Mortgage - closing or no closing costs?

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pdanet
Posts: 43
Joined: Wed Feb 08, 2017 3:29 pm

Mortgage - closing or no closing costs?

Post by pdanet » Fri Dec 08, 2017 7:11 am

We are getting ready to close on our new construction home over next few weeks.

we also have decided to sell our paid-off existing home once we move into the new home. The existing home needs maintenance work(replacing carpet, new paint, a through cleaning, some landscape work etc) and I anticipate its a 2 month effort and I'll begin that process once we move into new home.

Once we sell the existing home and along with the down-payment and potential bonus payment(~20k) at work, it will be sufficient to pay off the new home mortgage in about 4-5 months(assuming home sells in about 90 days or sooner once we list it)

Question: Builder is offering a 15 year mortgage at 3.125% with 15K closing cost. If we choose their in-home lender, they will kick-in 5K so we need to bring 10K to the closing date.

Should I window shop no-closing cost mortgage? Aimloan.com offers no-closing cost 15-year mortgage at 3.875%

How do I estimate which is better especially say, we will pay off the home loan in about 4-5 months(or 7-month with no bonus but usually it gets paid) from the day we close.

Compound
Posts: 609
Joined: Mon May 26, 2014 1:32 pm

Re: Mortgage - closing or no closing costs?

Post by Compound » Fri Dec 08, 2017 7:16 am

There are a ton of mortgage calculators that you can use to compare mortgages at the mortgage professor website:

https://www.mtgprofessor.com/calculators.htm

Best of luck.

Compound
Posts: 609
Joined: Mon May 26, 2014 1:32 pm

Re: Mortgage - closing or no closing costs?

Post by Compound » Fri Dec 08, 2017 7:22 am

Also there are a lot of interesting and helpful calculators here:

http://www.hughcalc.org/index.php

chevca
Posts: 1874
Joined: Wed Jul 26, 2017 11:22 am

Re: Mortgage - closing or no closing costs?

Post by chevca » Fri Dec 08, 2017 7:23 am

With that short a time frame, definitely a low or no closing cost mortgage. It will come with a higher interest rate, but you certainly won't pay $15k in extra interest over a handful of months.

I'd say, stick with the current preferred lender and see what they say to a lowest closing cost 30 year loan. Or, a 15 year... but, what do you care about 15 or 30 if you will pay it off within the year. They give the $5k, so there would likely still be some closing costs. They're not going to give you $5k for nothing. But, it should be able to come close to $0 out of your pocket.

With just a few weeks to close on a new build, shopping around could cause issues. Not that it couldn't be done. But, you probably signed something saying you would go with the preferred lender and would need the builders permission at this point to change lenders. Check your paperwork on that.

ResearchMed
Posts: 7083
Joined: Fri Dec 26, 2008 11:25 pm

Re: Mortgage - closing or no closing costs?

Post by ResearchMed » Fri Dec 08, 2017 7:31 am

chevca wrote:
Fri Dec 08, 2017 7:23 am
With that short a time frame, definitely a low or no closing cost mortgage. It will come with a higher interest rate, but you certainly won't pay $15k in extra interest over a handful of months.

I'd say, stick with the current preferred lender and see what they say to a lowest closing cost 30 year loan. Or, a 15 year... but, what do you care about 15 or 30 if you will pay it off within the year. They give the $5k, so there would likely still be some closing costs. They're not going to give you $5k for nothing. But, it should be able to come close to $0 out of your pocket.

With just a few weeks to close on a new build, shopping around could cause issues. Not that it couldn't be done. But, you probably signed something saying you would go with the preferred lender and would need the builders permission at this point to change lenders. Check your paperwork on that.
If there was official wording about the preferred lender, check if it required only that you "apply" or "be accepted" or did it actually require that you closed with them. And IF the latter, see if they will offer a lower-closing-cost, higher rate mortgage. (Don't mention you want to pay it off fast; just mention something like you'd rather save the closing costs to use for moving expenses, some new furniture, etc.)

