Applying for a mortgage prequal question

[robr]

OK, so I'm looking to get prequalified for a mortgage for my first home. I did this last year through a friend but he's no longer in the industry and frankly I'm not sure that he was the best choice anyway.

A few questions:
I can go out and search the internet and find who has the lowest mortgage rates in the country. Can I just approach the banks directly and apply for a mortgage through them, or do I need a broker?

If I can go to the banks directly, I assume I'll have to fill out the same paperwork over and over and they'll each hit my credit with a hard lookup. I guess with a certain number of hard lookups in the same period, that won't affect my credit adversely, but... the paperwork... eesh.

Is there a way to find a mortgage broker who already works with these multiple specific banks (online broker?) to save myself some headaches with paperwork and credit pulls?

Will banks do an 80/20 thing for 100% financing or do I need to go to a broker for that? I have maybe 5% in the bank but that's gotta cover everything. closing costs, insurance, legal, title, etc.

How long is a prequal good for? My last one never said.

Thanks!

 

[nathan]

OK, so I'm looking to get prequalified for a mortgage for my first home. I did this last year through a friend but he's no longer in the industry and frankly I'm not sure that he was the best choice anyway.

A few questions:
I can go out and search the internet and find who has the lowest mortgage rates in the country. Can I just approach the banks directly and apply for a mortgage through them, or do I need a broker?

If I can go to the banks directly, I assume I'll have to fill out the same paperwork over and over and they'll each hit my credit with a hard lookup. I guess with a certain number of hard lookups in the same period, that won't affect my credit adversely, but... the paperwork... eesh.

Is there a way to find a mortgage broker who already works with these multiple specific banks (online broker?) to save myself some headaches with paperwork and credit pulls?

Will banks do an 80/20 thing for 100% financing or do I need to go to a broker for that? I have maybe 5% in the bank but that's gotta cover everything. closing costs, insurance, legal, title, etc.

How long is a prequal good for? My last one never said.

Thanks!

Given that I am a Mortgage Consultant, let me try to help you out bud.

Stay away from online advertisements like Lending Tree. 9/10 they will claim to offer the best rates. However, there are always under lying factors they dont tell you. Such as, up front fees, buy down points, or discount points that get charged to you. They are kings of the bait and switch tactic. They bait you in with advertisements and miss quotes (incomplete good faith estimates). Then when it comes down to solidifying your home loan the terms change.

If you have a good relationship with your local bank start there for a quote. Yes they will pull your credit bureau. However, walk in banks only pull the EquiFax/Beacon bureau.

From there I recommend finding a wholesale lender / broker in your area who has a great reputation. You should get quotes from 3 different lenders/brokers. Do not be afraid of brokers if they are reliable and have good track history.

Credit reports. Yes you will have your credit pulled. Shopping with 3 different banks is just fine. Having your credit pulled 3 times is fine. Your scores will not drop, because the credit agencies will recognize that you are having your bureaus checked by mortgage lenders. They will basically treat it as one hit, so long as you have them pulled within a similar time frame. Should you have it pulled more than 3 times.....no. In addition, be sure to ask the loan officer that you deal with if their investors honor the credit report that they pull. If they do, then they can shop your loan only using one credit report and it wont be re-pulled every time the shop for you.

Yes banks will do 80/20 combo loans. However, with secondary interest rates being on the high side (for straight principle and interest), it is just as beneficials as getting 1 loan at 100% with mortgage insurance. Effective 01/01/07 mortgage insurnace is 100% tax deductible. If your account says otherwise he is wrong. I can gladly show you outline on this. In addition the single loan at 100% is probably lower then the blended rate on an 80/20 combo loan. Now if you want to do a second that is a HELOC (Home Equity Line of Credit), that changes things. All HELOCs are interest only. Granted that HELOCs just dropped 0.5% from 8.25 to 7.75%, just remember that HELOCS are fixed to prime. Meaning whenever the prime index rate changes, your HELOC rate changes. And I can tell with 90% certainty that the FED will not cut the prime rate the next session. It may go back up a quarter to 8.00%

Also, as a heads up stay away from CountryWide. I could write up 3 pages of why, but trust me. Right now your key investors in this market are Citi, Chase, Wells Fargo, 5/3, AmTrust, SunTrust, and Provident. I would try to find a broker that deals with Provident Funding Group. Their conforming products can not be beaten by anybody...period.

