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Old 11-25-2017, 10:57 PM
 
36 posts, read 38,190 times
Reputation: 17

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Hi:

New Construction in Texas - Jumbo loan (~510K) for 30 yr fixed

Builder's preferred lender (and title company) par rate is 4.125% but provides $4K in closing costs and $6K incentive off "upgrades" cost (so 6K reduced from loan amount)

Another bank XYZ is providing 3.875% interest rate but will lose the total 10K in incentives.

Buying down rate to 3.875% from builder's lender costs ~5K so that blows the 4K closing cost incentive - but not sure about the 6K deduction in loan amount.

Its also interesting that builder's lender title insurance is $3200 and owner title insurance (optional) is $850 compared to bank XYZ's lender title insurance is $100 and owner title insurance is $3500

Of course builder's lender and title company are affiliates.

I will have about 110K more to pay down principal in 4-5 months after existing home is sold. But it doesnt look like they recast the mortgage "for free".

So maybe I will have to refinance anyway after the 110K which makes the loan conventional and not jumbo but thats AFTER the current decision of builder's lender vs someone else.

So whats the best way to go?
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Old 11-26-2017, 06:40 AM
 
Location: Bloomington IN
7,224 posts, read 8,855,649 times
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It's time to do some math on your own and consider the best/worst case scenarios.

Use an amortization calculator/schedule like this one: Amortization Schedule Calculator

Assume:
$514,000 loan through builder at 4.125% (just picked a number since I don't really know it.)

Interest for 6 months=$10,533
Title costs=$3350
Costs =$13,883 for 6 months (There are other costs associated with the loan, but since I don't know those I can't add them in.)

Assume $520,000 loan at 3.875% through bank XYZ
Interest for 6 months=$10,008
Title costs=$3600
Costs= $13608 for 6 months

You will need to add in the other closing costs, but with just the title costs and interest costs, the lower rate is a better option. After about the third month with the lower rate loan, the difference in title costs is recovered.

For me personally I would do the lower rate. Circumstances can change unexpectedly. I would prefer paying a little bit more for the short term (closing costs) just in case I needed the long term option. That's my personal financial gamble though. Your gamble maybe different.
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Old 11-26-2017, 08:29 AM
 
Location: MID ATLANTIC
8,140 posts, read 19,992,551 times
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If you do an advanced search on just the Real Estate forum (and child forums) using key words "Builders lender" around 263 PAGES of threads will come up. Maybe not every thread will be pertinent, but by the time you are done, every angle you could possibly consider will be there. This is probably in the top 5, definitely top 10, questions asked when buying a new home. Even if dated 2008, the response would still be applicable.......I believe that's how long they've been saying, "rates are definitely going up this year."
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Old 11-26-2017, 08:40 AM
 
Location: Austin
7,205 posts, read 18,941,769 times
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Quote:
Originally Posted by emi_oasis View Post
Hi:

New Construction in Texas

Its also interesting that builder's lender title insurance is $3200 and owner title insurance (optional) is $850 compared to bank XYZ's lender title insurance is $100 and owner title insurance is $3500
Please educate yourself. This is wrong. Title insurance policies are regulated in Texas and every single title company charges the exact same thing. It's the law. Your numbers are off. The numbers are published online on many sites.
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Old 11-27-2017, 11:26 AM
 
3,806 posts, read 8,254,235 times
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Quote:
Originally Posted by emi_oasis View Post
Hi:

New Construction in Texas - Jumbo loan (~510K) for 30 yr fixed

Builder's preferred lender (and title company) par rate is 4.125% but provides $4K in closing costs and $6K incentive off "upgrades" cost (so 6K reduced from loan amount)

Another bank XYZ is providing 3.875% interest rate but will lose the total 10K in incentives.

Buying down rate to 3.875% from builder's lender costs ~5K so that blows the 4K closing cost incentive - but not sure about the 6K deduction in loan amount.

Its also interesting that builder's lender title insurance is $3200 and owner title insurance (optional) is $850 compared to bank XYZ's lender title insurance is $100 and owner title insurance is $3500

Of course builder's lender and title company are affiliates.

I will have about 110K more to pay down principal in 4-5 months after existing home is sold. But it doesnt look like they recast the mortgage "for free".

So maybe I will have to refinance anyway after the 110K which makes the loan conventional and not jumbo but thats AFTER the current decision of builder's lender vs someone else.

