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Old 08-26-2008, 08:34 PM
 
35 posts, read 140,029 times
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The builder offered to pay 12500k for closing cost if we use their lender. We are putting 20% down payment for the home and we will not have enough money to pay all the closing cost so we agreed to purchase the home. The lender said the closing cost would be around 10k to 15k. So we figured that we can still cover the difference if the closing cost ends up to be 15k.

Before we signed the purchase agreement contract, we were told by the lender that the interest rate is 6.625 and our payments would be around 3100. We were not even pre approved with their lender when we signed the contract. They just pre qualified us the same day. But we were already preapproved with a different lender.

Four days after the signing of the contract, we receive a GFE from the lender. We were quoted for a 6.5% interest with 1 discount point. We told the lender to send us a GFE with 0 point. We got the GFE the same day and we were quoted with a 7.0 interest rate with 0 point. We asked the lender about the 6.625 interest rate we were quoted a couple of days ago during the signing of the purchase agreement. She said that the rate she gave us includes 1 discount point. She also said that she automatically gives rates with 1 discount point since the rates are high and also for us to use all of the 12500 closing credit. But the closing cost for the loan now is around 16500 including impounds. We know that she wants to make a big commission or the company wants to get the 12500 back in some other way.

The problem now is can we back out from purchasing the home because of this? We won't have enough money to pay for the closing cost if we use a different lender. We might have enough but we won't have anything left for moving expenses, refrigerator, washer/dryer, etc. (this is our first home).

Please advise. thanks. We are scheduled to close on Sept. 26.

Last edited by solanoMan; 08-26-2008 at 08:51 PM..
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Old 08-26-2008, 09:05 PM
f_m
 
2,289 posts, read 7,365,770 times
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Quote:
Originally Posted by solanoMan View Post
The builder offered to pay 12500k for closing cost if we use their lender. We are putting 20% down payment for the home and we will not have enough money to pay all the closing cost so we agreed to purchase the home. The lender said the closing cost would be around 10k to 15k. So we figured that we can still cover the difference if the closing cost ends up to be 15k.

Before we signed the purchase agreement contract, we were told by the lender that the interest rate is 6.625 and our payments would be around 3100. We were not even pre approved with their lender when we signed the contract. They just pre qualified us the same day. But we were already preapproved with a different lender.

Four days after the signing of the contract, we receive a GFE from the lender. We were quoted for a 6.5% interest with 1 discount point. We told the lender to send us a GFE with 0 point. We got the GFE the same day and we were quoted with a 7.0 interest rate with 0 point. We asked the lender about the 6.625 interest rate we were quoted a couple of days ago during the signing of the purchase agreement. She said that the rate she gave us includes 1 discount point. She also said that she automatically gives rates with 1 discount point since the rates are high and also for us to use all of the 12500 closing credit. But the closing cost for the loan now is around 16500 including impounds. We know that she wants to make a big commission or the company wants to get the 12500 back in some other way.

The problem now is can we back out from purchasing the home because of this? We won't have enough money to pay for the closing cost if we use a different lender. We might have enough but we won't have anything left for moving expenses, refrigerator, washer/dryer, etc. (this is our first home).

Please advise. thanks. We are scheduled to close on Sept. 26.

Depends on which state you are in, but generally you have about 2 weeks from the initial agreement to back out and get all your money. Of course it depends on how the agreement/contract was written.
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Old 08-26-2008, 09:10 PM
 
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We are in California. It states on the contract if we back out the deposit will be forfeited.
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Old 08-26-2008, 09:15 PM
 
Location: Lemon Grove, CA USA
1,055 posts, read 3,485,247 times
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No contingencies written into the agreement? If not you might be stuck. Sounds like you didn't ask for enough in writing and they took advantage of you or you just didn't ask enough questions. What does your agent say? ... you do have your own agent right?
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Old 08-26-2008, 09:27 PM
 
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no contingencies. I have an agent but we are dealing/talking with the loan officer. What can the agent do? We haven't talked to our agent. These things just happened the last 2 days.
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Old 08-26-2008, 09:32 PM
 
Location: Lemon Grove, CA USA
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Well he should have been with you through the whole thing so you didn't get into this spot. Is the sale contingent on you securing a loan? Does the deal require you to use their loan company? Is the 12.5k written into the agreement?

I would shop loans though it would have to be a pretty good loan to beat out that 12.5k credit. Sadly if you didn't get a lock-in agreement there isn't a whole lot you can do. It will be your word against theirs. I would read carefully over your escrow papers for an out if you are that worried or negotiate for a bigger credit to offset what you feel you are being shorted.

Just so you know closing costs are usually inflated so you might want to look over that GFE and see if there are any obvious errors. Mine was over quite a bit on the insurance and a few other things since the escrow company didn't have all the paperwork yet. Being this early in the escrow you are probably in the same boat.
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Old 08-26-2008, 09:43 PM
 
35 posts, read 140,029 times
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Our agent was with us during the signing. The sale is not contingent upon securing a loan. They do not require us to use their lender but if they do they will give 12500 for closing cost.

Is it really a practice to give interest rate quotes with points already in it? I thought it is the buyer's decision if he/she wants to purchase discount points?

