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Old 08-26-2008, 02:11 PM
 
35 posts, read 139,986 times
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We signed to purchase a house from a builder. The builder offered to give us 12500 for closing cost if we use their lender. During that time we were quoted for a 6.625% interest rate for a 481k house with 20% down payment for 30 years fixed. We have a good credit score (720 & 730), 900 car payment a month with 2 years remaining, no any other debt.

After a week we got a GFE from the lender quoting us for a 6.5% interest rate with 1 discount point. We asked her to give us a GFE with no points and we were quoted with a 7.0% interest rate. We asked the lender why the interest rate is 7.0% instead of the 6.625 which we were originally quoted. She replied that the 6.625% interest rate she quoted us originally included 1 discount point however the rates have gone down since so the new rate is 6.5% with 1 discount point. She also said the she automatically quotes all her clients with 1 discount point since the interest is high and also for us to use up the 12500 credit for closing costs.

Are the prepaids included in the closing cost? Because this loan officer was saying that the closing credit usually does not cover the impounds but we were allowed to use it for impounds.

It does not make sense because if we start with 7.0% with 0 point and she charges a point and it drops the interest rate to 6.5%. Then .5% is a point, is this correct? I know that she is not being truthful but we want to use the lender because of the 12500 closing cost credit. What should we do?
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Old 08-26-2008, 05:33 PM
 
Location: Plano, Texas
1,676 posts, read 6,333,376 times
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This is the big problem i have when builders steer you towards their lender by offering you money to use them. They want to make back the $12500 with the loan. I would advise that you use a different lender and tell the builder you will walk from the loan unless they give you the same $12500 in concessions for the lender you choose. With your credit scores and using $12500 to cover all costs and prepaids, you would still have some money left over to pay a discount point. Your rate, using todays rate should be closer to 6%. Remember, you are in a buyers market. If you walk from this house, you can easily find another. You hold the cards. good luck
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Old 08-26-2008, 07:29 PM
 
35 posts, read 139,986 times
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That would be easy but we gave a deposit of $7500. Can we get that money back? It is stated in the purchase agreement that if we back out from purchasing the house, they will get the deposit. What should we do about it?

We asked the loan officer about the one time float down option they have and the loan officer said there is none for short term locks. But if we want to she can look into it however there would be a fee! When we talked to the sales representative in office of the builder before we signed the purchase agreement, we were told there is a one time float down with no fee. The builder owns the lending company.

Yesterday, we got a quote for 6.5% interest rate with 1 point and today the loan officer said the rates have gone up a little to 6.625 with 1 point.
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Old 08-26-2008, 09:57 PM
 
Location: Cary, NC
1,036 posts, read 3,627,489 times
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I can't really say what a "good" rate is without knowing all the details... but at the very least rates were stable or actually decreased today, there was no increase.

Float downs are not usually for short term locks, but there are often renegotiation options if rates drop by .25% or more. If they promised the float down, you need to have your Realtor talk to the builder.

I think on the other thread someone recommended this... get your agent involved, that is what they are there for. They should fight with your builder to honor the promises they made, hopefully they are in writing.

It does unfortunately sound like they are playing games with you. It can happen with any lender or bank, but you see it often on the builder-lender arrangements (my old company worked with builders and I saw the games in that division). Basically they figure they can jerk someone around because they have that $12,500 carrot they can keep waiving in front of you.
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Old 08-26-2008, 10:10 PM
 
Location: Plano, Texas
1,676 posts, read 6,333,376 times
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You could always try to bluff the builder. Go see him or her raise a fit, tell him you are going to walk if he doesnt allow you to use someone else. if he refuses, just continue the transaction as is. Good luck either way.
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Old 08-26-2008, 11:03 PM
 
35 posts, read 139,986 times
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They would allow us to use a different lender but they won't give the 12500 closing cost credit. We have good credit 720 & 730 FICO score, no credit card debt, 900 car payment per month with 2 years to go, putting 20% down, no late payments whatsoever.
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Old 08-26-2008, 11:35 PM
 
35 posts, read 139,986 times
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I was quoted with an interest rate 0f 6.5% with 1 discount point yesterday and 7.0% with no discount point. So by paying a point, the interest rate was decreased by .5%. If I buy 2 points will it reduce it to 6.0%? I don't know if this is how it's calculated? If this is their game then I would like to play it. I'll probably buy 3 points to reduce it to 5.5%

The buy down option is not documented anywhere. It was just verbal but our agent was there. We have no documents for the loan up to now. We just have the GFE from yesterday and today.
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Old 08-26-2008, 11:49 PM
 
Location: Rural Central Texas
3,581 posts, read 9,002,297 times
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Quote:
Originally Posted by solanoMan View Post
I was quoted with an interest rate 0f 6.5% with 1 discount point yesterday and 7.0% with no discount point. So by paying a point, the interest rate was decreased by .5%. If I buy 2 points will it reduce it to 6.0%? I don't know if this is how it's calculated? If this is their game then I would like to play it. I'll probably buy 3 points to reduce it to 5.5%

The buy down option is not documented anywhere. It was just verbal but our agent was there. We have no documents for the loan up to now. We just have the GFE from yesterday and today.
The point simply refers to the % of loan amt the buydown costs. It has no direct relationship to the loan interest rate. The buydown costs whatever the loan company decides it costs. Their only pressure is market conditions and other mortgage company rates. That you have $12,500 vested with them takes away a lot of market pressure from their need to compete with other mtg companies.

The rate is subject to change at their whim until you commit and they lock the rate. The rate lock is normally limited to a 30/60/90 day term and if the lock term expires before closing the rate can change again at their discretion and you have no protection against that other than to hurry the closing.

Hope that helps. Most of this is industry standard practice and nothing odd that only your mtg company does. The only "unusual" part is the credit toward closing, and even that is becoming more and more common. A lot of builders will have a credit regardless of which mtg company you use and perhaps a bigger credit if you pick one off their list. This sounds like the builder and mtg company are a bit more friendly than I would be comfortable with unless I knew how close during the negotiations. As long as it was upfront, I could deal with it. It just becomes in-house financing at that point.
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Old 08-26-2008, 11:56 PM
 
35 posts, read 139,986 times
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Let us say there are 10 lenders, all 9 decreased the interest rate. Does my lender have to abide by some margin to the average interest rate? or if the average interest rate is 6.0%, they can still charge me at 7.0%, 8.0% or whatever they want?
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Old 08-27-2008, 12:39 AM
 
Location: Cary, NC
1,036 posts, read 3,627,489 times
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Quote:
Originally Posted by solanoMan View Post
Let us say there are 10 lenders, all 9 decreased the interest rate. Does my lender have to abide by some margin to the average interest rate? or if the average interest rate is 6.0%, they can still charge me at 7.0%, 8.0% or whatever they want?


Each lender is different. One bank may lower rates, anotehr raise them. Generally the money all comes from the same sources so if 9 banks are lowering them its odd that #10 is raising it on the same day. However, your lender does not have to do the same. It is a (mostly) free market and any lender can set the rates/fees (within legal limits) they wish on the money they lend.

Usually its the forces of competition that make them all decrease, knowing that if they are the 1 out of 10 raising rates they will lose clients. But in this situation, your lender has ZERO COMPETITION. They have you just where they want you, as long as that $12,500 incentive is there you have 12,500 reasons not to walk to the bank across the street.

That is where these builder deals shouldn't be legal..... how is it good for the consumer
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