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We've finally got an accepted offer on a house that we looked at 3-4 times. The Listing was $359K and our offer was accepted at $330K net to seller with a 6% concession. For a few months I was working with a great broker who had really taken care of me. Unfortunately he was not experienced in FHA (and this property needs to go FHA) and a direct lender was recommend to me through a friend. I dealt directly with the LO and I took his quote, shopped it around and found it to be competitive.. if edging slightly high. Still I went with him because he is local and we are looking to close by April 15th. He seemed the best option for a smooth closing.
So last week we met with our LO went over the details of our loan and got our GFE.
Loan Amount: $334650
FHA 30 year fixed
6.25%
Est Monthly Payment
Mortgage-$2088
Insur-$100
Taxes-$466
PMI-$173
TOTAL: $2827
Given the rates at the time I was satisfied. Today I just recieved the loan processing paperwork from the processor and the Truth-In-Lending Disclosure Statement is showing an APR of 6.743% and my payments have increased to $2230 (putting me at $3K per month). It states that is not a 'contract or a commitment' to lend.
I'm a little red... in part, because I pushed to meet with this LO two weeks ago when the rates for FHA dipped below the 5.8% mark. He said it would be fine, as we know they rose shortly after. The LO apologized and verbally committed to honoring a lower rate should the rates dip again before the closing. Now I am not so sure to believe him.
I haven't signed any of the paperwork and will not until I get an explaination from the LO regarding this new quote. Is this something I should be concerned with?
Sadly the rate can change anytime if its not locked in. Promises other than a lock agreement are pretty much meaningless.
The important part is what is your new interest rate? You stated it was 6.25% and that now APR is 6.743%, but that also includes MI and many closings costs so its comparing apples to apples. If your principle and interest went from $2088 to $2230 then it must be higher, but by how much was this increase?
Thats why when clients ask me to lock, I lock. Its not worth gambling and losing a rate for a client... if they want to pull the trigger the LO should unless there is some reason it can not be done. Some lenders require you to be under contract or to have a specific property/price determined so that could have been an issue... but the LO should have explained why they could not lock at the time.
The truth in lending form is the most confusing form in the process of purchasing a home. I always always get the same reaction from buyers.
The APR on the TIL is not the interest rate you will pay on your loan, it is a rate that they come up with when they include all the closing fees associated with the loan, the mortgage insurance if any and your homeowwers insurance.
Your real interest rate on your loan will be on the GFE and at closing will be on the actual NOTE.
I appreciate all of the responses. When I got the letter on Saturday I pannicked a bit (since we're closing in a month and it would be hard to line up finances all over again). It wasn't explained to me what APR was. And now that I see it is the MI rolled up with the principle and interest I'm a bit more relaxed. I just assumed they were extra banking fees and I would still have to calculate my MI, home insurance, in addition to taxes on top of my monthly. All of the sudden I was $200 per month over budget.
I appreciate all of the responses. When I got the letter on Saturday I pannicked a bit (since we're closing in a month and it would be hard to line up finances all over again). It wasn't explained to me what APR was. And now that I see it is the MI rolled up with the principle and interest I'm a bit more relaxed. I just assumed they were extra banking fees and I would still have to calculate my MI, home insurance, in addition to taxes on top of my monthly. All of the sudden I was $200 per month over budget.
I appreciate everyone's kind responses.
Glad to hear there is a happy ending. People get nervous when buying a home and its understandable, there is a lot to digest in the process and it can get confusing.
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