I know it is very hard to beat the 12500 credit for closing cost but by the way they're jacking up the interest rate and maybe some other items in the closing cost. We feel that we are only receiving 7500. They originally were offering 10k in closing cost but we just negotiated to get the 12500.

What is the minimum time before I can refi? How far can the actual closing cost be from the GFE?

It hasn't been 2 weeks yet since we signed the contract.
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Old 08-26-2008, 09:53 PM
 
Location: Cary, NC
1,036 posts, read 3,628,214 times
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Quote:
Originally Posted by solanoMan View Post
Our agent was with us during the signing. The sale is not contingent upon securing a loan. They do not require us to use their lender but if they do they will give 12500 for closing cost.

Is it really a practice to give interest rate quotes with points already in it? I thought it is the buyer's decision if he/she wants to purchase discount points?

I know it is very hard to beat the 12500 credit for closing cost but by the way they're jacking up the interest rate and maybe some other items in the closing cost. We feel that we are only receiving 7500. They originally were offering 10k in closing cost but we just negotiated to get the 12500.

What is the minimum time before I can refi? How far can the actual closing cost be from the GFE?

It hasn't been 2 weeks yet since we signed the contract.

It is a buyers decision about points.... but lenders can always say its "Standard" to charge 1% origination or point. Lenders can quote how they want and that is why they are legally supposed to present you with a GFE + a TIL at application. If they did not disclose this (or manipulated it after) you can try to go after them for not disclosing the proper APR or terms.

There usually is no minimum time to refinance, although some programs say 3-6 months to have the title/deed properly executed and recorded. The proble is will it be worth paying closing costs in a few months to lower the interest rate by .5%??? Maybe not....

There is no rule that the GFE has to be 100% accurate. It is only as good as the experience and integrity of the person doing it. If someone wants to underestimate costs or APR they can do so, then "bait and switch" the consumer. That is why it is best to find out about the reputation and education of your lender and not just ask about rates. Anyone can quote a rate, not everyone will honor it.
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Old 08-26-2008, 11:38 PM
 
35 posts, read 140,029 times
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The lender did not disclose that the 6.625% interest rate had 1 discount point. So you are saying I can use that to back out from the purchase?

How much would be the closing cost for a refinance? Is it the same as a purchase?

We are thinking of getting the interest rate with zero points and then refinance afterwards. We'll just use the most of the 12500 for impounds and the rest will be for the regular closing cost. That way we don't have to cash out any money for the closing cost. The payments would be higher by 125 dollars a month compared to the original interest rate, 6.625, which is supposed to have no discount point. If the interest rate goes down in a couple of months to 6.0 then refinancing would make sense. That would be a 1 percent difference. We will be able to save 12500 in closing cost so it would take 100 months with the higher payment before we start to be the losing end.

Last edited by solanoMan; 08-27-2008 at 12:10 AM..
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Old 08-27-2008, 12:57 AM
 
Location: Cary, NC
1,036 posts, read 3,628,214 times
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Quote:
Originally Posted by solanoMan View Post
The lender did not disclose that the 6.625% interest rate had 1 discount point. So you are saying I can use that to back out from the purchase?
Again, talk to your Realtor. They should be the "professional" that knows the specific details of your transaction and what was disclosed/negotiated. The mortgage is not their area of expertise, but they can at least advise you about options a little and should have been there to warn you of this when you signed the contract.

Just because they did not disclose it does not mean you can back out. In some states, you have a "financing contingency" that allows you out if the terms you receive are beyond a certain threshold (so you cant be forced to buy if the rate ends up being 15%). I don't know what you signed- builders use custom forms sometimes, which of course benefits them at your expense.

What is true is that within 3 days of application a lender must provide to you a GFE and TIL with APR disclosure. That is a federal law. If it was not disclosed to you it might provide some leverage in negotiations. If they did provide it but you didn't like it.... well, the law doesn't say you have to.


Quote:
Originally Posted by solanoMan View Post
How much would be the closing cost for a refinance? Is it the same as a purchase?

We are thinking of getting the interest rate with zero points and then refinance afterwards. We'll just use the most of the 12500 for impounds and the rest will be for the regular closing cost. That way we don't have to cash out any money for the closing cost. The payments would be higher by 125 dollars a month compared to the original interest rate, 6.625, which is supposed to have no discount point. If the interest rate goes down in a couple of months to 6.0 then refinancing would make sense. That would be a 1 percent difference. We will be able to save 12500 in closing cost so it would take 100 months with the higher payment before we start to be the losing end.

It will not be as much, but there are qute a few. The attorney will want a new fee. The new lender will want new title insurance (cheaper if its a re-issue, but in some states still expensive). You will need to pay underwriting and other lender fees, probably a new appraisal and recording of the new deed. If your state has any taxes on mortgages, you will have to pay those again.

At the cheapest (NC is cheap) maybe $2000-3000. A "no closing cost loan" usually has a higher rate, so you likely will get the same rate you would get now with those $12,500. Basing it on a hope that rates go to 6% in a few months is not a plan.... prepare to stick with the loan you get for the long haul.

Also... how do you plan to use most of the $12,500 for impounds? The escrows are what they are... you can't ask them to "put more" into the escrows. They will be the 1st year of home owners insurance and ~3 months of taxes and insurance on the home. Then a little bit in interim interest until the end of the month.
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