If you want more information, just let me know. I am not licensed in Massechusetts, so I cannot get you a quote. However, if you want me to look up back door rates and see if someone is raping you, let me know. So, long as they are an investor that I am setup with, I can check the wholesale rate sheets for you.

I hope this helps.

Nathan

 

[sahtt]

OK, so I'm looking to get prequalified for a mortgage for my first home. I did this last year through a friend but he's no longer in the industry and frankly I'm not sure that he was the best choice anyway.

A few questions:
I can go out and search the internet and find who has the lowest mortgage rates in the country. Can I just approach the banks directly and apply for a mortgage through them, or do I need a broker?

If I can go to the banks directly, I assume I'll have to fill out the same paperwork over and over and they'll each hit my credit with a hard lookup. I guess with a certain number of hard lookups in the same period, that won't affect my credit adversely, but... the paperwork... eesh.

Is there a way to find a mortgage broker who already works with these multiple specific banks (online broker?) to save myself some headaches with paperwork and credit pulls?

Will banks do an 80/20 thing for 100% financing or do I need to go to a broker for that? I have maybe 5% in the bank but that's gotta cover everything. closing costs, insurance, legal, title, etc.

How long is a prequal good for? My last one never said.

Thanks!

I just went through this process again getting my mother set up in her first "own" home.

You need to be careful as illustrated above. I do not recommend anything other than a sizeable down payment coupled with a fixed rate mortgage. Due to the most recent fed cut, the rates are extremely low right now. I wouldn't be in a big hurry, my best guess is another fed cut is coming sooner or later. I "guessed" the last one about 6 months in advance.

Just get used to the paperwork. Do some research on the closing and associated costs. My father is a title insurance attorney and through the knowledge he has given me I saved my mother about 1,500$ in closing costs on a house purchased for only $125,000.

As said above, a reliable broker can be helpful, but can also hurt you if they aren't experienced and don't have your best interests in mind which is all too common. CITI and WF are probably the best to work with in Texas that I'm aware of. Depends on the area and your local bank/credit union is often a great place to start.

 

[morrow]

Due to the most recent fed cut, the rates are extremely low right now. I wouldn't be in a big hurry, my best guess is another fed cut is coming sooner or later. I "guessed" the last one about 6 months in advance.

The Feds DO NOT Control the rates!!!! The have control over the fed funds rate.... this is why you will typically see prime adjust with the raise or cut but long term rates will normally go un affected. The lastest cut gave investors confidence and as a result their was a bull run on investing in mortgage backed securities.... this is what will determine the rise or fall of your interest rates.

There are a ton of good First Time Home Buyer Programs available. Ask about 100% My Community loans... these have a income limit so you may need to watch that, but if you can qualify they have reduced mortgage insurance coverage that will help lower your monthly payment... they also allow for 6% Seller credits towards closing cost and up to 65% Debt ratios!!! If your income is too high then try the Flex 100. Both of these loans are Fannie Mae loans and will yeild a good rate and NO Pre Payment Penalties.

I can price out loans for you in MA. I am licesed. Give me a PM wiht your scenario and Ill get you pricing without pulling your credit. It will give you a reference point while you are out their shopping.
Best of Luck to you.

 

[Vega$ NSX]

Just slightly off topic, (and this is not in a negative way at all) but if you can't afford at least 5% down comfortably (80-15-5: 80% 1st loan, 15% second loan, 5% down) you should really reconsider buying a home. First off, people way underestimate the upfront costs at the time of closing and moving. There are just so many little things you ending up paying for or buying or fixing or replacing. I bought and own 3 right now and in each time, the cost of closing and moving far exceeded my estimations by a lot. I had to tap into safety funds each time. Secondly, it sounds like you are doing a little stretching of the finances to buy the home. And this is exactly where a lot of people are in trouble now with their mortgages. In the housing boom, banks were eager to throw out no money down mortgages, and let people really stretch themselves (and then there's the whole ARM thing). But the point is, the pendulum has swung the other way and banks are really hammering those who appear as if they are stretching themselves. I just wouldn’t want you to fall into the same mortgage trap and become another statistic. IMHO if you appear to be struggling to put even 5% down, you aren't even going to get the best rates. My advice would be to save up until you have a comfortable 5% along with all the other estimated costs then go home shopping. Or at least do the math calculations on how much you could save at getting a better rate by putting money down then without and see if there is a payback and how long. Also I still think we have some more time in the downturn housing market so you might even pick up a few bucks if prices still drop, but that's purely speculation. However, I'm fairly confident you aren't going to see a sharp rise in prices anytime soon. Good luck with the home! It's truly a satisfying and hand exhausting (signing papers) experience!

