Is this a good mortgage deal?

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Topic Author
jason1122
Posts: 28
Joined: Mon Oct 12, 2015 3:03 pm

Is this a good mortgage deal?

Post by jason1122 » Sun Oct 20, 2019 8:21 pm

I don't have a lot of folks I can talk to about this. I feel like an idiot, I just went with the lender my realtor recommended. He didn't walk us through what "points" are or what "APR" is. We just talked about the interest rate. There was no discussion of points and I don't know if we had any? I'm learning that just the interest rate is not the best way to gauge a mortgage? Oh and on top of whats listed below - they charged me 500 to lock in the 3.75 rate. Do the numbers below look reasonable for a 30y fixed with 5% down and excellent credit?

Estimated Sales Price: 425,000
Down Payment: 21,250
Estimated Mortgate Amount (Est. APR: 4.033%): 403,750

Est Monthly ->>
Estimated Mortgage P/I (3.75%): 1869.83
Est. Mortgagte Ins: 127.85
Est. Taxes: 430.08
Est. Hazard Insurance: 166.67
Est. Monthly: 2594.43

Closing Costs →
Mortgage Fees: 1499.69
Est. Vendor Fees: 511.00
Est. Title Fees: 2389.50
Est. Gov’t Fees: 1066
Est. Other Non-Settlement Fees: 399
Est. Total Closing Costs: 5865.19

Est. Total Prepaid Expenses: 5165.87

Est. Cash to Close ->
Est. Total Cash Investment (Closing Costs, Prepaid Items, Down Payment): 32,281.06
Less Estimated Total Items Paid Outside of Closing: 13,250
ESTIMATED CASH FROM BORROWER DUE AT CLOSING: 19,031.06

jello_nailer
Posts: 96
Joined: Sun Apr 07, 2019 10:20 pm

Re: Is this a good mortgage deal?

Post by jello_nailer » Sun Oct 20, 2019 8:35 pm

Where's the house located? Each mortgage markets a bit different.

Also, it's easy to shop mortgages on line, tons of sites to help you. I'm not too sure about just going to the realtors good buddy, I mean referral.

Grt2bOutdoors
Posts: 21386
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Is this a good mortgage deal?

Post by Grt2bOutdoors » Sun Oct 20, 2019 10:31 pm

jason1122 wrote:
Sun Oct 20, 2019 8:21 pm
I don't have a lot of folks I can talk to about this. I feel like an idiot, I just went with the lender my realtor recommended. He didn't walk us through what "points" are or what "APR" is. We just talked about the interest rate. There was no discussion of points and I don't know if we had any? I'm learning that just the interest rate is not the best way to gauge a mortgage? Oh and on top of whats listed below - they charged me 500 to lock in the 3.75 rate. Do the numbers below look reasonable for a 30y fixed with 5% down and excellent credit?
It's sort of an oxymoron to say you have excellent credit in the underwriting of a mortgage where pmi comes into play, the reason is the lender is not relying totally on the creditworthiness of the borrower, as much as it is on the underlying insurance - the PMI to make good in the event you default. Should you default at any time, the lender will go after the collateral - the real property and the PMI insurer for the shortfall.
As soon as you cross the 20% threshold in owners equity, look to get rid of the PMI. It's costing you an extra $1,534.20 each year in non-deductible expenses or roughly 2.41% of $63,750 (15% remaining equity).


Estimated Sales Price: 425,000
Down Payment: 21,250
Estimated Mortgage Amount (Est. APR: 4.033%): 403,750 APR or annual percentage rate is telling you the true cost of your borrowing is $4.033 per $100 of loan. Although your rate is 3.75%, the difference between the actual interest rate and the "all-in" rate are the fees you pay upfront and it converts those fees to an annualized cost.

Est Monthly ->>
Estimated Mortgage P/I (3.75%): 1869.83
Est. Mortgagte Ins: 127.85
Est. Taxes: 430.08
Est. Hazard Insurance: 166.67
Est. Monthly: 2594.43

Closing Costs →
Mortgage Fees: 1499.69 This is an origination fee or "points" you are paying. You are paying a rate of 37.5 bps or 0.375%.Usually origination fees are 0.50% or 1%. It's a reasonable charge.
Est. Vendor Fees: 511.00 the Vendor here is likely the bank's attorney - yes, you are paying the bank's attorney to review the mortgage documents before and after signing.
Est. Title Fees: 2389.50 Sounds reasonable.
Est. Gov’t Fees: 1066 Real estate transfer tax, usually it's the seller who pays for this, not the buyer. Before you sign any document saying "I agree to pay X dollars for a period of X months in the amount of ....... You have the right to ask any and all questions. Do not blindly sign any document without knowing far in advance what you are signing for. And don't let them blindly lead you and say "oh it's just standard language" "
"or that is what your real estate attorney is for, they'll tell you". :oops:

