Crazy differences between 417K (4.875%) vs. 450K (8.3%) in Orlando area quotes (insurance, loan)

[aneftp]

First I'm about to sign a contract for a home in the Orlando (Seminole County, Lake Mary, FL) area for about 600K.

I originally was only going to put down 120K (20%) down and have now decided to go with 25% downpayment (150K).

So I ask the mortgage broker what the rates are these days because they are dropping.

I get this quote: loans less than 417K are currently 4.875%--30 year fixed with zero points

Loans above 417K with 25% down-payment is 8.375% for 30 year fixed with zero points.

Both of these rates assumed a credit score of 740 or better.

I can't believe the spread difference between getting a home with a 417K vs. 450K mortgage. I'm already planning to put down 150K to get my mortgage down to 450K. I'm a little leery about putting another 30K for a total of 180K (30% down-payment) just to get the 4.875% interest rate.

So the banks are seeing no difference between getting a 418K loan and a 800K loan and charging the same regardless of how much downpayment you are making? Can the banks see that a homeowner is very unlikely to walk away or default if they are putting this much money down on a house? Plus I have a recession proof profession and verifiable income.

Than again this must be related to the location being Florida/Nevada, part of Arizona, and parts of California.

[chet everett]

It is not the banks -- it is the "jumbo limit". There are lenders that HOLD "non conforming loans" in their portfolio for excellent credit risks and the can offer MUCH more attractive rates...

Frannie and Freddie are very ill and the excess interest is supposed to help make them well. Instead it is just discouraging people from crossed the Jumbo line...

[sonarrat]

3 1/2 points is absolutely gigantic on a mortgage. I wouldn't think twice about putting down just enough to make the loan amount $416,999.

[SmartMoney]

Call a different lender. Have you looked into doing a split loan, an 80/10/10? There are more options that what this lender has presented.

Keep shopping.

[aneftp]

Originally Posted by SmartMoney

Call a different lender. Have you looked into doing a split loan, an 80/10/10? There are more options that what this lender has presented.

Keep shopping.

Yeah, I went to Bank of America yesterday where I'm a premier Banking customer. Best rates they can give me with 30 year fix with 20% downpayment (on a 600K home with 120K cash downpayment) for a total mortgage of of 480K was still 6.5% zero points. They were willing to give a 480K mortgage 5 year conventional ARM for 5.625% zero points (also assuming 120K downpayment).

I have pristine credit plus I am in the 35% tax bracket and have very little debt. The mortgage along with estimated taxes/insurance etc would only be less than 10-14% of my monthly income.

They said they can 10% downpayment with 80% first mortgage of 7.6% second 10% mortgage of 9.8%. I said I didn't need that, I can put down 20%. I just do not want to put down 30% cash.

For me, because I want to buy in a "declining market" Central Florida (even though I am buying in a very nice area of Seminole County, FL), the mortgage underwriters all group Central Florida areas together and for what they consider Jumbo loans (417K and above) they want you to put down 30% in order to qualify for the best interest rates. So with simple math on a 600K loan, if I'm being forced to put down 30%, I'm basically down to the conforming loan limit anyways.

But I'd rather have the extra 30K sitting around in a rainy day fund.

It sucks because if I were back in suburban Washington DC, I could still get a pretty good rate on a home costing 750K and putting down 20% (160K) because temporary conforming loans limits there are around 610-650K whereas in Central FL, they conforming loans are still 417K.