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Old 12-10-2008, 12:50 AM
 
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So far, we have only been talking to one broker. Most of our discussions to date are about chasing the lowest rates and how we want 0 points. How do I know exactly what 'other stuff' comes with the rate and lending program? Stuff like pre-payment penalties if any etc? etc? When does that get disclosed and what effect does that have if we are already supposedly "locked"? What if we don't like the terms of the lender our broker has taken us to and "locked" us in with?

I've also asked for Good Faith Settlement charges but was told to expect total expenses to be around 4% (I am in NY) of the loan sum and that they are more or less all the same except for a few hundred dollars. I asked to see the breakdown in writing but he said that I would see it 3 days after the application was placed...

I guess I'm not sure how mortgage brokers work - this is our first home and the whole process is utterly daunting.

Thanks in advance for any help.
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Old 12-10-2008, 08:31 AM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,098,953 times
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I think the thing to do is to tell the broker what rate and term you are looking for and to let them find it for you. It shouldn't be too difficult for the broker as the majority of mortgage nowadays are conforming conventional (Fannie Mae) or government (FHA, VA, USDA). Pre-payment penalties are all but non-existent anymore. Everything should be disclosed in the good faith estimate, which the broker is required by law to give you within 3 days of pulling your credit. If he has not pulled your credit or taken an application he is not required to give you a good faith estimate.
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Old 12-10-2008, 10:29 AM
 
Location: Vermont
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When you get the mortgage application you should have the rate lock agreement , good faith estimate and somewhere in there a page, truth in lending disclosure, that discloses fees, etc. You will likely see "If you pay off early, you WILL NOT have to pay a penalty. WILL NOT Be entitled to a refund of part of the finance charge."
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Old 12-10-2008, 10:53 AM
 
31 posts, read 102,057 times
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Quote:
Originally Posted by joe moving View Post
When you get the mortgage application you should have the rate lock agreement , good faith estimate and somewhere in there a page, truth in lending disclosure, that discloses fees, etc. You will likely see "If you pay off early, you WILL NOT have to pay a penalty. WILL NOT Be entitled to a refund of part of the finance charge."
What finance charge? Finance charge are for late payments right?

I'm largely thinking about the scenario when/if we make extra payments. Friends have told us the money from these extra payments go towards the principle owed. So in essence we are saving on having to pay interest on that principle amount, right? Could there be fees against this type of thing or does it fall under "pay off early" too?
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Old 12-10-2008, 11:22 AM
 
Location: Vermont
5,439 posts, read 14,332,657 times
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My understanding of
Quote:
WILL NOT Be entitled to a refund of part of the finance charge.
is that you do not get any money back on the interest that you paid already (the interest part of your monthly principal and interest payments). My understanding is also that when you make a pre-payment (anything in addition to what your standard monthly payment is) it goes towards principal of the loan. There should be no fees on that pre-payment assuming the box marked
Quote:
If you pay off early, you WILL NOT have to pay a penalty.
is checked? That is my understanding - we had a laywer review this for us and seemed to think it was fine.
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Old 12-10-2008, 03:27 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,098,953 times
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Quote:
Originally Posted by joe moving View Post
When you get the mortgage application you should have the rate lock agreement , good faith estimate and somewhere in there a page, truth in lending disclosure, that discloses fees, etc. You will likely see "If you pay off early, you WILL NOT have to pay a penalty. WILL NOT Be entitled to a refund of part of the finance charge."
I think a lock agreement, GFE, and TIL without a completed application is a bit premature. These are things that are delivered with the complete application and disclosure package, which as I said before the LO is required by law to deliver within 3 days of pulling credit.
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Old 12-10-2008, 05:59 PM
 
Location: Plano, Texas
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Why do you want to pay 0 points? I hear that all the time on this site and from clients i speak to. After educating my clients though, they quickly realize that paying a point and sometimes even more is a smart financial decision. If you are buying or refinancing and are planning on staying in your home for at least 3 years, then it is smart to pay a point.

Getting an interest rate is like buying anything else. For example, lets say you are taking a vacation and you are driving. it is getting late and you need to pull off the road and get a hotel room. On one corner there is a Motel 6 for $39 per night and across the street a Marriott for $99 per night. Why would anyone pick the Marriott? Well, it is a nicer hotel, better amenties, etc.. Why would anyone pay a high priced attorney lets say $1000 an hour when there are plenty of attorneys for $100 an hour, well they are probably a better attorney.

It is the same with getting a mortgage. By paying a point, you will be able to get a rate about .375% lower then not paying the point. So, lets say it is a $200,000 loan. A point would cost $2000, but a .375% lower rate would save you $750 per year in interest. So, if you keep house for 10 years you had a significant savings. Also, when you purchase a home the point is 100%tax deductible that year, so if you are in a 25% tax bracket your actual cost of the point is $1500. On a refinance, if you pay a point you can only deduct 1/30th each if a 30 yr mortgage or 1/15 each year if a 15yr mortgage.

Not sure where you live but 4% in costs seems very high. I only do loans in Texas and closing costs here with 1 point average about 2 to 3%. I would think since you are in NY, that you are probably buying a home of several hundred thousand, but some states do have higher costs and i am not familiar with NY. If you have a loan under $100,000 then the percent of costs will be higher.
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Old 12-10-2008, 07:04 PM
 
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No offense VB, but it is not just about "no points", it is simply easier to compare the best rate with no points.

Once you determine the lender that offers the best deal with no points it is entireably reasonable, for borrowers with the resources to do it, to compare the relative break-even point for cost of a "buy down" -- there are plenty of calculators that will allow one to determine that.
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Old 12-10-2008, 07:21 PM
 
Location: Plano, Texas
1,676 posts, read 6,334,862 times
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CE, why cant you compare with a point? It would be just as easy to compare 2 loans with no points as it would be to compare 2 loans with 1 point.

I mainly wanted to point out how many consumers always want a rate with no points when it makes sense in almost every scenerio to pay a point. If the borrower doesnt have the funds to pay a point, then get the seller to pay it or on a refi it can be rolled into loan.

I think a good general rule would be if you are keeping home for 3 years it makes sense. Hopefully my point about getting a rate is like getting anything else, if you want something better it costs more.

No offense taken, but your point about easier to compare i think is an invalid point. Especially when we are talking about a point, get my point. LOL
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Old 12-11-2008, 09:46 AM
 
Location: Vermont
5,439 posts, read 14,332,657 times
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Quote:
Originally Posted by Daddys///M3 View Post
I think a lock agreement, GFE, and TIL without a completed application is a bit premature. These are things that are delivered with the complete application and disclosure package, which as I said before the LO is required by law to deliver within 3 days of pulling credit.
Dads M3, you're right... thinking back to our original mortgage, I don't think we got the rate lock agreement until the completed application was turned in? I just put in an application for a re-fi, and included was the R.L.A. hmmmmmmmmm.....
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