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I see recently someone posted a loan worksheet for opinions, and I'd like to do the same. We have found a home to buy and plan to get a loan soon. I looked online and all the rates quoted there have an APR close to the interest rate. This quote from a local bank recommended by my realtor is quite different. I want to go with a 5% down, in spite of the extra insurance costs. I have excellent credit- over 760.
Here are the numbers. Is this reasonable, or should I find someone else? Thanks.
Purchase price- 225K
Total loan amount- 213,750
Down payment- 11,250
Interest rate- 4.875
APR- 5.774
Loan type- 30 year, C30-FN FNMA 30 year fixed
Total estimated prepaids- 1558.91
Total estimated closing costs plus prepaids- 5794.29
plus estimated down payment- 11,250
Total from borrower- 17,044.29
Looks solid. The reason your APR is higher is because you are paying mortgage insurance which is an APR affecting cost - no one in their right mind on the internet advertises an APR with mortgage insurance.
Okay, thanks. I got two quotes, this is the more complete, and maybe more accurate, but the other quoted a much lower insurance rate- 106.88 versus the 213.75 of this quote. Not sure why.
They may have used a different mortgage insurance option - like split level mortgage insurance where a portion of it is paid upfront and the monthly premium is lower. Alternatively you can pay a nominal upfront amount of mortgage insurance in lieu of the monthly mortgage insurance. Depending on where you believe your loan balance will be, how values will go, amongst other factors could sway your opinion on what form of mortgage insurance is best for your situation.
The second quote actually has lower closing costs as well. But I'm trying to look into the reason for the discrepancy, which translates into a difference of more than $100/month in payment, before going with either quote. Thanks for reassuring that both are basically in line with expectations.
The other may be underestimating the fees, I'm not sure how valid quotes are, but for the second quote, the rate was 4.852, the closing costs were 3,313.01, and the total estimated payments were principal and interest- 1,128.20, hazard insurance, 60, real estate taxes, 155.14, and mortgage insurance, 106.88, for a total of 1450.22 monthly payment. Our realtor seems to think the insurance on this quote isn't realistic, so otherwise the two are pretty close.
The first mortgage person just came back with another option- paying a 1% loan origination fee, and $6305 upfront for a mortgage insurance premium, with the rate up to 5.25 but an effective APR of 5.407. The monthly payment without insurance would then be lower- 1400.43, but the upfront cost would be 19,183.98. I'm not sure if taking the higher rate but lower APR is a good option. Any ideas? Thanks.
PS- This modified quote also has a line for less seller/lender/3rd party paid items of 6305.63, which explains why the total to/from borrower is just over 19K rather than higher.
You'd have to determine how long you would stay in the mortgage for.
Paying a large upfront cost in lieu of slightly higher payments, only pays off if you'll have the mortgage long enough so the savings of not having those slightly higher payments is greater than the upfront cost you laid out.
So if Option A is $10k in costs and payment is $1,500. Option B is $13k in costs but payment is $1,400. Then Option B saving $100/mo in payment it'll take 30 months to make the overall costs the same as Option A, and then every month after you are $100/mo ahead than if you went with Option A. Not considering inflation.
I think I'm going with the option to avoid the insurance. The total costs at close are just over 19K, versus just over 17K with the first quote. The difference in monthly payment for that is 1400, versus 1565 with insurance. So although the rate on paper is lower with the latter, adding in the $200/insurance adds a lot to the mortgage. Effectively it would only take a little over a year to break even with the added upfront costs.
Thanks for your insights, I appreciate it.
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