As for your current home, make sure that the renovations that you plan will appeal to a broad range, not just things "you" like.
And that it really makes sense rather than selling for a lower price without the renovations (or with fewer).

RM
This signature is a placebo. You are in the control group.

chevca
Posts: 1874
Joined: Wed Jul 26, 2017 11:22 am

Re: Mortgage - closing or no closing costs?

Post by chevca » Fri Dec 08, 2017 7:42 am

True, it probably didn't require the buyer to close with the preferred lender. But, a change now would require notifying the builder and getting their blessing, I would bet. I've been through more new build home purchases than I should have been lately. But, it all worked out, so...

The most recent one we barely had any closing costs out of pocket after the builder and lender credits were factored in.

OP, you have probably already locked in this rate, right? They got you a real good rate. But, you don't care about that if you're not going to carry the mortgage for 15 years. Talk to them and say you changed your mind and want as low of closing costs as can be. Tell them no worries about the lock and whatever the new rate might be. You just want lowest closing costs.

ResearchMed
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Joined: Fri Dec 26, 2008 11:25 pm

Re: Mortgage - closing or no closing costs?

Post by ResearchMed » Fri Dec 08, 2017 8:06 am

chevca wrote:
Fri Dec 08, 2017 7:42 am
True, it probably didn't require the buyer to close with the preferred lender. But, a change now would require notifying the builder and getting their blessing, I would bet. I've been through more new build home purchases than I should have been lately. But, it all worked out, so...

The most recent one we barely had any closing costs out of pocket after the builder and lender credits were factored in.

OP, you have probably already locked in this rate, right? They got you a real good rate. But, you don't care about that if you're not going to carry the mortgage for 15 years. Talk to them and say you changed your mind and want as low of closing costs as can be. Tell them no worries about the lock and whatever the new rate might be. You just want lowest closing costs.
We've done it twice with new builds, and in both cases there was a requirement that we apply with preferred lender.
But we actually financed with a different lender each time. We did NOT notify the builder in advance, as there was no requirement to do so.
We didn't want to throw up red flags while there was time for them to back out and sell to someone else.
We just came to the table prepared to close.

Even when not dealing with a builder, we have always applied to at least 2 lenders, after learning by accident (fortuitous) that they might keep trying to sweeten the deal once we told them we had chosen a different lender. That has ended up saving us in either - or both - closing costs or rate.

RM
This signature is a placebo. You are in the control group.

chevca
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Joined: Wed Jul 26, 2017 11:22 am

Re: Mortgage - closing or no closing costs?

Post by chevca » Fri Dec 08, 2017 8:13 am

I didn't say it was a requirement to apply with the preferred lender either. You're reading things I'm not writing. :happy

Way back when you, I, and the OP signed the contract we had to show we could get a mortgage. We could do that with whomever we wanted, but it had to be done in so many days. Then there was another so many days to change lenders if wanted. Any time after that required notifying the builder/seller and getting their approval.

It seems the OP already applied and got approved with the preferred lender here and has been talking to them for months. Well past the days of just changing lenders no problem. That's where I'm coming from since they're just a few weeks from closing. I'm assuming 5 - 6 months between contract and closing here. That's what I've been through.

ResearchMed
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Joined: Fri Dec 26, 2008 11:25 pm

Re: Mortgage - closing or no closing costs?

Post by ResearchMed » Fri Dec 08, 2017 8:30 am

chevca wrote:
Fri Dec 08, 2017 8:13 am
I didn't say it was a requirement to apply with the preferred lender either. You're reading things I'm not writing. :happy

Way back when you, I, and the OP signed the contract we had to show we could get a mortgage. We could do that with whomever we wanted, but it had to be done in so many days. Then there was another so many days to change lenders if wanted. Any time after that required notifying the builder/seller and getting their approval.

It seems the OP already applied and got approved with the preferred lender here and has been talking to them for months. Well past the days of just changing lenders no problem. That's where I'm coming from since they're just a few weeks from closing. I'm assuming 5 - 6 months between contract and closing here. That's what I've been through.
Sorry - I got that the first round above, about applying with a "preferred lender" (or even being approved).

