3.75 vs 4.00

User Forum Topic
Submitted by Sean19 on April 22, 2016 - 7:32pm

Hello,

I was offered 2 loans at 4.00% interest rate with 5% down and closing costs + misc funds coming in at around $15,000.

I was then offered a loan at 3.75% interest rate with 3% down but closing cost and other total close to $15,000 as well.

The loan value would be ~$200,000. I can put down $10,000 no problem. I feel like this loan company is asking me to put down only $6,000 (3%) and then taking that other percent in origination fees or closing cost that is about $4,000. I feel like it would be better for me to put that towards the principal so I can get rid of mortgage insurance quicker. Any advantage to the loan at %3.75 that I am not seeing.

Submitted by Balboa_Again on May 11, 2016 - 9:00am.

Hi HLS -- We have a broker who shops us to wholesalers (as I understand it). The broker was recommended by our agent, who is a close family friend. Apparently the broker has "worked miracles" for other people we know, but our file is so straightforward that we haven't really needed miracles for our other offers.

Now we need things done fast, and maybe that's the price of doing business? The sellers didn't counter on price but did ask for 10 days for the inspection period and 15 days for the loan contingency and we agreed.

The "Compensation to Broker" part isn't filled out yet on the paperwork we have, so I don't know the breakdown...

Submitted by HLS on May 11, 2016 - 10:41am.

You had stated conforming loan amount, I'm assuming now that your loan is over $417K ? (Agency Jumbo)

I'm hoping that you are getting a 'no cost' loan PLUS additional credit towards closing costs.
(You will not get 3.50% above $417K.... If your loan is below $417K, something is wrong)

10 days for inspection is not unreasonable.
Loan contingencies are a dangerous item for a buyer, without being 100% clear on the consequences.
A loan approval-with conditions-
is not a funded loan. Lifting that contingency can put a deposit at risk.

Guidelines are guidelines, working miracles is relative.
With a bank/direct lender you probably will not see their
compensation, just your costs.

Underwriters are busy and may not accommodate a buyer who agreed to needing it fast.
It's very dangerous for a buyer to agree to terms that they have no control over.
Many Realtors have unrealistic expectations

I hope that it goes well for you!

Submitted by Balboa on May 11, 2016 - 6:28pm.

HLS wrote:
You had stated conforming loan amount, I'm assuming now that your loan is over $417K ? (Agency Jumbo)

I'm hoping that you are getting a 'no cost' loan PLUS additional credit towards closing costs.
(You will not get 3.50% above $417K.... If your loan is below $417K, something is wrong)

10 days for inspection is not unreasonable.
Loan contingencies are a dangerous item for a buyer, without being 100% clear on the consequences.
A loan approval-with conditions-
is not a funded loan. Lifting that contingency can put a deposit at risk.

Guidelines are guidelines, working miracles is relative.
With a bank/direct lender you probably will not see their
compensation, just your costs.

Underwriters are busy and may not accommodate a buyer who agreed to needing it fast.
It's very dangerous for a buyer to agree to terms that they have no control over.
Many Realtors have unrealistic expectations

I hope that it goes well for you!

Thanks for this helpful post, HLS -- I looked back through the paperwork and it turns out that we're "Super Conforming" which is not as cool as it sounds. :) I didn't know we'd be dinged for it, but we definitely are above 417k on this one and ponying up the difference is not on the table.

We're making a good faith effort on our part as far as all the paperwork/inspections/appraisal, but we will not lift the contingency until the loan is actually funded.

Submitted by bewildering on May 11, 2016 - 7:22pm.

Balboa wrote:
HLS wrote:
You had stated conforming loan amount, I'm assuming now that your loan is over $417K ? (Agency Jumbo)

I'm hoping that you are getting a 'no cost' loan PLUS additional credit towards closing costs.
(You will not get 3.50% above $417K.... If your loan is below $417K, something is wrong)

10 days for inspection is not unreasonable.
Loan contingencies are a dangerous item for a buyer, without being 100% clear on the consequences.
A loan approval-with conditions-
is not a funded loan. Lifting that contingency can put a deposit at risk.

Guidelines are guidelines, working miracles is relative.
With a bank/direct lender you probably will not see their
compensation, just your costs.

Underwriters are busy and may not accommodate a buyer who agreed to needing it fast.
It's very dangerous for a buyer to agree to terms that they have no control over.
Many Realtors have unrealistic expectations

I hope that it goes well for you!

Thanks for this helpful post, HLS -- I looked back through the paperwork and it turns out that we're "Super Conforming" which is not as cool as it sounds. :) I didn't know we'd be dinged for it, but we definitely are above 417k on this one and ponying up the difference is not on the table.

We're making a good faith effort on our part as far as all the paperwork/inspections/appraisal, but we will not lift the contingency until the loan is actually funded.

AFAIK the limit in San Diego is $562,350 not $417,000

Are you buying in San Diego?

Submitted by Balboa on May 11, 2016 - 8:13pm.

bewildering wrote:

AFAIK the limit in San Diego is $562,350 not $417,000

Are you buying in San Diego?

I thought < $562k would before fully conforming, too, but it appears not. HLS will be the expert on this but, after looking into it, I think the hard limit actually applies to Fannie/Freddie and that other lenders just mostly fall in line. There are higher Fannie/Freddie limits in San Diego, but I can see how the higher limits would come with a bit of an interest penalty.

Submitted by bewildering on May 11, 2016 - 9:12pm.

Balboa wrote:
bewildering wrote:

AFAIK the limit in San Diego is $562,350 not $417,000

Are you buying in San Diego?

I thought < $562k would before fully conforming, too, but it appears not. HLS will be the expert on this but, after looking into it, I think the hard limit actually applies to Fannie/Freddie and that other lenders just mostly fall in line. There are higher Fannie/Freddie limits in San Diego, but I can see how the higher limits would come with a bit of an interest penalty.

Odd. We got a conforming loan for a house in Clariemont, and the first amount was ~450K. It was explained to me that Fannie takes account of higher cost areas when determining the limit. And treats the loans just the same depending on downpayment. We put 10% down and got a good rate (at that point in time). How much are you putting downpayment? IIRC if we had wanted to put 5% down the limit was lower.

This might be a good question to put on https://www.reddit.com/r/RealEstate/ There are a couple of loan officers that answer questions on that subreddit.

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