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Old 01-05-2008, 08:35 AM
 
Location: Cary, NC
116 posts, read 268,000 times
Reputation: 52

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I have read a lot on this forum about mortages and still not sure if I am being offered a good deal or it is a ripoff. I appreciate your advice but please disclose if you are a broker.

My offer has been accepted on a house in Durham (zip 27713) and I need to get a loan asap. I have been talking to a broker in my buyer's agent office and I have already paid $395 for application fee. I saw on this forum that it sound a bit too much so I want to make sure the whole deal is not a ripoff.

My credit score (middle one) is 695 and I don't have any debt. I am putting down around 5%. Sale price is $439,000 and the loan amount is $417,000 (so that it is not a jumbo loan).

There was a $4000 origination fee that my broker told me everyone charges this and if I don't see it in other quotes it is because it has been taken care of somewhere else mostly in the interest rate. I asked it to be taken care of by increasing the Interest as I am having difficulty with coming up with down payment in a short time.

I have been given the rate of 6.375% for a fixed 30-year which requires a monthly payment of $2601.85 for principle and interest.

There was a $395 Application fee (appraisal, credit) and $250 commitment fee. Mortgage insurance will be $271.08.

Let me know if I have missed anything. I have had a hard time to compare multiple offers mostly because of every broker using different terms and me not being familliar with all the catches.

One thing I like about the loan being offered to me is that I was told I can pay a fee aournd $200-300 and then I can make a payment over $10,000 toward the loan and have the bank re-calculate my monthly payments. Not sure how important this is or if this is a standard thing.

My main question is if this is a good deal or not.
And second question, to compare quotes from multiple sources isn't the most important thing the interest rate and application/commitment fee (fees that go to broker). I should not be looking at PMI, Property tax, Hazard insurance, ... right?
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Old 01-05-2008, 09:49 AM
 
Location: Raleigh, NC
12,475 posts, read 32,152,505 times
Reputation: 9450
Your Realtor should be able to produce a "buyer's ESTIMATED closing costs" sheet from our MLS. This will show you the typical costs with buying a home in NC. Therefore, you'll be able to compare what lenders are telling you to make sure that you are not being charged junk fees.

If your Realtor has not offered this to you, please ask.

Vicki
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Old 01-05-2008, 01:27 PM
 
406 posts, read 786,164 times
Reputation: 354
Default To high of a rate

That seems high a "no points" fixed rate full doc loan should be under 6%
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Old 01-05-2008, 01:38 PM
 
Location: Garner
15 posts, read 54,103 times
Reputation: 10
majidmo - Let me first point out, I am a broker.

The first question I would ask you is this. Has your broker given you a Good Faith Estimate? This will show you a breakdown of ALL the fees involved in your loan. The normal fees that will show up are: loan origination, appraisal, credit report, application or processing fee, and commitment fee (this is the fee the lender charges to do underwrite the loan) You may also see a tax and flood cert fee. These are both normal. Other fees that are involved are you prepaids. This is the items that the lender requires to be paid at closing. For example, on a new home purchase, they require you to pay a full year's home owner's insurance premium up front. You will also be required to set up your escrow reserves for taxes and insurance. Lastly, you will have your attorney's fees, title insurance, recording fee, etc.

You mentioned that you were told that you could make a $10,000 payment to principal for around $200-$300. Not all lenders offer the ability to have your loan recast. Most lenders often sell their loans to other mortgage companies. So even if the originating lender does offer this, there is no guarantee that whoever gets your loan down the road (sometimes this can be immediately after closing) will offer that option also.

You asked if you were getting a good deal or not. I would highly suggest getting a minimum of three quotes. It never hurts to shop around, especially on a purchase this large. The brokers fees are always negotiable. Without knowing what type of income documentation you have and other factors, its hard to say whether you are being "ripped off." Can you do better? I would probably say yes.
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Old 01-05-2008, 04:20 PM
 
Location: Cary, NC
116 posts, read 268,000 times
Reputation: 52
I am providing my recent paystubs, my last year W2, and I have documented all sources of my down payment.
I think I have a good faith estimate. I have a document that breaks down all the fees. My biggest concern is that if I can get a much better interest rate than the current 6.375 % or not.
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Old 01-05-2008, 06:05 PM
 
Location: Cary, NC
2,407 posts, read 10,658,008 times
Reputation: 1380
I think you should be able to get a better rate than that, considering par rate had dropped significantly and your credit score is not bad (above 680 middle score qualifies you for most programs). Either way, you need to talk to different mortgage brokers to get a competitive rate. Talk to some of the other mortgage brokers. If you need a few names, drop me a DM.
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Old 01-06-2008, 03:44 AM
 
Location: Norfolk, VA
1,036 posts, read 3,960,868 times
Reputation: 515
Moderator cut: removed

Any reputable loan officer will start by telling you we can not really give you a 100% honest answer on this without knowing all the facts. But just a few pointers.

You are in a pretty good position with that credit score and being able to document your income and assets. Lenders will want to see that 5% and 2-3 months of payments on the home in reserves. Job and rent history are also important, as the program and rate can vary if there are gaps in employment history, career changes or unverifiable rent history.

This can affect the rate so anyone saying the rate is "too high" or "too low" is just guessing. It also depends on the DATE you were quoted the rate. Last Friday's unemployment numbers cause the yields on mortgage backed securities to drop, which means interest rates also went down.


