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Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,847,817 times
Reputation: 958
Quote:
Originally Posted by suzie02
I am not familiar with FHA at all but so can not help you with that part. We have have had so many mortgages that is not even funny so I would say to you do not use a broker go directly to lenders. The broker's fee comes from your pocket.
Is the FHA UFMIP/VA Funding Fee like an origination fee? If it is I would shop around.
A pay back of ~42 doesn't seem worth it to me.
We are about to refi and we are looking at payback of 4 months. In the past we have refi for payback of 6 months.
The FHA UFMIP is an FHA fee, so you will be charged this fee regardless of who you use for your mortgage. The fact is that FHA is pretty much the only high loan to value option left in many areas.
A little off topic and I apologize if this seems argumentative, the site you posted is advertising a rate equivalent to the FHA rate for their conventional rate, which should be considerably lower. If it makes you feel better to go to Schwab and pay 5.5% by all means (by you I don't mean you personally, just generalizing). Meanwhile brokers are getting their clients into the high 4% range and although you will have to pay an origination fee, the interest saved over 5 years or so will more than cover it. Of course a broker could make all of their money on the back as well, and 5.5% is paying very nicely today to the tune of almost 2% YSP.
The FHA UFMIP is an FHA fee, so you will be charged this fee regardless of who you use for your mortgage. The fact is that FHA is pretty much the only high loan to value option left in many areas.
A little off topic and I apologize if this seems argumentative, the site you posted is advertising a rate equivalent to the FHA rate for their conventional rate, which should be considerably lower. If it makes you feel better to go to Schwab and pay 5.5% by all means (by you I don't mean you personally, just generalizing). Meanwhile brokers are getting their clients into the high 4% range and although you will have to pay an origination fee, the interest saved over 5 years or so will more than cover it. Of course a broker could make all of their money on the back as well, and 5.5% is paying very nicely today to the tune of almost 2% YSP.
We have never stayed in a house for 5 years so I didn't even look at the fixed rates. By all means if you know someone with a lower rate let me know.
What is YSP?
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,847,817 times
Reputation: 958
Quote:
Originally Posted by suzie02
We have never stayed in a house for 5 years so I didn't even look at the fixed rates. By all means if you know someone with a lower rate let me know.
What is YSP?
Oh, ok. My apologies, I thought you were looking at the fixed rate loans and I did mean it when I said I wasn't trying to be argumentative, just trying to break down the preconceived notions that many folks have about brokers, particularly since the media and government started lambasting them.
Back on topic, their 3/1 ARM is very competitive and in fact is lower than anything that I've seen with no points. The 5/1 ARM is on par with everyone I've seen today. Their 30 yr fixed pricing is definitely not competitive though.
YSP is also known as yield spread premium or premium pricing. It is a form of compensation but it is paid to the broker by the lender as opposed to the borrower. The higher the rate, the more the YSP. It was originally a tool to help offset out of pocket costs incurred by the borrower, and many brokers still use it as such. There are, however, many unscrupulous loan officers (broker as well as retail bank) that use premium pricing to boost their compensation without benefit to the borrower. If one was looking for a no cost loan, it would be YSP that covered the LO's compensation as well as lender fees and third party fees. Retail banks also have premium pricing, although they are not required by law to disclose it.
We are about to refi and we are looking at payback of 4 months. In the past we have refi for payback of 6 months.
Yeah. I am not 100% sure I calculated the payback period correctly. I don't know if I'm supposed to add in the Estimated Reserve/Prepaid Costs ($1,232.19) and FHA UFMIP/VA Funding Fee ($2747.50) to the Total Estimated Closing Costs ($2,085) listed in the GFE. Or, if I am just supposed to use the Total Estimated Closing Costs listed in the GFE, which would amount to a 13 month payback period.
However, I assumed that since our loan amount is going from $153,500 to $157,000 with a $2,700 FHA financed fee, that we will owe around $6,200 more than before the refinancing.
Yeah. I am not 100% sure I calculated the payback period correctly. I don't know if I'm supposed to add in the Estimated Reserve/Prepaid Costs ($1,232.19) and FHA UFMIP/VA Funding Fee ($2747.50) to the Total Estimated Closing Costs ($2,085) listed in the GFE. Or, if I am just supposed to use the Total Estimated Closing Costs listed in the GFE, which would amount to a 13 month payback period.
However, I assumed that since our loan amount is going from $153,500 to $157,000 with a $2,700 FHA financed fee, that we will owe around $6,200 more than before the refinancing.
Any amount that you will have to pay when you refinance that you wouldn't have to pay if you don't is what you have to include.
Property taxes and home insurance you have to pay regardless. So if that is what is in the $1232.19 then do not include that.
We had our house built about a year and a half ago. We already owned the land.
We put no money out of our pocket and got a construction loan for about $160K at 6.75%
We moved in July of 2008.
Our monthly mortgage payment including taxes and insurance was about $1200.
We recently decided it would be nice to build a room off the bedroom for a hot tub.
Property values here have plummeted. Our house used to worth $230K and since we moved in we added about $16K worth of improvements, but it was just appraised at $210K.
