Misfitmorgan's Journal - That Summer Dust

[Latestarter]

Typical closing costs on a residential 1st mortgage purchase loan should be right at about 3% of loan amount. That drops as loan amount goes up, as most closing costs are relatively "fixed" costs that are not loan amount dependent. The most important aspect of the loan you should be looking at is APR. That is the effective interest rate you will have had on the loan after it's all paid off down the road. Financing the closing costs costs you money in the long haul as they are being charged interest over the life of the loan. Buying points to buy down the rate is rarely if ever beneficial to you the borrower. I paid points when I bought this place as I wouldn't have had enough deductions on my taxes to file itemized deductions. Paying the points saved me several hundred dollars in taxes which more than made up for the cost over time to pay them. But I also put down 25%.

ETA: closing costs will be a much higher percentage of the loan amount if doing a small loan. Once again, many of the costs are fixed costs so on a small loan, they add up to a bigger percentage. A loan less than $100K is considered a small loan. Many lenders won't even do a mortgage loan if less than $50-75K.

If you do conventional financing you can generally remove the PMI any time after 2 years if you can prove the value of the property has increased sufficient to make your loan less than 80% of the appraised value. With FHA, you can remove the PMI at 80% after 5 years or Supposedly the lender had to automatically remove it when a 78% LTV (Loan To Value) has been achieved.

If you can get the lender to add in discount points sufficient to cover all the closing costs and remove the closing costs in return, they still make their money and you can write those points off on your taxes (That's a part of what I did here as well).

Just as an aside, if you do a comparative analysis, Quicken loans is one of the MOST expensive lenders to do business with. Your local credit union will be the least expensive option 98% of the time. They are "not for profit" where a bank is "all for profit". Good luck!

 

[norseofcourse]

The people who bought my old house went through Quicken. They made them jump through a lot of extra hoops and it took weeks beyond what they said the closing date would be initially. Quicken also took some of their fees directly out of the buyer's bank account which the buyers were not expecting (I'm sure they signed something saying this would happen, without reading it...).

 

[misfitmorgan]

Doesn't sound like Quicken is a great route to take, that "lender agent" sounds like a weasel ... "Don't worry about it"? BS, mortgages are a ton of money and OF COURSE you want to know EXACTLY what is going down.

Geez they get you coming and going! Don't you just LOVE "prepaid interest"? AKA points. Such a deal: Give me a lower APR but hit me up front for the interest I WOULD have paid over the life of the loan if I had a higher APR.

I don't recall what our closing costs were 6 years ago but we didn't have that many "guaranteed" fees. Nor did we pay "points". And I don't "do" escrow so we didn't need yet MORE money to open a separate account. The CU just pulls the monthly payment from our checking account. Even with my first house in 1984 I didn't do escrow, the bank gave me a payment book and I mailed a check monthly and did the same when it was time to pay property taxes. I guess escrow depends on your lender? See if you can get out of it so you don't have to tie up even more money.

Quicken requires Escrow they say for all of their loans.

Is that total closing or just your part?

IIRC, I think my total closing (as seller) was $8k on $120K total selling price.
I could look but don't remember what the buyer's was.

That's just my cost and doesnt include paying the realtor.

Do you mean an impound account?

Escrow account is for property taxes and house insurance, most places require 2-6months of payments for those in an escrow account, Quicken is requiring more then 6 months for mine for some reason.

Typical closing costs on a residential 1st mortgage purchase loan should be right at about 3% of loan amount. That drops as loan amount goes up, as most closing costs are relatively "fixed" costs that are not loan amount dependent. The most important aspect of the loan you should be looking at is APR. That is the effective interest rate you will have had on the loan after it's all paid off down the road. Financing the closing costs costs you money in the long haul as they are being charged interest over the life of the loan. Buying points to buy down the rate is rarely if ever beneficial to you the borrower. I paid points when I bought this place as I wouldn't have had enough deductions on my taxes to file itemized deductions. Paying the points saved me several hundred dollars in taxes which more than made up for the cost over time to pay them. But I also put down 25%.

ETA: closing costs will be a much higher percentage of the loan amount if doing a small loan. Once again, many of the costs are fixed costs so on a small loan, they add up to a bigger percentage. A loan less than $100K is considered a small loan. Many lenders won't even do a mortgage loan if less than $50-75K.

If you do conventional financing you can generally remove the PMI any time after 2 years if you can prove the value of the property has increased sufficient to make your loan less than 80% of the appraised value. With FHA, you can remove the PMI at 80% after 5 years or Supposedly the lender had to automatically remove it when a 78% LTV (Loan To Value) has been achieved.

If you can get the lender to add in discount points sufficient to cover all the closing costs and remove the closing costs in return, they still make their money and you can write those points off on your taxes (That's a part of what I did here as well).

