by Greg Cryns 
©2009

Last year I brought some of my personal financial information to my local bank. My mortgage gal from the bank told me she could "lock in" 5.375% interest for a new mortgage.

I was told that at a minimum I would get the 5.375% rate with not points applied OR I would get 4.875% with one mortgage point.

A "mortgage point" is a payment made to the mortgagor to obtain a lower rate on issuance of the loan.  So, for a $300,000 loan, for example, with a 30 year payout, a point would cost me $3,000 in addition to the normal closing costs.

She told me she would "try her best" to get me a lower rate since the feds recently reduced the overall credit rate.

Her bank associate told me she had locked in a mortgage for 4.5% that day. This made my mouth water for the possibility of a lower rate for me. I did not ask if there were any mortgage points included in that lock in. At 5.375% there were no points. 

I also obtained a quote from my friend and State Farm insurance agent for 5.1% with no points.

What does it mean to "lock in" a mortgage loan? This means your mortgage company agrees to give you a specified interest rate on a new mortgage if everything else falls in line.

30 days later...

I received the papers for the lock-in a few days ago. My banker locked us in at 4.875%. This translates to 5.018% Annual Percentage Rate (APR).

I've watched the rates since I received these papers. At this time, the rate offered is still very good (cannot find a lower rate somewhere else). I did discuss my situation with two other major banks.

The total estimated closing costs are $5,415.00 as shown in my Good Faith Estimate.

Some of the fees to process this loan are:
Appraisal fee:  $400
Credit Report: $16
Processing fee: $300
Underwriting review fee: $150
Administration fee: $250
Document Preparation fee:  $55
Title charges: $1115

Total estimated closing costs: $5,415 including two points

After much haggling and searching and just plain good luck, I nailed down a mortgage at 4.25% with two full points. I am sure that my credit rating may have had something to do with the final result.

The best takeaway from this experience: if you have a good credit rating, be ruthless and owe allegiance to no one. Negotiate hard to get the best possible rate.