 

[docjohn]

I would say give your local banks a chance.Brokers typicaly are going to close a loan with an institution that they have a close relationship with,,not necesarily one which will have the lowest rates/closing costs.I agree the rates on seconds will probably shock you.So try do do one loan.If you have to do two loans because of your lack of up front cash vs the total cost,some banks may be able to structure a home equity loan like a 20 or 30 yr fixed mortgage.Either way the thing which surprised me most about borrowing money to pay for a primary home was how important an apraisal of the property was to the lenders.You will have a better experience also the better your credit scores so some of this advice is predicated on that, good luck.

 

[robr]

Thanks for all the advice, I'm going to take some time to reread and absorb it all on Monday when I'm not being chased by the family . I understand how nice it would be to have a substantial amount to put down up front, but the reality is that paying almost $2K/month in rent is going to prevent me from saving much at all. I'd rather be putting that money into a house I own instead of into someone else's pocket. Housing prices here are still mostly out of my range but I am starting to see them drop enough where I might have options this winter and just want to be ready with a prequal in case I see something I want to put an offer on.

Morrow, thanks for the offer, I appreciate it and I'll drop you a PM during the week.

 

[SilverStone05]

I do not recommend anything other than a sizeable down payment coupled with a fixed rate mortgage.

That is a very uninformed recommendation. Without knowing about your situation, I can safely say your down payment should be enough to allow for a monthly payment that you can afford now AND in a crunch. Don't pour anymore money into real estate now when there are other investments that would allow for a much better return. Housing is looking bleak for the next few years.

As far as fixed mortgages compared to ARMs, either are fine. Just make sure that you will be able to cover the difference when your rates adjust, or that you will be in a position to re-finance when that time comes. ARM's aren't the devil. Buying a more expensive home than you can afford IS.

Due to the most recent fed cut, the rates are extremely low right now. I wouldn't be in a big hurry, my best guess is another fed cut is coming sooner or later. I "guessed" the last one about 6 months in advance.

Current rates right now are not yet affected by the most recent Federal Funds Rate cut, nor does the central bank set mortgage rates, people. The Discount rate, (the rate at which the Fed loans money to banks) and the Federal Funds rate (the rate at which banks borrow from each other in order to meet reserve requirements) are "target" rates. They trickle down and take some time to actually settle in the economy. Don't expect to see rates lower for another couple months. And that is only a given if the jitters from the credit crunch continue to calm.

Just get used to the paperwork. Do some research on the closing and associated costs. My father is a title insurance attorney and through the knowledge he has given me I saved my mother about 1,500$ in closing costs on a house purchased for only $125,000.

Paperwork? I filled out two forms for my loan approval. As far as closing costs, find someone who charges a flat fee. My bank charges a flat $1500
closing cost independent of the cost of the house. $2mm house? $1500 closing costs. Bottom line, research a few different banks. 5/3 Bank made my loan approval one of the simplest financial transactions ever.

Good luck.

 

[sahtt]

The Feds DO NOT Control the rates!!!! The have control over the fed funds rate.... this is why you will typically see prime adjust with the raise or cut but long term rates will normally go un affected. The lastest cut gave investors confidence and as a result their was a bull run on investing in mortgage backed securities.... this is what will determine the rise or fall of your interest rates.

The general fed funds rate and the consumer interest rate are related. No the consumer does not immediately have the ability to get the exact decrease in their home mortgage, but it is certainly related. The purpose of the fed cut (this is from the minutes released from the past meeting from the fed themselves) were to ease rates overtime to allow homebuyer's easier access to loans to help with the credit crunch/housing recession. The reason the fed went for a 50/50 cut vs a 25 fed funds 0 discount rate etc. cut was because the projected housing data was quite grim. Again, this is from the minutes released from their past meeting. Over time it will enable consumers to have better loan conditions.

I'm glad you mentioned the loan programs that can really help first time homebuyers out. My father's previous job was working with the city of Houston to expand their 1st time home buyer programs, specifically to aid disabled people at or near the poverty line. There is tons of money out there if you are willing to look. Your income, # of children, area, size of the loan, etc. are all variables that will effect your success.

