Fee to lower interest rate to meet government FHA standard? (insurance, loan officer)

[safetyhaven]

I'm applying for a loan through cardinal financial for the house i have been RTO. The person whos been walking me through it said that recently the interest rates have gone up and now i have to pay ~3 thousand dollars to lower my interest rate to 4.875% to meet government standards. My question is, if the company is the one giving me the loan, why is the interest rate so high? Why not comply with government standards and give it to me at 4.875%. Their origination fees are a flat rate + 3% as well. The closing is outragously high and i dont understand why. Can someone please explain?

[Tilo22]

Only one thing comes into mind... Your rate needs to be lower so the debt-to-income is low enough for you to qualify and "meet government standards." The rate at 4.875% is the sweet spot that you qualify, anything higher and you wouldn't qualify so he's telling to pay points to buy down rate so you can qualify. Rates have definitely gone up - so he's not lying there... besides, not sure what he would mean that a rate needs to be a certain number and you need buy it.

There are some down-payment assistance programs that have a set rate for everyone and you need to pay origination points (may also be but you're not buying down the rate and if anything the rate may be higher). I only mention down payment assistance because it shows up as origination points on the loan estimate. Want to make sure there is no confusion.

[blanis]

Just adding a few things to the prior comment... Yes, as Tilo22 mentioned, rates are up! So if you began talking to this person a month ago (at 4.875%) and are just now beginning the process, you will see an increase in rate. If you are only qualified at 4.875% because your debt-to-income (DTI) ratios would otherwise be too high, then buying down the rate would be your only option. I wouldn't ever use the term "government standards," but they could be referring to their internal maximum DTI, a down payment assistance program max, or just simply that you don't qualify at a higher rate.

[Pfhtex]

Originally Posted by safetyhaven

I'm applying for a loan through cardinal financial for the house i have been RTO What does this mean . The person whos been walking me through it said that recently the interest rates have gone up and now i have to pay ~3 thousand dollars to lower my interest rate to 4.875% to meet government standards This is poorly put by your Loan Officer, to say the least. Further explanation is required, up to and including changing lenders. My question is, if the company is the one giving me the loan, why is the interest rate so high? That is not high. I've owned houses at 11%. Why not comply with government standards and give it to me at 4.875% The government does not set rates, they set guidelines, which lenders use to write loans and earn income by creating a pipeline wherein they sell their closed loans to servicers - and can only do this if those Government guidelines are met.. Their origination fees are a flat rate + 3% as well Wow, what is this, 2002? . The closing is outragously high and i dont understand why. Can someone please explain?

What credit score did they pull?

Bottom line, my first take is that you're being poorly informed. Sounds like the up front FHA Mortgage insurance was not explained, and the rate buydown needs further investigation.

At the very least, I'd change lenders due to the poor communication.

[FalconheadWest]

Buying down your rate is not the only option. Buying a less expensive house so your mortgage payments are lower is an option. If you cannot lower your price point, the only other way to qualify for higher amounts is to pay to get the numbers to work.