Real estate question(s)

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truthdetector

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"Thank you for your inquiry. If you escrow taxes/insurance it does save
0.250 points in closing costs. You will still get to pick your insurance
company however you will need to provide us the insurance declarations page
so we can see the details."


The statement above was from a loan officer. Does that mean 0.250 off the A.P.R. of the loan, OR just some amount literally off of the closing costs.  I am assuming the latter, but I have never purchased a home with an escrow.  I don't care for it now, but would if the savings is significant.

 
It's an amount off the closing costs, not the interest rate.

Point work sort of like pre-paid, additional interest. You can pay more points for a lower interest rate over the life of the loan, and and it can come out cheaper in the long run than paying them for the whole length of the mortgage in the form of higher interest. Lenders like them because they can make the same amount of money, and more up front, while advertising lower interest rates and lower monthly payments.
 
0.250 points would be .25% of your loan amount. So if your loan amount is 100,000 then escrowing taxes/interest will save you $250 of your closing costs.
 
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