 

[nathan]

Robr,

There is some good information in this thread, and some bogus info. Please filter through it correctly and make a decision that is best for you.

But, Robr, know this. Just because the Fed cut the prime index rate, conforming rates do not necessarily drop. All conforming interest rates are a direct correlation with the 10 year bond (excluding the LIBOR). When the great FED cut the prime rate by a quarter of a point, the 10 year bond dropped like it was hot. What happened two days later? Rates actually took a jump about a quarter of a point. So, if you want to see what rates are actually doing then follow the yield on the ten year bond. Take note of what it is on Monday, then watch it from week to week. The lower the yield on the bond, the lower the interest rates. Period, fact, no fiction. BTW the yield right now is sitting at 100 16/32 or 4.68%

Nathan

 

[sahtt]

That is a very uninformed recommendation. Without knowing about your situation, I can safely say your down payment should be enough to allow for a monthly payment that you can afford now AND in a crunch. Don't pour anymore money into real estate now when there are other investments that would allow for a much better return. Housing is looking bleak for the next few years.

SilverStone, will all do respect, for a first time home buyer who appears to know very little (at this point) about his options, I would not suggest anything besides the more standard fixed rate. I do not consider myself an expert and haven't claimed to be one, but I am not uninformed. Without being sat down and explained in detail the potential ramifications of a ARM, neg amort., etc. loan I wouldn't even bring them up. The fact is well over 50% of ARM loans made since 2004 that have reset have resulted in a default within 60 days speaks for itself. Don't want our friend robr to end up there.

As to if real estate is a good place to drop 20,000 in a down payment, that's a whole other story. I'd be a renter personally.

As far as fixed mortgages compared to ARMs, either are fine. Just make sure that you will be able to cover the difference when your rates adjust, or that you will be in a position to re-finance when that time comes. ARM's aren't the devil. Buying a more expensive home than you can afford IS.

The last line is the most important part of the discussion, but my personal opinion is still to avoid ARM's, especially if you don't know exactly what you are dealing with. If housing values continue to go down, the option for refinancing may not always be there. You can end up in a trap like many are in currently.

Paperwork? I filled out two forms for my loan approval. As far as closing costs, find someone who charges a flat fee. My bank charges a flat $1500
closing cost independent of the cost of the house. $2mm house? $1500 closing costs. Bottom line, research a few different banks. 5/3 Bank made my loan approval one of the simplest financial transactions ever.

Good luck.

It depends on your area as to your options on closing costs. In Texas for instance, title insurance is set up differently and can effect your closing costs. A $1500 flat fee in Texas would be excellent, even on a 100-120k home. Some lenders use a lot of paperwork, some don't. There is a lot more if you are applying for any programs, first time home buyer program, etc.

 

[SilverStone05]

Point(s) taken.

This particular topic hits close to home for me because I have close friends who thought they were getting great deals on their loans only to find out that they'd been had by some scumbag.

I shopped rates and lenders for some time and what really is beyond me are the high school dropout mortgage brokers who think they are economists. Most of these people have no idea what mortgage backed securities are, much less open market operations or the difference between the discount window and the ffr. No offense to you informed and scrupulous brokers on this site.

The lender I chose was actually recommended by a friend.

 

[nathan]

Point(s) taken.

This particular topic hits close to home for me because I have close friends who thought they were getting great deals on their loans only to find out that they'd been had by some scumbag.

I shopped rates and lenders for some time and what really is beyond me are the high school dropout mortgage brokers who think they are economists. Most of these people have no idea what mortgage backed securities are, much less open market operations or the difference between the discount window and the ffr. No offense to you informed and scrupulous brokers on this site.

The lender I chose was actually recommended by a friend.

Unfortunately for every good broker there are 5 idiots, just like you said. However, it is actually more widespread that "loan officers" with lenders suh as CountryWide are actually worse than your idiot broker. Reason being? They know absolutely nothing about loans themselves. They only know how to try and sell one to an uninformed customer......kinda like car sales man.

Whether it is a broker or a lender.....the point is get referrals. That and common sense will go a long way in making a mortgage decision.

