Rate locked, but cost to buy points increased? House in PA

why is the cost for buying the point higher? It was .75 for $2865. Now it’s .875 for $3045? We signed a rate lock

His response:

I was going to give you a call Monday to explain.
Because the loan amount decreased substantially, there was a .125 pricing increase. We can offset this by going up on the rate if you’d like. Or we can leave as is. Your choice.

Info: Buyer & seller went back & forth and settled on lowering purchase price vs seller giving buyer cash back at settlement. Price was lowered ~$43k

Different lenders have different margins set for various loan amounts.

If the loan amount changed it’s likely you fell into a worse pricing bracket with this lender.

Flynn said:
Different lenders have different margins set for various loan amounts.

If the loan amount changed it’s likely you fell into a worse pricing bracket with this lender.

Thank you - this explains it.

The rate lock was also based off a certain loan amount. Lenders typically give better pricing as the loan amount goes higher because they make more money on it. There are tiers to pricing most places. Same credit/ltv borrowers when you compare 300k loan to 100k loan will differ due to this

@Yan
This explains it, thank you.

If terms change pricing can change with it.

You probably lowered your LTV to a bucket with an additional 12.5 basis point hit

Presley said:
If terms change pricing can change with it.

You probably lowered your LTV to a bucket with an additional 12.5 basis point hit

Thank you - that explains it.

Did the LTV (Loan to Value%) change to a different bracket? (usually in increments of 5)

Morgan said:
Did the LTV (Loan to Value%) change to a different bracket? (usually in increments of 5)

Yes

Morgan said:
Did the LTV (Loan to Value%) change to a different bracket? (usually in increments of 5)

Yes, as stated in the post. LOs have the attention span of a hamster i swear

Rate lock is actually locking the “rate sheet” at that time, which includes different rates based on loan amount

Cairo said:
Rate lock is actually locking the “rate sheet” at that time, which includes different rates based on loan amount

Thank you - didn’t know about rate sheet until now.

He’s saving $43k on the home and causing a stink over a $200 increase in origination?

Lennon said:
He’s saving $43k on the home and causing a stink over a $200 increase in origination?

So you just blindly accept whatever increases presented to you? $43k “saving” is more like more things popped up on inspection than realized. It’s not like the seller reduced selling price out of the goodness of their heart.

@Harley
Well yeah. Why didn’t he work with a loan officer he trusts in the first place

Lennon said:
@Harley
Well yeah. Why didn’t he work with a loan officer he trusts in the first place

Ahhh see, the thing was original LO didn’t lock in rate and then was slow to respond. Therefore causing an increase in rate bc “it’s the weekend and I can’t do anything anymore.” LO came highly recommended too.

This is a second LO because they actually do respond/take action promptly. But due to already dealing with an increase in rate & therefore money, it didn’t make sense to just blindly accept everything.

And yes, I now know from browsing some subs that apparently they could have been made to pay fees to get lower rates or forgo their commission. So I doubt my friend knew about this either. They were just trying to make sure they get the loan bc they found a house they liked.

@Harley
I’m sure what it is is his rate is locked meaning the market pricing is locked for whatever day he locked on but the lender has pricing adjustments based on loan amount so whatever the loan amount was lowered to added a .125% adjustment to the origination cost

This would be what’s called a change of circumstance under which the loan terms are allowed to be altered after the lock.
Legally, points can only be charged after rate lock if the pricing decreases on the loan.

Pricing in this sense is a percentage of the loan amount that the lender gets back when they sell a loan to an investor after funding the loan. This is industry jargon that means the lender will make less money on the backend selling the loan to other investors. Essentially, the lender is making less money on the deal due to the loan amount decrease, and they are charging you the difference. Its entirely above board in a legal sense as long as the pricing decreased by the amount of points charged.

They should have rate sheets from the prior lock and current lock to show the difference in pricing. I don’t actually know if you are entitled to demand it from them as a consumer, but legally they are bound to produce it if a regulatory body asks

@Bailey
Thank you for the explanation - this helped explained a lot.

That checks out if there is a change in loan amount your pricing will likely change if there is a different pricing “bucket”. Typically ever $50K in loan amount. For example if the original loan amount was $252,000 but the new loan amount is $247,000 you are in a worse pricing “bucket”