But we were able to refinance with cash out at 4.5% and got $13K that will help with the remodel.
We put no money out of our pocket and the new mortgage payment including taxes and insurance will be about $960.
The bottom line is that we got $13K free money and saved about $200 a month in our house payment. Long term considerations don't matter to us as we are old, retired, and for us there is no long term.
My wife and I have owned our home since January of last year (01/2008). Over the past month or so, as interest rates have been dropping, we've decided to go back to our original broker (who helped us close on the house last year) to see what it would cost to refinance. This is our first home, so we don't have a whole lot of experience in the refinancing department of homeownership. So, I'm hoping that there are people that have more experience than us (probably most people), who could provide some guidance as to whether the GFE we received yesterday is a good one, or if we should shop around, or if we should just stick with what we have... We plan on staying in this house for at least 5 years unless something forces us out (job relocation, job loss, winning the lottery, etc).
Our broker's plan is to have us wrap the closing costs into our mortgage with the exception of the appraisal ($375) that we had performed and paid for last week.
Current Mortgage info:
We currently have a 30-year fixed rate mortgage at 5.875%.
We owe ~$153,539 on our loan.
Appraised house value is $165,000.
Current monthly payments (including escrow) are $1,360.
Refinancing Info based on GFE received yesterday:
This will be an FHA loan.
800 Lines: Items Payable in Connection with Loan
810 (Processing Fee): $450
811 (Underwriting Fee): $695
815 (Administration Fee): $200
824 (Yield Spread Premium): 2.000% = $3,194.94
1100 Lines: Title Charges
1101 (Settlement or Closing Fee): $200
1108 (Title Insurance Fee): $475
Total Estimated Closing Costs (from lines 800 thru 1309): $2,085.00
Our new monthly payment is estimated to be $1,204.98
Note: I left a few small charges out (recording fee, etc), so if the numbers do not add up completely, that may be why.
Questions:
Are the total costs incurred with refinancing calculated as follows: Total Estimated Closing Costs ($2,085) + Estimated Reserve/Prepaid Costs ($1,232.19) + FHA UFMIP/VA Funding Fee ($2,747.50) + Appraisal ($375)? This would total to $6,439.59. Since we would then be saving ~$155/mo. on our monthly payments, our payback period would be ~42 months?
Do the estimated costs in the GFE seem reasonable? Should we shop around?
Should the YSP of 2.000% ($3,194.94) be of concern to me (I don't know a whole lot about YSP)?
Is there a correlation between the 5% interest rate and the 2% YSP? If so, is this a good interest rate based on the YSP, or should I expect a better rate?
Can I use the FHA appraisal that I purchased last week with other brokers/lenders, or would I have to get a new one if I shop around?
Bonus Questions:
Does it make sense to wrap all of the costs (minus appraisal) into our mortgage? We could probably afford to pay half ($3,000ish) of the closing costs up front.
Is an FHA loan our only option? Why did we not require one when we initially closed on the house? (I'm not a big fan of the $2,747 FHA UFMIP/VA Funding Fee)
Sorry for the amount of questions, my wife and I just want to make sure that refinancing would be worthwhile for us. Thanks in advance for any help that can be provided!
As a mortgage broker I feel those fees are reasonable. The loan officer is charging 2% in YSP Yield spread premium which means that you are taking a higher rate than what the LO has on his/her rate sheet and the bank is compensating his company. You could get it for less if you have a trustworthy loan officer somewhere else but if you trust this LO and are comfortable with him/her then perhaps you can ask them to reduce their compensation. Keep in mind that your loan amount is not large therefore many companies will charge a higher percentage.
Do not include pre paid/reserves because these are not fees. You would be paying these whether you refinance or not. If you have an escrow account that balance from the escrow account would be refunded to you after the close of escrow.
If your original purchase was using an FHA loan and it was only 1 year ago you will most likely be entitled to a portion of the UFMIP paid on the original loan so have your LO deduct that from your costs before averaging your savings. Rule of thumb is you should break even on your closing costs within 36 months or less or it is not worth your while. I usually use 24 months unless you plan on staying 10 years or more, then I use the 36 month rule.
Oh, ok. My apologies, I thought you were looking at the fixed rate loans and I did mean it when I said I wasn't trying to be argumentative, just trying to break down the preconceived notions that many folks have about brokers, particularly since the media and government started lambasting them.
Back on topic, their 3/1 ARM is very competitive and in fact is lower than anything that I've seen with no points. The 5/1 ARM is on par with everyone I've seen today. Their 30 yr fixed pricing is definitely not competitive though.
YSP is also known as yield spread premium or premium pricing. It is a form of compensation but it is paid to the broker by the lender as opposed to the borrower. The higher the rate, the more the YSP. It was originally a tool to help offset out of pocket costs incurred by the borrower, and many brokers still use it as such. There are, however, many unscrupulous loan officers (broker as well as retail bank) that use premium pricing to boost their compensation without benefit to the borrower. If one was looking for a no cost loan, it would be YSP that covered the LO's compensation as well as lender fees and third party fees. Retail banks also have premium pricing, although they are not required by law to disclose it.
Nice post!
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