Nathan

 

[nathan]

SilverStone, will all do respect, for a first time home buyer who appears to know very little (at this point) about his options, I would not suggest anything besides the more standard fixed rate. I do not consider myself an expert and haven't claimed to be one, but I am not uninformed. Without being sat down and explained in detail the potential ramifications of a ARM, neg amort., etc. loan I wouldn't even bring them up. The fact is well over 50% of ARM loans made since 2004 that have reset have resulted in a default within 60 days speaks for itself. Don't want our friend robr to end up there.

The last line is the most important part of the discussion, but my personal opinion is still to avoid ARM's, especially if you don't know exactly what you are dealing with. If housing values continue to go down, the option for refinancing may not always be there. You can end up in a trap like many are in currently.

It depends on your area as to your options on closing costs. In Texas for instance, title insurance is set up differently and can effect your closing costs. A $1500 flat fee in Texas would be excellent, even on a 100-120k home. Some lenders use a lot of paperwork, some don't. There is a lot more if you are applying for any programs, first time home buyer program, etc.

Lets try and get a few facts straight here.

50% of all ARM loans since 2004 that have come due ARE NOT in default within 60 days. That is absolutely ridiculous. That is the piece of $hit liberal media outlet who are blowing the housing market out of proportion because 4 states (CA, FL, NV, AZ) are having issues. The median across the country is fine.

Neg Am, or MTA, loans are NOT a good idea for a owner occupied home buyer. For investment properties, yes. But only if you are a disciplined owner who will invest the difference wisely.

You should NOT avoid ARMs if you are a first time homebuyer. Fact is first time home buyers are in their home an average of 3.5 years nationwide. If the borrower is forced to get into a non-conforming product, then ARMs are just fine so long as you know the terms of them. Are 30 yr fixed better? Of course.

First time home buyer programs? Umm they dont exist. There is no true loan program out there for first time home buyers. Fannie and Freddie do not have these. FTHB really is nothing more than a marketing gimic. Now, do FTHBs get certain exceptions from the underwriters? Yes. But there is no true FTHB loan out there.

My Community loans currently do not offer the best overall payment. For those buyers who qualify for MyCommunity (Fannie Mae) or Home Possible (Freddie Mac), then have your LO run you on a Flex 100 or even and FHA. FHA, financially, is the best way to go right now, if you need 100%.

Flat fee closings costs - are very rare. Typically, if you are paying a single, small flat fee, then you are paying a higher rate. Banks do not work for free, unless you currently have high accounts with them currently. Keep this in mind.

Thanks,
Nathan

 

[sahtt]

Lets try and get a few facts straight here.

50% of all ARM loans since 2004 that have come due ARE NOT in default within 60 days. That is absolutely ridiculous. That is the piece of $hit liberal media outlet who are blowing the housing market out of proportion because 4 states (CA, FL, NV, AZ) are having issues. The median across the country is fine.

Neg Am, or MTA, loans are NOT a good idea for a owner occupied home buyer. For investment properties, yes. But only if you are a disciplined owner who will invest the difference wisely.

You should NOT avoid ARMs if you are a first time homebuyer. Fact is first time home buyers are in their home an average of 3.5 years nationwide. If the borrower is forced to get into a non-conforming product, then ARMs are just fine so long as you know the terms of them. Are 30 yr fixed better? Of course.

First time home buyer programs? Umm they dont exist. There is no true loan program out there for first time home buyers. Fannie and Freddie do not have these. FTHB really is nothing more than a marketing gimic. Now, do FTHBs get certain exceptions from the underwriters? Yes. But there is no true FTHB loan out there.

My Community loans currently do not offer the best overall payment. For those buyers who qualify for MyCommunity (Fannie Mae) or Home Possible (Freddie Mac), then have your LO run you on a Flex 100 or even and FHA. FHA, financially, is the best way to go right now, if you need 100%.

Flat fee closings costs - are very rare. Typically, if you are paying a single, small flat fee, then you are paying a higher rate. Banks do not work for free, unless you currently have high accounts with them currently. Keep this in mind.

Thanks,
Nathan

Nathan, you didn't read carefully enough. I said after the adjustable rates reset, the vast majority go in to default within 60 days. This is fact. I'll pull up my sources if need be, but this isn't even really news. You are correct though, not every single loan is going default in the next 60 days.

