How to Read a Mortgage Rate Sheet

Mortgage rate sheets become important on the day your lender locks in the interest rate on your mortgage loan application. Their significance lies in the fact that rate sheets allow to you calculate and verify the number of points the loan will cost and help you determine whether the lender is building a point-based commission into your out-of-pocket closing costs. Because of this, it is crucial that you know how to read a mortgage rate sheet and make the necessary calculations, both for self-protection and to ensure your lender is operating in an ethical manner.

Calculate Adjustments

Get the most current wholesale mortgage rate from your lender.

Locate the adjustments section of the rate sheet. Here you will find the number of points -- each equal to one percent of the amount of your loan that you must pay at closing -- your lender charges separately and that you will include later. Points assessed initially depend on the size of the loan, your credit score, the LTV or loan-to-value ratio and whether the loan is for a private residence or a multi-family investment.

Calculate adjustments that apply to your situation and your loan. For example, if your loan amount is $200,000, your credit score is between 700 and 719 and LTV is between 60.1 and 70 percent, your lender may charge .500 or one-half point. If the loan is for a two-unit investment property your lender may add another point, bringing the total to 1.500 points or $3,000.

Calculate Lock-in Points

Move to the section of the rate sheet applicable to the type of loan for which you are applying. The section will include four columns; one column for the interest rate quote and three that include varying lock-in points for a 15, 30 and 45 day lock and a section at the bottom containing point penalty assessments for extending the lock-in period.

Locate your interest rate quote, review the corresponding points and see how changing the time period of your lock-in affects point calculations.

Determine whether your lender is building a commission into points -- and create a starting place for point reduction negotiations -- by locating points enclosed in parentheses.

Determine Final Point Costs

Add the adjustment and lock-in points to calculate the points due at closing. If your loan amount is $200,000, the 15, 30 and 45 day lock-in points corresponding to your interest rate are .500, .720 and .830 and you have 1.5 adjustment points, you will need to bring $4,000, $4,440 or $4,660 to the table at closing.

Add lock-in extension points that may become applicable. If the lock-in period ends before your loan closes, you must extend the lock-in for an additional 10 days and your point penalty assessment is .020 points per day, the total amount due at closing may rise to $4,400, $4,840 and $5,060 respectively.

Negotiate with your lender for a reduction in points by changing the lock-in time period, reducing or removing the point penalty assessment for extending a lock-in or by reducing the commission your lender receives.