I personally do not like brokers that charge application fees up front, I feel it locks in borrowers and decreases their ability to shop around as much. That is after all why they charge it (or to at least make $395 if you do switch). I make it policy in my office that we only charge fees on loans we do, but it varies in other offices.

As was stated the recast feature is only available with some lenders, and even if this lender offers it now there is no gurantee the loan will not be sold and the option will go away. I would not weigh that very high on the list and look at other factors.


A $4000 orgination fee at that rate does sound high. If there was no origination fee, that would seem perfectly acceptable however (not sure if that is the rate he quoted you when you asked for him to waive the fee and include it in rate).

Taxes, Insurance and PMI will not change. The taxes and the insurance are set based on the property and the company you choose. PMI is based on the type of loan, LTV, documentation, credit, etc but is provided by a 3rd party and is the same 99% of the time regardless of where you do the loan.


The number to REALLY look at is the APR on your truth in lending form. Every bank/broker is required by law to provide you an initial application, good faith esitmate and truth in lending within 3 days of your application. The GFE shows you all the costs broken down by where it goes.

The truth in lending gives you the annual percentage rate, APR, which is the "true" cost of financing. That includes not only the interest you pay but also the finance charges you pay at closing to the broker (like the $4000 origination fee). You are required to be given this so you can more easily compare loans.

Example: Lender A gives you 6.5% charging $0 in orgination fee. Lender B gives you 6.25% but charges $5000 in origination fee. Looking at the APR lets you see which of these is a lower cost over the life of the loan.

Of course, the less time you plan to spend before selling or refinancing, the more important it becomes to get lower upfront costs and the less important rate is.

Example: Do you care if your rate is 5% or 6% if you plan to pay something off in 1 year if the lower rate requires $10,000 in fees?

A broker should also do a break-even analysis for you to determine how long it will take you to recoup the upfront investment in points and fees versus taking the higher rate. People get blindsided by "low rate" and forget that there is more to it than rate! You can probably get a 5% rate, but it would cost so much in fees you wouldn't want it!



Also remember, a GFE is as good as its name. Its an ESTIMATE, not a binding document. If the broker wants they can make it look like a great bargain by decreasing the estimates, then change them all before closing. Always take a copy of a GFE to closing (I bring one for my clients in case they forget and want to compare). It will never be 100% the same, and expect it to vary +/- $500 as estiamtes come in for insurance, title work, inspections, etc.

Ask them if they do any gurantee that their numbers are correct or if they will give you a credit if it comes in > a certain amount. I usually say mine will be within that +/- $500 window and if there is any error on my part we will honor the lower estimate (if taxes or insurance came in higher of course, nothing we can do about it).

Have your financial planner or CPA go over it with you as well if you have one. They can help you make sense of it and compare the different offers. If you trust the Realtor you can ask them as well, but if it is an in-house broker they may have a vested interest in them keeping the transaction.

Good luck, just ask away if you have more questions.... hope the long post was not too boring

Last edited by autumngal; 01-12-2008 at 10:57 AM.. Reason: advertising
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Old 01-06-2008, 08:25 AM
 
Location: Cary, NC
116 posts, read 268,000 times
Reputation: 52
Thanks rcarillo. Great post. I had not heard about Truth in Lending before and had no idea what the hell is the APR (my broker told me "it is just a number a bit higher than interest rate, DON'T WORRY about it"). Thinking about her response, makes me laugh now. I will email her the wikipedia link.

Now I know my broker Moderator cut: removed a no-no sucks big time. I should have known this sooner becasue every time I asked her a question or expressed some concern, she told me "Trust me, I have been doing this for more than 25 years". She gave me on multiple occasions a quote with itemized fees (no GFE or Truth in Lending) with only her name and phone number on it . I always wished she would put a date on those so that I could sort them and know which one is the latest. Now I know there was a reason there was no date on them. She also has not given me a GFE even though She cashed my check a week ago (I doubt it she would ever give me a truth in lending).

Also I asked her what if rate drops and she said she would change to another bank one time only if rate drops a quarter of point. Friday evening finding on my own rates had dropped on gave here a call about it and she said she doens't think rate has droped much. I already have a GFE for 5.75% from somone I found after posting here (bringing my monthly payments about $200 down) and $500 credit toward possible closing cost increase.

I consider myself not stupid and I should have noticed my broker is not a good one. I think I got fooled with her tone (sometimes getting angry with my questions) and how confident she acted. She was not acting like a sale person and it looked to me she doesn't need my business and I gave her some points for that. That was probably my mistake. I should have put more weight on sound reasoning vs. looking to act in a professional way but that is difficult when you yourself are not very informed. I love this forum and thanks everyone for contributing.

Last edited by autumngal; 01-09-2008 at 08:59 PM.. Reason: no business names please
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Old 01-06-2008, 08:49 AM
 
Location: Fuquay-Varina
4,000 posts, read 10,809,309 times
Reputation: 3303
go with the 5.75% no question, the other broker is trying to retire off of you
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Old 01-06-2008, 12:30 PM
 
38 posts, read 145,201 times
Reputation: 23
Default 1st time buyer needs advice on getting a loan

Go to the nearest library and check out a copy of "Mortgage Ripoffs and Money Savers: An Industry Insider Explains How to Save Thousands on Your Mortgage or Re-Fi" by Carolyn Warren. You'll be glad you did...
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