I think you should read the "housing and subprime fiasco" thread for a little more information. I have a BA in Economics and spend a significant amount of my free time researching international banking trends and the U.S. loan and real estate markets. I don't really care about what the media says because it's entertainment not data, but if anything they are underplaying it due to ignorance. And BTW, the median across the country isn't "fine" by any rational standard. Forclosure rates are doubling month to month on a year over year standard and the back up in the housing supply is already at an all time high and growing rapidly.

ARM's, neg armort's, etc. are the types of loans where if you have to ask you shouldn't mess with them. If you are running investment properties like you mentioned, they can be useful and profitable.

There are first time homebuyer programs. I have set up several people with them. Harris county and the state of Texas has them. Again, this is not exactly news. There are tons of programs out there if you are willing to look for them. My mother currently uses one that brings her monthly payment down by 312$ per month, so they definitely "exist".

I am being unusually specific/anal in this thread because it's that important. After you speak with enough people who have walked away from their homes.. it gets to you. Most of them are from either buying a house that was too expensive, getting screwed on a loan, or most often a combination of both.

 

[Daedalus]

There's over a quarter $Trillion of subprime mortages that have/will reset in '07. If over 1/2 have/will default then I would like to know, and I would REALLY like to know which publicly traded companies, if any, own large portions of that paper. I think maybe what Sahtt means is that statistically, of all ARM loans that end up in default, most begin the process within 60 days of the reset.

The RE market has been on quite a ride. My favorite story thus far is of the family with no credit whatsoever that bought a $720k house on $1000/wk combined income from picking mushrooms.

 

[sahtt]

There's over a quarter $Trillion of subprime mortages that have/will reset in '07. If over 1/2 have/will default then I would like to know, and I would REALLY like to know which publicly traded companies, if any, own large portions of that paper. I think maybe what Sahtt means is that statistically, of all ARM loans that end up in default, most begin the process within 60 days of the reset.

The RE market has been on quite a ride. My favorite story thus far is of the family with no credit whatsoever that bought a $720k house on $1000/wk combined income from picking mushrooms.

Way ahead of you. I rode CFC all the way down to 18 dollars. If you want specific companies, look back to the stocks that took the biggest hits during the summer subprime scare. Anything with a lot of housing exposure is slowly going to get slashed, much of that has already occured. There are many more Netbanks and Countrywide Financials with their heads barely above the water that will go under soon enough. If you want more info feel free to PM me, I don't want to clutter the thread too much.

 

[Zishan]

I just went through this same process, 1st time buyer as well.

I did some extensive searching. My advice, first check to see if your state/city/county/area has any 1st time buyers programs. I qualified for a 5% grant and a low interest rate of 5.25% or something like that. Butttttt, I was too late and all that money got used, quick.

I ended up going with Bank of America. I know I know, they are the corporate giant, I was convinced someone else would be able to give me a better deal. Out of all the banks, BofA had the best deal, followed closely by Deutch Bank.

Good Luck,
- Z

 

[SilverStone05]

Flat fee closings costs - are very rare. Typically, if you are paying a single, small flat fee, then you are paying a higher rate. Banks do not work for free, unless you currently have high accounts with them currently. Keep this in mind.

Typically, probably. However, I shopped and shopped, and 5/3 had the lowest rate period, combined with the relatively low closing costs. The finance company affiliated with my builder wanted 1.3% of sales price.

I really couldn't stand it when I'd ask a broker what their rates were, and they gave me some run around sales pitch that their supervisor taught them without even coming close to answering the question. If I called someone up and they did this, I'd just hang up. Not that hard to quote a 30 year fixed a paper with no points.

 

[pvmike]

Closing costs include:

Lender fees (for their processing, underwriting, closing)
Flood Check
Notary
Recording
Tax Service
Termite Report
Credit Report
Appraisal
Abstract/Title
Title Insurance

Other fees included in your closing statement which aren't really a cost of the loan:

Prepaid interest
Impound reserves (deposit for taxes and insurance if you want them wrapped up in the monthly payment - the number of months needed vary depending on what month the loan closes)

Often you'll see "junk" fees, which don't really exist:

Application fee
Administration fee
Broker fee

If you're using a broker, they may have their own processing fees as well. "Fixed closing costs" is simply a sales tactic - closing costs will be what they are going to be. If the broker decides to fix it at a certain rate, then he's paying the difference out of his profit, which may include points charged and rebate given by the lender. A broker will often be less expensive than dealing directly with a lender. Shop around.