Just as an aside, if you do a comparative analysis, Quicken loans is one of the MOST expensive lenders to do business with. Your local credit union will be the least expensive option 98% of the time. They are "not for profit" where a bank is "all for profit". Good luck!

That's the problem with Quicken, i asked what APR that loan was at and the response i got was "All rates currently on the market" It's like they are trying to make it as mysterious as possible. It's almost 10% closing costs and i found out yesterday that is not including the points he says i will have to take.

The people who bought my old house went through Quicken. They made them jump through a lot of extra hoops and it took weeks beyond what they said the closing date would be initially. Quicken also took some of their fees directly out of the buyer's bank account which the buyers were not expecting (I'm sure they signed something saying this would happen, without reading it...).

Yeah they are already asking weird.

Ok so the Realtor called me yesterday. We got the house!! but not really. The Seller accepted our offer but we have to do a conventional instead of an FHA, we have to put down $1,000 Ernest money, provide them with a new pre-approval for a conventional loan and if we go over our closing date we have a $50/day fine.

So i called Quicken because the local guy for my bank here was off yesterday and i only wanted a pre-approval. My "lender agent" said he can't give me a conventional mortgage because i cant take enough points on it because Fannie Mae and Freddie Mac(who set the rules he says) don't even do Mortgages below 75K Firstly i know Freddie and Fannie set rules but i am pretty positive they do loans under 75K or a lot of people locally here would be homeless for sure. Anyhow the agent got jerkish cause he realized he wasnt gonna get paid suddenly and told me "Well i dont think your going to be able to get it anyhow because your debt to income is to high" Really??? then why were you all excited before and trying to make sure i got the place? From what i can figure i am good up to 77K with a DTI of 36% on my income only.

Anyhow I will be talking to the local guy here later today. He knows the loan amount, already ran my credit, got my paystubs, and still says he can do 5% down, $5,900(or less) closing costs and finance a large chunk of that. So hopefully he is right. I have to submit a pre-approval ASAP or i lose the house.

 

[Bruce]

I would blow Quicken right out the window. And I would talk to the superior of the Quicken guy, he is a snake. MAYBE that is SOP for Quicken but maybe not. He should be turned in in case he is a flyer.

Good luck!

 

[misfitmorgan]

I talked to his manager, manager said the same things as him. So i think that is just how they do business. He did literally tell me he only gets paid if we get the loan so....i assume they are very driven to try to get people loans. Why they don't allow closing costs in the loan i dont know.

 

[Bruce]

Then their business model is ****. Double the closing costs of a real bank??? Fuzzy with the customer on the important details?

I don't think I'll ever need another bank loan but based on your experience, I sure won't even consider Quicken if I do.

 

[Latestarter]

Providing an APR on a loan is federally mandated. They HAVE to provide/disclose that info. If they don't they are breaking the law. As I said, many lenders will not do loans below 50-75K because they "make no money on them". It's not worth their effort because the cost to service the loan is more than what they make in interest income. I was a mortgage broker and I was a loan officer. I LOVED doing FHA loans as I was virtually guaranteed to make a minimum of 2 points (2% of loan amount) in profit on each loan. FHA pretty much sets their rate to guarantee the lender will make 1 point on the back end, and they make another on the 1% loan origination fee, then whatever other BS fees they can strap on. If the borrower has "questionable" credit or some other "bogus" reason that the lender can use to justify a slightly higher rate, that increases the amount they will make on the back of the loan. A .25-.375 increase in rate equals another point in profit on the back. So by increasing the rate by as little as 1/2 a point could have the lender making 3 points on the back side of that loan. Now, what would that mean for a paycheck on the typical home loan of $300,000.00? yep, a $9,000.00 minimum profit.

No lender "gets paid" unless you do the loan with them. They do all their work up front and cash in when you close the loan. Since your loan is so small, they are trying to make/mark up their income through discount points, fees, charges etc so they can make a more decent/adequate (in their eyes) profit on the loan. An FHA lender is NOT going to want to change from that FHA loan to a conventional loan as they will cut their income potential in 1/2 or more.

Quicken advertises their high satisfaction rate and I just sit here in wonder/amazement... how stupid are these people (satisfied borrowers)? They had to have had P.T. Barnum level sales people (loan officers), because they got took! Please do yourself a favor and don't walk, RUN away from those thieves!

Virtually everyone nowadays closes "in escrow". It simply means that there's a third, non-involved party, typically a title company, who handles all facets of the money between buyer/seller/lender. They make sure everything adds up down to the penny and hold all funds until each of the parties signs off that they are satisfied with the numbers breakdown, and signs all contracts/mortgage loan/title/deed/etc. documents. They then, and only then, disburse all the funds that they've been holding (in escrow) to each person as applicable: seller(s), realtor(s), contractor(s), etc.