Est. Other Non-Settlement Fees: 399 ask what this is. What is "Other Non-Settlement Fees"?
Est. Total Closing Costs: 5865.19

Est. Total Prepaid Expenses: 5165.87 Two months escrow - it seems more or less, but you have a right to a full accounting of the components of this total in advance of the close. Don't go to the close and get surprised, ask for it in advance.

Est. Cash to Close ->
Est. Total Cash Investment (Closing Costs, Prepaid Items, Down Payment): 32,281.06
Less Estimated Total Items Paid Outside of Closing: 13,250
ESTIMATED CASH FROM BORROWER DUE AT CLOSING: 19,031.06
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

dsmil
Posts: 661
Joined: Tue Sep 08, 2009 10:51 am

Re: Is this a good mortgage deal?

Post by dsmil » Mon Oct 21, 2019 7:17 am

I like the mortgage professor site for looking at rates (https://www.mtgprofessor.com/ext/partne ... rLoan.aspx). Right now it looks like 3.625% is their rate that is the closest to zero lender fees. Whether the lender calls it points or not, you should focus on the total amount that you're paying the lender. Your offer looks reasonable but you could definitely shop around with an online lender to get a comparison. If you're more comfortable with the lender that you're realtor recommended, you can always present the competing quote to them. If they charge $500 to lock the rate, you shouldn't do that until you shop around and make sure that you want to go with them. I would also ask that $500 to be taken out of the $1,500 of mortgage fees, rather than you paying them $500 to lock in the rate. The only fees that I paid before closing last year was a $95 application fee and the appraisal fee.

Jags4186
Posts: 3877
Joined: Wed Jun 18, 2014 7:12 pm

Re: Is this a good mortgage deal?

Post by Jags4186 » Mon Oct 21, 2019 7:37 am

jason1122 wrote:
Sun Oct 20, 2019 8:21 pm
I don't have a lot of folks I can talk to about this. I feel like an idiot, I just went with the lender my realtor recommended. He didn't walk us through what "points" are or what "APR" is. We just talked about the interest rate. There was no discussion of points and I don't know if we had any? I'm learning that just the interest rate is not the best way to gauge a mortgage? Oh and on top of whats listed below - they charged me 500 to lock in the 3.75 rate. Do the numbers below look reasonable for a 30y fixed with 5% down and excellent credit?

Estimated Sales Price: 425,000
Down Payment: 21,250
Estimated Mortgate Amount (Est. APR: 4.033%): 403,750

Est Monthly ->>
Estimated Mortgage P/I (3.75%): 1869.83
Est. Mortgagte Ins: 127.85
Est. Taxes: 430.08
Est. Hazard Insurance: 166.67
Est. Monthly: 2594.43

Closing Costs →
Mortgage Fees: 1499.69
Est. Vendor Fees: 511.00
Est. Title Fees: 2389.50
Est. Gov’t Fees: 1066
Est. Other Non-Settlement Fees: 399
Est. Total Closing Costs: 5865.19

Est. Total Prepaid Expenses: 5165.87

Est. Cash to Close ->
Est. Total Cash Investment (Closing Costs, Prepaid Items, Down Payment): 32,281.06
Less Estimated Total Items Paid Outside of Closing: 13,250
ESTIMATED CASH FROM BORROWER DUE AT CLOSING: 19,031.06
I don’t know what the implications of only putting 5% down on rates/terms besides PMI, but from the looks of it this is an extremely expensive mortgage.

As the above poster stated, I am currently refinancing to a conventional 30 year fixed 3.625% mortgage with $2700 in lender credits to cover all fees. The only money out of pocket is 2 months of escrow which is about $2300. I’ll receive a refund from my current escrow account which is actually sitting on a $3000 balance right now.

Topic Author
jason1122
Posts: 28
Joined: Mon Oct 12, 2015 3:03 pm

Re: Is this a good mortgage deal?

Post by jason1122 » Mon Oct 21, 2019 2:55 pm

Thanks all, great advice! Quick question: How do you get lender credits?

TJHOFF
Posts: 2
Joined: Sun Sep 22, 2019 5:49 am
Location: Northern KY

Re: Is this a good mortgage deal?

