Just watching the market earlier and I saw that bond prices were up 72 basis points. Yesterday, they were down 100 basis points and the day before up 100 basis points.

WHAT THE HECK ARE BASIS POINTS?

This is really easy. When a lender charges one point to the borrower, it can also be called origination. Even a discount point, the cost, equals one point or the origination. What is it? Plain and simple, one point is one percent of the mortgage amount and one point of the mortgage amount is equal to 100 basis points. For example:

1. 1 point = 1 percent of the loan amount or 100 basis points;
2. .25 or a quarter point = a quarter percent of the loan amount or 25 basis points

WHAT DOES THE CONSUMER NEED TO KNOW ABOUT BASIS POINTS?

1. Generally speaking every point that you pay a lender will buy the rate down .25%. THAT'S .25% TO THE RATE. For example, if the 30 year fixed that you are quoted today for a $300,000 loan is 4.5%, one point, or 100 basis points or 1% of the mortgage amount or $3,000 would buy that rate down to 4.25%.
2. Now when you here the news station say that bond prices are up 25 basis points, don't freak out. When bond prices go up (really we look at mortgage backed securities), rates go down. As a lender we freak out when we hear that bond prices are dropping. That raises rates. Therefore you need to spend more money to buy that rate back down to the rate that you want.

Rates are great right now. If you don't want to pay points, origination, basis points, or anything to buy the rate down, the time to act is now. If you do want to buy the rate down...then....

Now you know the rest of the story!