Lenders might do loans to Fannie/Freddie guidelines for qualification purposes, but for loans under the cut-off, they hold them themselves, in house, and don't sell them to Fannie or Freddie. Many things have changed since I was in the business, but 80-90%+ of all residential loans are now sold on the aftermarket to Fannie/Freddie then routed into the investment marketplace. Pretty much the same as before the last mortgage/real estate crash. Here's the deal from the lender's perspective... If they can't sell the loan (get their money out to lend again), they won't do the loan. Primary reason I recommended you try to find a local lender, preferably a credit union (member owned/non profit). I tried to find if F/F had a min loan amount, but can't find the info, sorry.

If you put $1000.00 down as an earnest money deposit, make CERTAIN that your realtor writes an "out" into the contract so you get that money back if you can't get a loan, or can't get a specified rate or loan terms that you seek. You don't want to lose that money.

 

[CntryBoy777]

Sure Hope it all works out for ya....I told ya you would get the bid........I certainly don't have anything to add to what has already been said, so really hope ya find the right loan and Fast.....

 

[misfitmorgan]

Providing an APR on a loan is federally mandated. They HAVE to provide/disclose that info. If they don't they are breaking the law. As I said, many lenders will not do loans below 50-75K because they "make no money on them". It's not worth their effort because the cost to service the loan is more than what they make in interest income. I was a mortgage broker and I was a loan officer. I LOVED doing FHA loans as I was virtually guaranteed to make a minimum of 2 points (2% of loan amount) in profit on each loan. FHA pretty much sets their rate to guarantee the lender will make 1 point on the back end, and they make another on the 1% loan origination fee, then whatever other BS fees they can strap on. If the borrower has "questionable" credit or some other "bogus" reason that the lender can use to justify a slightly higher rate, that increases the amount they will make on the back of the loan. A .25-.375 increase in rate equals another point in profit on the back. So by increasing the rate by as little as 1/2 a point could have the lender making 3 points on the back side of that loan. Now, what would that mean for a paycheck on the typical home loan of $300,000.00? yep, a $9,000.00 minimum profit.

No lender "gets paid" unless you do the loan with them. They do all their work up front and cash in when you close the loan. Since your loan is so small, they are trying to make/mark up their income through discount points, fees, charges etc so they can make a more decent/adequate (in their eyes) profit on the loan. An FHA lender is NOT going to want to change from that FHA loan to a conventional loan as they will cut their income potential in 1/2 or more.

Quicken advertises their high satisfaction rate and I just sit here in wonder/amazement... how stupid are these people (satisfied borrowers)? They had to have had P.T. Barnum level sales people (loan officers), because they got took! Please do yourself a favor and don't walk, RUN away from those thieves!

Virtually everyone nowadays closes "in escrow". It simply means that there's a third, non-involved party, typically a title company, who handles all facets of the money between buyer/seller/lender. They make sure everything adds up down to the penny and hold all funds until each of the parties signs off that they are satisfied with the numbers breakdown, and signs all contracts/mortgage loan/title/deed/etc. documents. They then, and only then, disburse all the funds that they've been holding (in escrow) to each person as applicable: seller(s), realtor(s), contractor(s), etc.

Lenders might do loans to Fannie/Freddie guidelines for qualification purposes, but for loans under the cut-off, they hold them themselves, in house, and don't sell them to Fannie or Freddie. Many things have changed since I was in the business, but 80-90%+ of all residential loans are now sold on the aftermarket to Fannie/Freddie then routed into the investment marketplace. Pretty much the same as before the last mortgage/real estate crash. Here's the deal from the lender's perspective... If they can't sell the loan (get their money out to lend again), they won't do the loan. Primary reason I recommended you try to find a local lender, preferably a credit union (member owned/non profit). I tried to find if F/F had a min loan amount, but can't find the info, sorry.

If you put $1000.00 down as an earnest money deposit, make CERTAIN that your realtor writes an "out" into the contract so you get that money back if you can't get a loan, or can't get a specified rate or loan terms that you seek. You don't want to lose that money.

Trust me i am running away....here is the problem though. Quicken pulled my credit twice, Chemical Bank pulled my credit twice, so i now have 4 new inquiries....i think my odds of a CU financing me with 4 brand new inquires are pretty slim. So for now i am seeing if Chemical Bank will work out.

I just got the Pre-qual letter for the conventional loan from chemical bank and sent it to my realtor letting him know if they demand a pre-approval it will take another day or two. I also send over all the documents Chemical Bank Requested w-2s tax return, bank statements....they had my pay stubs already.

My realtor is waiting for the sellers realtor to let us know who to have the check made out to for the Ernest money so we can officially submit the offer acceptance. I believe refund of the Ernest money is already written in but i will check.

 

[misfitmorgan]

Sure Hope it all works out for ya....I told ya you would get the bid........I certainly don't have anything to add to what has already been said, so really hope ya find the right loan and Fast.....

Thanks!!