So whats the best way to go?
If you are certain that you are going to refinance, use the Builder's Lender and ask for them to price the loan such that you have $6-7k in YSP/Lender Credit. This will facilitate payment of property taxes/Homeowners Insurance, closing costs, that the $4k won't cover. Then worry about terms when you refinance.
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Old 11-27-2017, 11:37 AM
 
36 posts, read 38,190 times
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Quote:
Originally Posted by FalconheadWest View Post
Please educate yourself. This is wrong. Title insurance policies are regulated in Texas and every single title company charges the exact same thing. It's the law. Your numbers are off. The numbers are published online on many sites.
Thanks, I dint know - I was just quoting numbers from the estimate.

I checked out the Title Rates effective May 2013 on TDI Texas Gov website.

Range: [$100,001 - $1,000,000] Subtract 100,000 Multiply 0.00554 Add $875

So is it the same formulae but owner policy is for the full value of the house and lender policy is for amount of loan?

The owner policy is optional - Do people generally buy this in Texas?
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Old 11-27-2017, 11:41 AM
 
Location: Bloomington IN
7,224 posts, read 8,855,649 times
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I don't imagine it would differ in Texas, but who knows. I can't imagine purchasing a house without an owner's title policy. The lender's policy will only cover the lender, not you.

Again, Texas may differ, but in my state the Owner's policy is the "first" policy with the lender policy the less expensive, second policy. Lenders do insist it be purchased for them. Both are for the same amount.
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Old 11-27-2017, 01:50 PM
 
Location: Austin
7,205 posts, read 18,941,769 times
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Quote:
Originally Posted by emi_oasis View Post
So is it the same formulae but owner policy is for the full value of the house and lender policy is for amount of loan?

The owner policy is optional - Do people generally buy this in Texas?
The lender policy is $100, and then you'll have endorsements, and each lender requires something different so can't give the exact amount there.

If you're obtaining financing, and owner's policy is NOT optional. The lender wants to secure their collaterol, and if there is an issue on the owner's side, there's going to be an issue for them getting their money, so it is technically mandatory. It's optional on a cash transaction.

Quote:
Originally Posted by rrah View Post
Both are for the same amount.
They don't "cost" the same amount. I think this person is trying to say they are both based on the same amount, the price of the house.
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Old 11-27-2017, 04:19 PM
 
36 posts, read 38,190 times
Reputation: 17
Quote:
Originally Posted by FalconheadWest View Post
The lender policy is $100, and then you'll have endorsements, and each lender requires something different so can't give the exact amount there.

If you're obtaining financing, and owner's policy is NOT optional. The lender wants to secure their collaterol, and if there is an issue on the owner's side, there's going to be an issue for them getting their money, so it is technically mandatory. It's optional on a cash transaction.


They don't "cost" the same amount. I think this person is trying to say they are both based on the same amount, the price of the house.
That's what is confusing here. The builder's lender quoted lenders policy at $3200 with a bunch of associated costs:
Title - Delivery Fees $50
Title - Endorsement/Riders $225
Title - Lender's Title Insurance $3,200
Title - Search Fees $225
Title - Settlement Fee $450
Title - Title Guaranty Fee $6

and owner's policy at $850.

The Formulae for title insurance on Texas gov site comes to 3146 so about $3200. So I am assuming that formulae was used for lender's title insurance.


Bank XYZ has lenders insurance at $100 with a few additional associated costs
Title - Amendment R-19 Standard Tax Exception Endorsement$20
Title - Amendment R-24 Taxes Not Yet Due Endorsement $5
Title - Courier Fee $25
Title - Document Preparation Fee $100
Title - Lenders Coverage Premium $100
Title - Settlement Fee $250
Title - T-19 Restrictions, Encroachments Endorsement $161
Title - T-36 Environmental Protection Lien Endorsement $25
Title - Wire Transfer Fee $25

and owners policy at $3900

It looks like the total of policies is about the same though 3200 + 850 VS 100 + 3900
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Old 11-27-2017, 05:33 PM
 
Location: Austin
7,205 posts, read 18,941,769 times
Reputation: 9808
Quote:
Originally Posted by emi_oasis View Post
That's what is confusing here. The builder's lender quoted lenders policy at $3200 with a bunch of associated costs:
Title - Delivery Fees $50
Title - Endorsement/Riders $225
Title - Lender's Title Insurance $3,200
Title - Search Fees $225
Title - Settlement Fee $450
Title - Title Guaranty Fee $6

and owner's policy at $850.

The Formulae for title insurance on Texas gov site comes to 3146 so about $3200. So I am assuming that formulae was used for lender's title insurance.
Someone used the wrong words. The owner's title policy cannot be $850 unless the house is sub-$100k.

The only other numbers that go into the Lender's policy are Endorsements. Courier fees, search fees, delivery fees, escrow fees are all completely separate and different depending on the title company and a lender can't tell you an exact number until they get a fee sheet. The lender gives estimates on anything they don't control. The Guaranty Fee is a set fee that will be the same across Texas as well.
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