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Old 01-16-2013, 07:44 PM
 
3 posts, read 28,942 times
Reputation: 12

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I am trying to compare the costs/benefits of these two loan options and it is making my head hurt

Here are the initial apples to apples comparisons based on a $425k 30 year fixed mortgage:

Suntrust FHA

UPMI/Funding Fee: $7,438 / 1.75%
Downpayment: $14,875 / 3.5%
Monthly PMI: $448
Interest Rates: 3.25%
Points: 0.095
Origination Fee: 1%

NFCU Homebuyers Choice

UPMI/Funding Fee: $7,438 / 1.75%
Downpayment: $0 / 0%
Monthly PMI: 0
Interest Rates: 4.5%
Points: 0.25
Origination Fee: 0%

I am having a hard time figuring out the following issues:

1) Is it worth it to pay points/orgination fee to get a lower interest rate on the homebuyers choice loan? My recall on this issue is that typically it will take a long time to recoup the costs of the points versus the monthly payment so in most cases it is not worth it to pay the points. Is it the same with the origination fee? NFCU offers no origination fee in exchange for a 0.25% higher interest rate.

2) Is it better to pay no PMI and have a higher interest rate? PMI is only as long as you do not have 20% equity but the interest rate will be for the life of the loan so while initially it seems better to not have it - I am just wondering about the math long-term.

The homebuyers choice mortgage will allow us to use a lot less cash upfront including the option to include the funding fee in the mortgage up to 100% ltv. This is great for us because we would be funding our down payment primarily from 401k funds and this would allow us to keep our retirement funds in place. However, just because it seems good at first glance...I want to ensure that we aren't ending up with a much more expensive product due to some aspect/consideration that may not be obvious such as the amoritization cost of including the funding fee in the mortgage versus paying it at the closing table.

Looking for advice/insight into sorting through these issues and examining these two loan products.

Last edited by buyinginNOVA; 01-16-2013 at 07:55 PM..
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Old 01-16-2013, 07:48 PM
 
Location: northern va
1,555 posts, read 1,992,571 times
Reputation: 1328
do you have an idea how long you'll be living there? you need to calculate the monthly difference at the various interest rates and determine how many months it'll take to make any additional upfront money back. most loan officers can calculate the different options out in minutes..
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Old 01-16-2013, 09:03 PM
 
Location: MID ATLANTIC
7,598 posts, read 17,614,249 times
Reputation: 8078
First, Suntrust is overcharging you for rate - you should be getting 3.25% with a 2 point lender credit today (assuming your credit is okay)
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Old 01-17-2013, 11:50 AM
 
3 posts, read 28,942 times
Reputation: 12
Thanks for the feedback - very helpful.

@kww - We haven't found the house yet so it would depend on the property. I would ideally like to purchase a forever house but realistically it will most likely be around 10 years.

@smartmoney - Thankfully, we have great credit but just not alot of cash. Our scores range from mid 700s up to very low 800s. I will double check regarding the rate. Now that I think about it, I think she did say the preapproval letter was for a scenario with 1 point lender credit...I used the info for the origination from their websites rates.
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Old 01-17-2013, 10:39 PM
 
3,317 posts, read 7,251,326 times
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That Suntrust Origination Fee might simply be Underwriting and Processing fees added up.

You have to also realize that, to a point, you get what you pay for. Somebody might bandy about crazily impressive bottom-dollar rates and fees. And then they turn out to be nothing more than a broker, someone who literally passes off your file to another person at another company.

And then you call in to try to find out what is going on, and they always "have to check" with the other company.

And the days go by.

So, as you go insane waiting for word, any kind of word about your loan and if it will close this month, that .125%, or small fee, looms larger and larger, and you realize that you should have gone with the Banker who wasn't the cheapest deal on the block, but always answered the phone, and would have personally shepherded your file across the finish line.

People tend to realize, after it's over, that they were shopping for a lot more than the lowest rate, and they tend to be end up exhausted and angry if that was their sole criterion.
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