Post by TJHOFF » Mon Oct 21, 2019 4:42 pm

Don't make any assumptions on getting rid of the PMI, an FHA loan you're stuck with it for life of loan for example. Check into it.
I'm closing soon on a refinance at 3.125%, 15 year fixed, no points, ~$2900 in closing costs.
$500 to lock in a 3.75% rate seems like you're paying them for the privilege of doing business with them.
I say look elsewhere, it doesn't sound like the mortgage company or the realtor has your best interest in mind.

TropikThunder
Posts: 1821
Joined: Sun Apr 03, 2016 5:41 pm

Re: Is this a good mortgage deal?

Post by TropikThunder » Mon Oct 21, 2019 5:49 pm

jason1122 wrote:
Mon Oct 21, 2019 2:55 pm
Thanks all, great advice! Quick question: How do you get lender credits?
Lender fees vs lender credit is just the net cost/benefit of a particular interest rate, taking into consideration credit score, location, down payment, market rates, etc. One thing you’ll notice when comparing rates online is that they are always in intervals of 0.125% so when people say rates are “up” or “down”, they’re really referring to how much the fee/credit is for a given rate.

Lets say the zero-fee rate you can get is 3.750%. You’ll get a credit if you accept a higher rate or you’ll pay a fee (points) to get a lower rate. The smart way to analyze this is to compare the P%I at the different rates vs the fee/credit and see how long it till take you to break even. If you take a credit of $2,000 and your P&I is $25/month higher, that means it will take [$2,000 / $25 = 40 months] to break even. If you’re going to still have that mortgage 3+ years from now it’s a bad deal.

If it’s not too late, get more quotes (LenderFI is dirt cheap).

Lee_WSP
Posts: 1170
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Is this a good mortgage deal?

Post by Lee_WSP » Mon Oct 21, 2019 6:49 pm

I do not think that sounds cheap, but it doesn't sound like you're being fleeced either.

megabad
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Re: Is this a good mortgage deal?

Post by megabad » Mon Oct 21, 2019 6:56 pm

Lee_WSP wrote:
Mon Oct 21, 2019 6:49 pm
I do not think that sounds cheap, but it doesn't sound like you're being fleeced either.
This. I don't think it is bad for a 5% mortgage assuming it is not FHA. Going up to a 10% down loan would definitely help a little on costs. If this is an FHA loan, it is horrible but otherwise, doesn't look too bad.

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unclescrooge
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Joined: Thu Jun 07, 2012 7:00 pm

Re: Is this a good mortgage deal?

Post by unclescrooge » Mon Oct 21, 2019 8:02 pm

It's not bad. You're probably not getting the cheapest loan, but I'd say you're doing okay. You are very far from being fleeced.

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MillennialFinance19
Posts: 152
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Re: Is this a good mortgage deal?

Post by MillennialFinance19 » Mon Oct 21, 2019 8:10 pm

If you shop around you can probably get a little better. Will take some effort on your part.

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fortfun
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Re: Is this a good mortgage deal?

Post by fortfun » Mon Oct 21, 2019 8:14 pm

Try aimloan and providentfunding. You'll get better rates with an online company than brick and mortar.

Lee_WSP
Posts: 1170
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Is this a good mortgage deal?

Post by Lee_WSP » Mon Oct 21, 2019 8:53 pm

Are you under contract? You may not have the luxury of time .

Admiral
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Joined: Mon Oct 27, 2014 12:35 pm

Re: Is this a good mortgage deal?

Post by Admiral » Tue Oct 22, 2019 10:13 am

You likely won't want to hear this but...

If you cannot afford 10% down (and you're not even close) you're buying too much house. (Most Bhs are pretty conservative when it comes to housing and down payments, myself included. More is better.) Also PMI is simply a terrible way to waste your money. You never get it back and it does nothing for you in terms of building your wealth.

You're also likely to get a better rate if you put down more.

Sorry, but that's my opinion. Put down 20%, or keep looking.

michaeljc70
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Joined: Thu Oct 15, 2015 3:53 pm

Re: Is this a good mortgage deal?

Post by michaeljc70 » Tue Oct 22, 2019 10:28 am

The closing costs sound quite high to me and I've never paid anything to lock in a rate. $2400 for title fees? So, no, I wouldn't call it a good deal. However, costs vary by state, your credit, etc.

EnjoyIt
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Joined: Sun Dec 29, 2013 8:06 pm

Re: Is this a good mortgage deal?

