Page 1 of 1

Ethical Dilemna - Rate Lock Woes

Posted: Fri Jul 10, 2020 9:47 pm
by cubaboymatt1316
[Removed]

Thanks for all the help!

Re: Ethical Dilemna - Rate Lock Woes

Posted: Fri Jul 10, 2020 9:49 pm
by HomeStretch
It’s business, not personal. Go with the lender that gives you the best deal. But a 7-year payback at Lender #2 seems too long.

Re: Ethical Dilemna - Rate Lock Woes

Posted: Fri Jul 10, 2020 10:16 pm
by jimmyrules712
I'm not sure a .5% rate reduction is worth $7k in extra costs for the loan. If you're going to go through the trouble to get a better deal make sure it's worth the trouble.

Re: Ethical Dilemna - Rate Lock Woes

Posted: Fri Jul 10, 2020 10:17 pm
by Stinky
I’d take a $300k loan at 2.75% with no closing costs over one at 2.25% with $7k closing costs. Payback on added closing costs is too long.

So I’d stick with original deal.

Re: Ethical Dilemna - Rate Lock Woes

Posted: Fri Jul 10, 2020 10:19 pm
by cubaboymatt1316
HomeStretch wrote: Fri Jul 10, 2020 9:49 pm It’s business, not personal. Go with the lender that gives you the best deal. But a 7-year payback at Lender #2 seems too long.
I agree it’s a long break-even period. Goes back to the builder not giving any closing costs unless I choose their preferred lender.

Re: Ethical Dilemna - Rate Lock Woes

Posted: Fri Jul 10, 2020 10:28 pm
by 28fe6
Payback is too long to switch. Take the first loan. If rates really drop, refi later. There's no sense in switching for such a small difference.

Re: Ethical Dilemna - Rate Lock Woes

Posted: Fri Jul 10, 2020 10:35 pm
by anon_investor
28fe6 wrote: Fri Jul 10, 2020 10:28 pm Payback is too long to switch. Take the first loan. If rates really drop, refi later. There's no sense in switching for such a small difference.
+1.

Re: Ethical Dilemna - Rate Lock Woes

Posted: Fri Jul 10, 2020 10:37 pm
by bampf
I don't think it is an ethical dilemma. Rates are lower. I guess you need to ask yourself how much 21K matters to you. A half point aint nothing. If I were doing the deal I would ask them to meet you half way or tell them you have a loan for 2.25 in your back pocket. That being said, if you pay off the loan early, it changes everything. Take the $7K in closing costs an immediately pay down the principle. That $7K translates to $13K less interest over the life of the loan. If you pay $15K upfront you are break even for the life of the loan.$555K vs $530K.

I don't know your cash flow, down payment of income. So, hard to judge. In general you can minimize interest by not paying it. You can also refi nearly immediately generally for faily low $. Maybe you close, shop around and bag a 2% 15 year loan. Lot of options here. That being said, over a year you are talking about a delta of ~$1. Maybe invest the $7k in a 10 bagger and make so much money you don't care.

Lot of words to say its just business. Is what it is.

--Bampf

Re: Ethical Dilemna - Rate Lock Woes

Posted: Sat Jul 11, 2020 12:27 am
by BrandonBogle
Thank you for your service Matt. You don’t mention if you qualify for a waived VA funding fee. If you do, just use the preferred lender for 2.75% and refinance elsewhere in a few weeks/months.

If you have to pay the VA funding fee, then look into what the costs for a IRRRL refi are. You may fine 2.25% without $7k in closing costs.

However, just a side note. Make sure you are thinking about real closing costs vs. what the paperwork says are loan costs. For instance, if you have an escrow account, don’t count that as part of your “closing costs” when refinancing. That is your money saved to pay for taxes and insurance. If you refi, the prior lender sends you a check for it about two weeks later. So even though it may show up as a “closing cost”, it really isn’t. The VA funding fee and escrow funding/prepaids could explain much of that $7k and thus, taking the 2.75% and refinancing may be far cheaper than $7k.

Re: Ethical Dilemna - Rate Lock Woes

Posted: Sat Jul 11, 2020 4:20 am
by cubaboymatt1316
BrandonBogle wrote: Sat Jul 11, 2020 12:27 am You don’t mention if you qualify for a waived VA funding fee.
....

However, just a side note. Make sure you are thinking about real closing costs vs. what the paperwork says are loan costs.
Thank you for all the responses. It’s put my mind at ease a bit.

I qualify for no funding fee.

7k includes prepaids, but Lender 1, the builder’s preferred, has the builder paying everything so I come to closing with nothing. Lender 2 has me coming to closing with all $7k because the builder will withdraw all incentives. That was told to me before I ever signed the contract.

To answer some other Qs:

- I have plenty of cash, about $70k, but plan on using that to build a pool on the new property (not quite all of the $70k, keeping a suitable EF). Retaining $7k would be nice, but ~$80/month reduction in payment is nice too.

- there’s a 210 day/6 payment waiting period to refinance with VA. So refinancing sooner would require a conventional refinance.

Re: Ethical Dilemna - Rate Lock Woes

Posted: Sat Jul 11, 2020 5:29 am
by qwertyjazz
cubaboymatt1316 wrote: Sat Jul 11, 2020 4:20 am
BrandonBogle wrote: Sat Jul 11, 2020 12:27 am You don’t mention if you qualify for a waived VA funding fee.
....

However, just a side note. Make sure you are thinking about real closing costs vs. what the paperwork says are loan costs.
Thank you for all the responses. It’s put my mind at ease a bit.

I qualify for no funding fee.

7k includes prepaids, but Lender 1, the builder’s preferred, has the builder paying everything so I come to closing with nothing. Lender 2 has me coming to closing with all $7k because the builder will withdraw all incentives. That was told to me before I ever signed the contract.

To answer some other Qs:

- I have plenty of cash, about $70k, but plan on using that to build a pool on the new property (not quite all of the $70k, keeping a suitable EF). Retaining $7k would be nice, but ~$80/month reduction in payment is nice too.

- there’s a 210 day/6 payment waiting period to refinance with VA. So refinancing sooner would require a conventional refinance.
So if you believe interest rates will be stable or lower in 7 months, you can take the original deal and net 7 k and pay half a point over that time and then refinance with VA or conventional? Am I missing something?

Re: Ethical Dilemna - Rate Lock Woes

Posted: Sat Jul 11, 2020 5:43 am
by cubaboymatt1316
qwertyjazz wrote: Sat Jul 11, 2020 5:29 am
So if you believe interest rates will be stable or lower in 7 months, you can take the original deal and net 7 k and pay half a point over that time and then refinance with VA or conventional? Am I missing something?
At 2.25%, I'd lean towards believing rates will be UP 7 months from now, but that's just a wild assumption based on current economic and health factors.

I've decided to work solely with Lender 1 and accept whatever decision they make (let me float, pay a re-lock fee, no changes, etc.). Thank you everyone for your help.

Re: Ethical Dilemna - Rate Lock Woes

Posted: Sat Jul 11, 2020 6:27 am
by samsoes
cubaboymatt1316 wrote: Fri Jul 10, 2020 9:47 pm [Removed]

Thanks for all the help!
Why did you remove your question?

Re: Ethical Dilemna - Rate Lock Woes

Posted: Sat Jul 11, 2020 7:38 am
by LadyGeek
The OP has removed his post, the thread is no longer productive.

This thread is locked to end the discussion.

cubaboymatt1316 - If you wish, feel free to PM me and explain why you've removed your post. If something is wrong, I may be able to help.

FYI - cubaboymatt1316 PM'd me. The post content contained personally identifiable information.