I was trying to emphasize that IF we could use a different lender, we would *NOT* notify the builder, which you assumed would be necessary.
That would depend upon wording, and if not required, we would *NOT* do that.
We've never seen wording requiring that.

The other words were tossed in at no extra charge. :twisted:

RM
This signature is a placebo. You are in the control group.

pdanet
Posts: 43
Joined: Wed Feb 08, 2017 3:29 pm

Re: Mortgage - closing or no closing costs?

Post by pdanet » Fri Dec 08, 2017 8:31 am

chevca wrote:
Fri Dec 08, 2017 7:23 am

With just a few weeks to close on a new build, shopping around could cause issues. Not that it couldn't be done. But, you probably signed something saying you would go with the preferred lender and would need the builders permission at this point to change lenders. Check your paperwork on that.
I don't think we are locked in to use builder's lender. However, I will check with them. Great suggestion.

ResearchMed wrote:
Fri Dec 08, 2017 7:31 am

If there was official wording about the preferred lender, check if it required only that you "apply" or "be accepted" or did it actually require that you closed with them.
I don't think it's required but will check with builder's lender.

chevca wrote:
Fri Dec 08, 2017 7:42 am

OP, you have probably already locked in this rate, right? They got you a real good rate. But, you don't care about that if you're not going to carry the mortgage for 15 years. Talk to them and say you changed your mind and want as low of closing costs as can be. Tell them no worries about the lock and whatever the new rate might be. You just want lowest closing costs.
Nope. we haven't locked in yet. Am sending in all the paper work today. Builder said I can lock-in for 45 days but scheduled to close in next few weeks. My guess would be last week in Dec to get in the books for 2017.
ResearchMed wrote:
Fri Dec 08, 2017 8:06 am

We've done it twice with new builds, and in both cases there was a requirement that we apply with preferred lender.
But we actually financed with a different lender each time. We did NOT notify the builder in advance, as there was no requirement to do so.
We didn't want to throw up red flags while there was time for them to back out and sell to someone else.
We just came to the table prepared to close.
Already, I'll be saving 10K with Aimloan.com(based on online information) if everything goes accordingly so that's a major driving factor for us.
chevca wrote:
Fri Dec 08, 2017 8:13 am

It seems the OP already applied and got approved with the preferred lender here and has been talking to them for months.
When we started home construction, yes, we had to go through builder's lender to be pre-qualified. I don't think we are required to use them at closing but then again, will check.

pdanet
Posts: 43
Joined: Wed Feb 08, 2017 3:29 pm

Re: Mortgage - closing or no closing costs?

Post by pdanet » Fri Dec 08, 2017 8:32 am

Compound wrote:
Fri Dec 08, 2017 7:22 am
http://www.hughcalc.org/index.php
Thanks
Thanks

chevca
Posts: 1874
Joined: Wed Jul 26, 2017 11:22 am

Re: Mortgage - closing or no closing costs?

Post by chevca » Fri Dec 08, 2017 8:52 am

pdanet wrote:
Fri Dec 08, 2017 8:31 am
chevca wrote:
Fri Dec 08, 2017 8:13 am

It seems the OP already applied and got approved with the preferred lender here and has been talking to them for months.
When we started home construction, yes, we had to go through builder's lender to be pre-qualified. I don't think we are required to use them at closing but then again, will check.
After all the earlier wording blunders :happy , this is the part I meant to check your contract on. No, you're not locked into using the preferred lender. But, after pre-qualifying, being approved, and whatever the day limits were, a switch of lenders probably requires notifying the builder.

If you locked anything in yet, this should be too easy. Tell the lender you want the lowest closing cost option. They have more options than what they presented to you. I'd start there.

There's something to be said for avoiding the pre-qual and approval with another lender, IMO. I find that and all the back and forth and emailing and faxing... ugh, downright painful. Might just be me though.

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