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Old 04-08-2015, 11:59 PM
 
1 posts, read 983 times
Reputation: 10

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Hi everyone!

First time buyer here in need of some help. The loan officer that Ive been working with provided me with a GFE with an interest rate that's a lot higher than what the avg market rate is. He mentioned before that he typically adds an extra 1/4 of a percent to his quote to clients as a 'cushion' for any rate fluctuations between the date of the quote and closing (weird?) so that there wouldn't be any surprises later on.

Anyhow, I received the GFE today. My question is, is it normal/legal for loan officers to add a 'cushion' to the rate quoted on the GFE? I understand that he overquotes a little on the phone, but isn't he supposed to use the current rate without any cushions on the GFE? I'm trying to figure out if the lender is ripping me off or not.

I've tried contacting the loan officer but he hasn't been very helpful or responsive. This is a preferred lender...

Appreciate all your help!
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Old 04-09-2015, 06:27 AM
 
Location: Austin
7,077 posts, read 16,889,211 times
Reputation: 9484
Have you found a property yet? Are you prepared to lock your rate yet? He can't quote you a par/low rate without you being able to lock the rate because then you get mad that rates go up when it's time to lock. The cushion is there to protect you that it shouldn't go higher than that number, and it might go lower depending on when you lock.

Also, a 30 day lock is different than a 45 day lock which is different than a 60 day lock. If he doesn't have this information on when you will be closing, he can't give you an exact rate.
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Old 04-09-2015, 08:41 AM
 
2,600 posts, read 5,445,746 times
Reputation: 2387
Read !!

http://www.federalreserve.gov/boardd.../cch/respa.pdf
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Old 04-09-2015, 02:36 PM
 
274 posts, read 263,492 times
Reputation: 138
Quote:
Originally Posted by rainyciti View Post
Hi everyone!

First time buyer here in need of some help. The loan officer that Ive been working with provided me with a GFE with an interest rate that's a lot higher than what the avg market rate is. He mentioned before that he typically adds an extra 1/4 of a percent to his quote to clients as a 'cushion' for any rate fluctuations between the date of the quote and closing (weird?) so that there wouldn't be any surprises later on.

Anyhow, I received the GFE today. My question is, is it normal/legal for loan officers to add a 'cushion' to the rate quoted on the GFE? I understand that he overquotes a little on the phone, but isn't he supposed to use the current rate without any cushions on the GFE? I'm trying to figure out if the lender is ripping me off or not.

I've tried contacting the loan officer but he hasn't been very helpful or responsive. This is a preferred lender...

Appreciate all your help!
Yes its normal, my GFE was .75% higher then my final rate ended up being with a no cost lock prior to closing.
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Old 04-09-2015, 02:51 PM
 
Location: Denver CO
18,975 posts, read 10,040,378 times
Reputation: 27746
I had the same experience with a house purchase in November. They make the rate on the GFE high so that you end up happy in the end when the numbers look so much better!

However, this

Quote:
I've tried contacting the loan officer but he hasn't been very helpful or responsive.
is a big problem. If you aren't getting answers you need on a timely basis, then you should try other lenders. A loan officer who knows they are working with a first time buyer should be prepared to hold your hand a bit, this is a very intimidating thing to go through, and it's reasonable to have lots of questions and need some reassurance.

I was a third time buyer but very pleased with my loan officer as I don't think I ever emailed a question without getting a response within 24 hours, usually sooner. And she sent an update every week, even if there wasn't anything new to day (this was new construction, so a much longer process than a typical resale loan)
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Old 05-14-2015, 10:08 PM
 
Location: Katy, TX
463 posts, read 407,024 times
Reputation: 726
Hi! I got two GFE's. One was $200 less than the other one. Two different rates. I spoke to the non preferred lender (broker) and she told me she prefers to "over" estimate her GFE's since she does not want ANY surprises at closing. She also used a higher interest rate since she could not predict what the rate would be when we closed (we were 90 days out). The preferred lender used current rates, and most likely did not "over estimate" since they are the builder preferred lender.

The broker was always VERY responsive and always got back to me ASAP. Now we are two weeks from closing and the rate went down, she called me and we locked at a rate lower than her GFE. Before I committed to lock with her I emailed the builder preferred lender and said this is the rate the other broker is offering are you able to beat that? I did not hear back all day. I then sent another email. I then got a response that night that she would have to check. I did not hear back for over 24 hours. At this point the rate may go up another 1/4 %. The other lender the very next day said good news the rate did not change do you want to lock. I said YES. I then get an email the very next day saying the builder preferred lender would match it. Too late! I pretty much told them we had to lock by 10pm the night before. We weren't sure what their answer was and we didn't want the rate to go up.


If you aren't getting prompt responses that a problem. Had the builder preferred lender been quicker they probably would have had the loan. Kind of glad they didn't since I really love our broker. She has been 100% responsive, answered questions, friendly etc.... We close in two weeks, and the new GFE is a lot lower. $200 less. I'd rather an over estimation than under estimated.
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Old 05-15-2015, 11:10 AM
 
Location: New York
2,251 posts, read 4,161,023 times
Reputation: 1607
.

Good Faith Estimate - an "estimate" of the loan and costs before closing. What many borrowers do as soon as they get a GFE, go shopping with a different lender. This can be a BIG mistake...

Before closing it is next to impossible to correctly predict closing costs are and interest rates when starting a loan application. Every loan is different due to the property and individual circumstances. How much of a cushion a loan officer adds in predetermining what the costs are, can be how experienced or honest the LO is.

I have seen many times LO's under quoting costs and rates to get you to go with them. By the time you get to closing, when you get hit with a higher increase rate and or higher closing costs. At closing you accept the higher terms, because you went through a lengthy process plus paying money for an appraisal. (This is called bait and switch.)

Here's a situation back when I was a loan officer. Worked diligently with an individual over the course of a year to rebuild their credit to help them purchased their first home. Starting out had mid 500 credit score, end up under 700. Structuring his loan he qualified for 5.25%, showed his cushioned rate at 5.5% on his GFE with normal closing costs. His father got involved a found another lender offering 5%, their GFE didn't have hardly any closing costs. After their closing called me apologizing- ended up with more closing costs and a rate of 5.75%. I got burned (he was the last borrower helped repair their credit).

The point of my story is how you feel with your loan officer, have they walked you through the loan process. Do you feel they did their best to explain every thing. You mentioned they were not attentive, this could be because they are busy with other borrowers. You mention a preferred lender, I feel you should be fine.

One key suggestion for you - tell your LO you want to go over the loan and closing costs before closing, that way there is not any unexpected surprises.

Best wishes on your new home.

Good Luck...


.

Last edited by Modification Specialist; 05-15-2015 at 11:22 AM..
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