There's some good information in this thread. Nathan is absolutely correct when stating that mortgage rates are directly affected by the 10 year T note. He's also correct in stating that the average 30 year note lasts 3.5 years. However, unless you are certain about the time frame, I would not suggest anything less than a 5/30 or 7/30 ARM. I think a fixed 30 year note is what most people should get.

It used to be the case that a second mortgage was always a better choice than getting a first loan greater than 80% LTV and paying PMI. This isn't necessarily the case now. Since 1/1/07, PMI is now tax deductible, and paying it may be the more cost effective solution.

If you want to figure out what loan amount a lender will approve (for a full doc loan), just add up your monthly debt (credit card payments, loan payments, child support/alimony, and any other monthly debt that shows on your credit report) and your expected monthly house payment (with taxes and insurance included). This amount must be less than 45-50% of your monthly gross. If you have rental property, assume a 75% occupancy rate when calculating it's monthly debt or gain.

Good luck!

 

[morrow]

My Community loans currently do not offer the best overall payment. For those buyers who qualify for MyCommunity (Fannie Mae) or Home Possible (Freddie Mac), then have your LO run you on a Flex 100 or even and FHA. FHA, financially, is the best way to go right now, if you need 100%.

FHA does not go 100% they will go 97% the other 3% can come from a DAP program. Yes FHA will usually yeild an aggressive payment due to the FHA MIP @ .5 but keep in mind that FHA has 1.5% Up front MIP. If you use MCM you can pay an upfront Split Premimum to lower the MI factor. I just closed a MCM for a cleint with 1% Upfront Split Premium MI, the mortgage insurance on a $335K loan 100% was only $25 per month!!! Even though the MCM rate was slightly higher it still beat FHA and Flex hands down. When shopping be aware of all these programs as they may be the perfect loan for you, but every scenario is slightly different so it will be hard for anyone here to tell you what loan to go with without actually having your whole scenario presented to them. You have a great group of people on this forum giving you advice. Good Luck.

 

[SilverStone05]

If you're using a broker, they may have their own processing fees as well. "Fixed closing costs" is simply a sales tactic - closing costs will be what they are going to be. If the broker decides to fix it at a certain rate, then he's paying the difference out of his profit, which may include points charged and rebate given by the lender. A broker will often be less expensive than dealing directly with a lender. Shop around.

Good luck!

Brokers make money three ways, by marking up the interest rate they get from the lending institution, charging points for rate reductions, or by marking up closing costs.

So closing costs won't necessarily be what they will be, because the broker adds in their commission among the other items.

My sister is a broker and even she was suprised at the bank's rates and costs.

 

[morrow]

Robr,

Just a heads up Rates are looking great today! The past few days we have seen improvement. I am not sure how far along you are in your search for a home but wanted to give you heads up on the rate reduction. I priced out a Fannie mae flex 100 30yr. Fixed 100% loan with NO Pre Payment Penalty and the Rate was 6.125% Today! That was from CITI bank. Good Luck in your search. Keep us posted on your progress.

 

[robr]

Robr,

Just a heads up Rates are looking great today! The past few days we have seen improvement. I am not sure how far along you are in your search for a home but wanted to give you heads up on the rate reduction. I priced out a Fannie mae flex 100 30yr. Fixed 100% loan with NO Pre Payment Penalty and the Rate was 6.125% Today! That was from CITI bank. Good Luck in your search. Keep us posted on your progress.

Thanks for the info, I'm not jumping on anything immediately, just trying to do some homework. Housing prices are still too high in my area, I just want to be have my ducks lined up. I've paid off my credit cards and am going to wait until after they've reported to the credit agencies before I apply, so when my credit score is pulled, I won't have any high balances.

 

[pvmike]

Brokers make money three ways, by marking up the interest rate they get from the lending institution, charging points for rate reductions, or by marking up closing costs.

So closing costs won't necessarily be what they will be, because the broker adds in their commission among the other items.

My sister is a broker and even she was suprised at the bank's rates and costs.

You're missing my point. Closing costs will be what they will be, independent of the broker marking up certain items or including junk fees and points. This statement should be read in conjunction with my assertion that there is no such thing as fixed closing costs; actual closing costs will vary, but the broker can fix it at a certain amount as a marketing ploy. If the fixed closing costs are less than actual cost, the broker will hence pay the difference out of his profit, i.e. points and rebate. Obviously, the broker can sell a higher rate to get a higher rebate to cover this cost.