Points changing during rate lock period?

Question

I'm in the process of doing a refi and have my rate locked. Every time I get a revised estimate statement during the underwriting process, the points have changed. They were initially 1.5%, a week later .5% and now .95%. I'm not really complaining since its still lower than I initially thought it would be, but I've never run into this before. Curious about why its happening.

Chris Mason · Answer

Each updated LE should have a cover letter detailing what changed.

Most common: If the appraisal comes in higher or lower than whatever the LO typed in when she originated it, that means the LTV changed. When starting a refi, a common question is "what do you think the home is worth today?" If you answer with a whimsical pie in the sky number, that means the appraisal will come in low and the points will go up. If you answer conservatively, the appraisal will come in high and the points will go down. If you answer spot on accurately, that just means you're a loan officer, appraiser, or Realtor, or a former of one of those. :P

Generally it is illegal for your LO to get paid any more or less depending on where your points come in, FYI. So it's not like the drop from 1.5 to 0.5 meant a 2/3 pay cut and then they went in and juiced it up to 0.95% to get paid more. We'd prefer if these things NOT jump around on us, since the normal thing to do when they go up is jump right to a conspiracy theory (but no one complains when they go down, of course :P ).

James McCarthy · Answer

Thanks Chris, that makes sense. The bank didn't even do an appraisal so it must just be their valuation algorithm jumping around. I appreciate the explanation!