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We are buying a house. We have informally applied for a mortgage through the mortgage company that is linked to the real estate company. I say formally because we've received copies via email from the mortgage guy, but things were missing (like my pension) so it's not signed. Oh, and he said the reason my pension was not listed was that husband and I were "overqualified" for the loan we wanted ($150k ... small loan).
I've tried to find out what the "Loan Discount Fee" really means. He quoted us a 5% interest rate. But isn't the Loan Discount Fee really "points?" The dollar amount of that Discount Fee is $1,500 (or 1%).
Now, in the meantime, after doing my research on mortgage lenders, it was recommended that we can a second bank also give us a rate as a basis of comparison.
I did not hide this fact. I was open with my realtor and the mortgage guy.
I was promptly chastised by the mortgage guy. He gave me a mini-rant about how it would "confuse" the VA lender if more than one loan were being processed. I tried to tell him that I had not locked in with our bank and that it was only on an informational inquiry.
Problem is, our bank gave us a better deal. 5% period. No points.
Is the mortgage rate going to go down soon?
Should I jump on and lock in a mortgage rate with our local bank?
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,845,674 times
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The loan discount fee is a discount point. Does the banks quote come in writing? I'm not sure that anyone can deliver 5% without points today. Rates are up around 5.5% currently with no points at more than a few lenders. Perhaps the bank is still charging points but calling it something else?
Also, it seems to me that you have an aversion to points with no real basis for it other than the negative connotations the word has developed. Points can be a very beneficial thing to you, particularly if you are comparing your short term costs to your long term savings. Obviously with different rate quotes being equal one should look at all the fees (not just points) to determine which quote is best, and if fees on the no-point deal are lower (they should be if the quote is legitimate) then the choice is obvious. Just make sure you do your homework to see which deal is actually better for you, and not which deal you perceive to be better based on some verbiage.
My only aversion to points is that the mortgage guy has it listed as "Loan Discount Fee" and I've asked him twice if this is points and he's not being straight with me.
I think the reason our regular bank gave us 5% with no points AND is willing to give us a loan $25k over what we asked for is because we've been with them a long time and it will be guaranteed by the VA.
On the papers the mortgage guy gave us he listed that the $$$ amount the seller will give towards closing is $584. I don't know how he could know that, we haven't even settled on a house yet!!!
I just have a feeling in the pit of my stomach that this mortgage guy is up to no good. And our bank is being more than upfront about answering our questions.
The bigger problem is that the mortgage guy is connected to the realtor ... so it's going to be awkward if we don't pick him.
In MOST cases origination discounts points are tax deductible,
I got this from the IRS site.
IRS Publication 530 says the following regarding points: You can deduct the full amount of points in the year paid if you meet all the following tests:
Your loan is secured by your main home. (Generally, your main home is the one you live in most of the time.)
Paying points is an established business practice in the area where the loan was made.
The points paid were not more than the points generally charged in that area.
You use the cash method of accounting. Most individuals use this method.
The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees and property taxes.
The funds you provided at, or before, closing plus any points the seller paid, were at least as much as the points charged. The funds you provided do not have to have been applied to the points. They can include a down payment, an escrow deposit, earnest money and other funds you paid at, or before, closing for any purpose. You cannot have borrowed these funds from your lender or mortgage broker.
You use your loan to buy or build your main home.
The points were computed as a percentage of the principal amount of the mortgage.
The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. The points may be shown as paid from either your funds or the seller's.
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,845,674 times
Reputation: 958
Quote:
Originally Posted by teebopop
My only aversion to points is that the mortgage guy has it listed as "Loan Discount Fee" and I've asked him twice if this is points and he's not being straight with me.
I think the reason our regular bank gave us 5% with no points AND is willing to give us a loan $25k over what we asked for is because we've been with them a long time and it will be guaranteed by the VA.
On the papers the mortgage guy gave us he listed that the $$$ amount the seller will give towards closing is $584. I don't know how he could know that, we haven't even settled on a house yet!!!
I just have a feeling in the pit of my stomach that this mortgage guy is up to no good. And our bank is being more than upfront about answering our questions.
The bigger problem is that the mortgage guy is connected to the realtor ... so it's going to be awkward if we don't pick him.
But, it's our money, right?
I understand what you are saying but whether it says fee or points it's still an interest rate buydown (if it is a bonafide buydown and not a way to increase compensation). Is he charging you an origination fee/point as well?
Regarding the seller paid closing costs he has listed, VA has a list of non-allowable charges that the borrower/veteran cannot pay. These fees MUST be paid by the seller. Also, when I preapprove my clients I always factor in seller paid closing costs, because the market in Vegas currently dictates that many banks are paying the closing costs on their REO and the buyers I work with always ask for them.
That being said, if you are not 100% comfortable with the guy then you should shop around. I personally would never work with someone I wasn't comfortable with. However if you are strictly looking for the best deal regardless of the level of relationship with your lender then you should compare the bottom line. Rate and total lender fees vs. rate and total lender fees.
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,845,674 times
Reputation: 958
Quote:
Originally Posted by teebopop
No Loan Origination fee is charged.
I really hate this home buying paperwork. It isn't easy to understand and I've read three books on it!
If only everyone would stick to the same vernacular life would be so much easier!
So in all likelihood his "loan discount fee" is his origination. Is the bank charging an origination fee? If so I have a feeling that the lender fees will be very similar.
This is something else I've wondered about since we haven't started shopping for a mortgage yet. To get real comparisons, I assume what we're looking at is basically getting "pre-qualified" at several lenders, correct?
How much of a barrage of daily/weekly phone calls/emails do you get from these people after you do a pre-qualification trying to seal a deal? It would be annoying enough from one, but multiplied by x lenders, it will drive me insane. Are we going to wind up on some lead list that's sold to every mortgage broker in town or is pre-qualification much less invasive than I am afraid it will be?
So in all likelihood his "loan discount fee" is his origination. Is the bank charging an origination fee? If so I have a feeling that the lender fees will be very similar.
I believe that they can not charge a loan origination fee because it's back by VA.
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Look at IRS Publication 530
