore, be sure to verify that their<br />
income is eligible for co-signing; if they have outstanding debt (their own<br />
mortgage, co-signatures on other loans, credit card debt, etc.) their eligible<br />
income will be proportionally reduced, just like the borrower’s. Also, their<br />
documentation will be scrutinized as carefully as the borrower’s, so be sure<br />
WE ARE FRIENDLY. Our team is always ready<br />
and willing to guide you through the real estate<br />
closing process.<br />
732.905.9400 • www.madisontitle.com<br />
2017 Lakewood Home Buyer’s Guide | 69
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