Post by EnjoyIt » Tue Oct 22, 2019 10:28 am

Admiral wrote:
Tue Oct 22, 2019 10:13 am
You likely won't want to hear this but...

If you cannot afford 10% down (and you're not even close) you're buying too much house. (Most Bhs are pretty conservative when it comes to housing and down payments, myself included. More is better.) Also PMI is simply a terrible way to waste your money. You never get it back and it does nothing for you in terms of building your wealth.

You're also likely to get a better rate if you put down more.

Sorry, but that's my opinion. Put down 20%, or keep looking.
I fully agree. You will wasting money in PMI fees for the privilege of buying a home. Save 20% and don't buy until then.

You are getting fleeced by the PMI.
Grt2bOutdoors wrote:
Sun Oct 20, 2019 10:31 pm
It's costing you an extra $1,534.20 each year in non-deductible expenses or roughly 2.41% of $63,750 (15% remaining equity).
Also, as you build equity in the home, the difference between PMI and no PMI decreases. So a few years down the line you may only need $10k more before you have 20% of the home paid off and get rid of PMI. You are still paying $1534.20 a year but now it is on $10k which is equivalent to 15.24%....Holly crap.

Plus, once you cross the 20% threshold you will find better rates as well. Looks to me like you need to save another $63,750

snailderby
Posts: 353
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Re: Is this a good mortgage deal?

Post by snailderby » Tue Oct 22, 2019 1:58 pm

I would second the advice from MillennialFinance19 and fortfun to shop around and compare not only interest rates but total closing costs. For example, depending on your credit score, you might be able to get a 3.750% loan from AimLoan while paying less than $2000 in closing costs. Other lenders to consider include HomeDirect Mortgage and Sebonic Financial, but this is by no means an exhaustive list.

Topic Author
jason1122
Posts: 28
Joined: Mon Oct 12, 2015 3:03 pm

Re: Is this a good mortgage deal?

Post by jason1122 » Thu Nov 07, 2019 6:47 pm

So thanks everyone for advice! Here's an update. I called around and got a quote from Lender B. Lender A (the quote above) was all incredulous and little angry that I was asking him why he was charging me a rate lock fee/points. He wouldn't budge until I sent him the new quote from Lender B. He agreed to remove the points (500$) and give me about 1k in lender credits to match the new quote. All the title stuff is still super high - but at least I I saved 1,500 by taking advice here.

Total Closing costs:
$8,354.65
$3,550.10 in Loan Costs + $5,801.81 in Other Costs (taxes, ins, escrow, etc) - $997.26 in Lender Credits.

Origination Charges: 995.00
---------------------------------
Commitment Fee: 495
Processing Fee: 200
Underwriting Fee: 300

Services Borrower did not shop for: 510
------------------------------------
Appraisal: 470
Credit report: 27
Flood cert: 13

Services Borrower did shop for: 2044.50
--------------------------------------
Title – Exam Fee: 725
Title - Lender’s Title Insurance: 1019.50
Title – Settlement Fee: 300

Admiral
Posts: 2437
Joined: Mon Oct 27, 2014 12:35 pm

Re: Is this a good mortgage deal?

Post by Admiral » Thu Nov 07, 2019 6:50 pm

jason1122 wrote:
Thu Nov 07, 2019 6:47 pm
So thanks everyone for advice! Here's an update. I called around and got a quote from Lender B. Lender A (the quote above) was all incredulous and little angry that I was asking him why he was charging me a rate lock fee/points. He wouldn't budge until I sent him the new quote from Lender B. He agreed to remove the points (500$) and give me about 1k in lender credits to match the new quote. All the title stuff is still super high - but at least I I saved 1,500 by taking advice here.

Total Closing costs:
$8,354.65
$3,550.10 in Loan Costs + $5,801.81 in Other Costs (taxes, ins, escrow, etc) - $997.26 in Lender Credits.

Origination Charges: 995.00
---------------------------------
Commitment Fee: 495
Processing Fee: 200
Underwriting Fee: 300

Services Borrower did not shop for: 510
------------------------------------
Appraisal: 470
Credit report: 27
Flood cert: 13

Services Borrower did shop for: 2044.50
--------------------------------------
Title – Exam Fee: 725
Title - Lender’s Title Insurance: 1019.50
Title – Settlement Fee: 300
"Commitment Fee"? "Title Exam Fee"? WTF are those? Title insurance, yes, that cannot be avoided. The rest...sounds fishy.

God I hate mortgage companies.

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