How do you "buy" a better rate?

Do you plan on keeping your loan for many years? Then it may make sense to "buy" a lower interest rate by paying one or more "points."

Even if you're unsure of how long you plan to keep your mortgage before you move or refinance, paying points now for a lower rate may make sense. For example, do you have a high-paying job now but you think you might change careers in the next few years? We can help you sort it out. It's part of finding the right loan to meet your long and short-term goals.

A point -- which equals one percent (1%) of the total loan amount --- is an up-front fee that lowers your monthly interest rate and total interest due over the life of the loan. So, a one-point loan will have a lower interest rate than a no point loan. Basically, when you pay points you trade off paying money later in favor of paying money now. You can also pay fractions of points, meaning there are many options to consider that can make a loan's terms more favorable. It all really depends upon your current situation and long-term plans.

There are a variety of rate and point combinations available. When you look at different loan programs, don't look just at the rate -- compare the whole package. Federal law requires lenders to publish their loans' Annual Percentage Rate, or APR. The APR is a tool used to compare different terms, offered rates, and points.