Financing in East Boston>Question Details

D, Home Buyer in 02128

Im trying to pick a honest mortgage company/ broker that doesn't charge bogus fees(email/internet access, doc prep, doc review,funding,

Asked by D, 02128 Tue Jan 26, 2010

ancillary, appraisal review, commitment, application) on a 115-125 k loan, 30 yr fixed, 5% down conventional or FHA 700 credit. Also that can provide a GFE without pulling credit so I can see what my loan would look like?

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23
Janet, a lot has changed in 2010. We are now required to have certain pieces of information before we can issue a true good faith estimate, because there are zero-tolerance on changes on some parts of it. We cannot issue a GFE without a credit pull. We need a FULL APPLICATION prior giving a GFE these days...
2 votes Thank Flag Link Wed Jan 27, 2010
Things like origination charges and transfer taxes have a zero-tolerance for fees to be higher. Most everything else has a 10% tolerance (this includes title fees, title insurance, recording fees, etc.). If there was ever a case where we forgot to put on transfer taxes, we, the lender would be responsible to pay the entire transfer taxes, which up here in NH are often over $2,000. As a result of the strict tolerances, most banks and lenders mark-up fees a little bit to ensure we don't have to eat the difference. The GFE from a bank and lender should be exactly the same, and held to the same tolerances. The only items where tolerance doesnt apply is escrows, per-diem interest, and hazard insurance premiums. Even if we don't disclose a water test or pest inspection that is required for the loan, we have pay for it in it's entirety. It's been quite the adjustment...

-Travis
1 vote Thank Flag Link Wed Jan 27, 2010
Robin, that is a good point, at 95% it is only 0.50% monthly PMI, which makes the FHA payment $5 less than what stated earlier. The lower total-cost option will still be the Conventional with one-time MI. I agree with you though, that it this program is not used nearly as often as it should be!
1 vote Thank Flag Link Wed Jan 27, 2010
Robin and Paul,

Even with a 700 credit score, the monthly payment and overall cost of a conventional loan is definitely less than FHA.

Let's use an example of $100,000 loan...

Conventional loan of $100,000 at 5.25% with one-time MI at 2.45% (this assumes a 700-719 credit score and 95% financing). I would suggest an offer with the seller paying this cost. Monthly principal/interest payment = $552. No monthly PMI. Therefore the total cost of MI = $2,450. (if your credit score was a 740, the cost would only be $2,100)

FHA loan of $100,000 at 5.25% - up-front PMI (financed, which increases the loan size to $101,750) of 1.75% and monthly PMI of .55% for 5 years. Monthly principal/interest payment = $562 + monthly PMI of $47 = $609. Total cost of PMI on this FHA loan after 5 years (which is the minimum that monthly PMI must be paid) = $4,570. Even if you look ONLY at the cost of the FHA monthly PMI for 5 years it totals $2,820. This is more than conventional with one-time MI in and of itself, nevermind the additional $1,750 financed PMI.

Don't get me wrong, I do a lot of FHA business, but if someone has the funds to do 5% down and pay closing costs, have the seller pay the one-time MI, and enjoy the security of a lower payment for the life of your loan. You have to pay monthly PMI with the FHA until you have 22% equity in your house. Back when homes were appreciating like crazy, this wasn't an issue, but in todays market it could certainly take a lot longer to get up to 22% equity than in the past.

Also, D, if your loan didn't close with us for some reason, there would be no charges that you would have to pay, except the cost of your appraisal IF one was performed. With our appraisers in MA, that would only be $300-350.

I hope everyone's information is somewhat helpful for you.
1 vote Thank Flag Link Wed Jan 27, 2010
D,

Actually, the overall cost of a conventional loan with single-premium PMI would be much less than the cost of an FHA loan. FHA charges 1.75% as up-front mortgage insurance that they finance into your loan, but you also have to pay monthly PMI for a MINIMUM of 5 years unless you refinance. With a single-premium PMI, the up-front cost would be about 2.0% (cannot be financed, but can be seller-paid) and there would be NO monthly PMI. This would be much less expensive than FHA financing.

Again, happy to talk more by phone or email if you're interested.
1 vote Thank Flag Link Tue Jan 26, 2010
Hi D,

I work for a direct lender up in NH, but I can certainly help you out with an FHA or Conventional loan in Boston. Boston is no longer considered a "declining market" by our mortgage insurance provider, so I could get you either 96.5% financing with FHA or 95% conventional. I would encourage you to consider looking at single-premium PMI on a conventional loan, versus paying PMI monthly. My personal opinion is that this will generally work out better for you in the short-run AND the long-run depending on how long you plan to stay in the house. We could even help you structure your offer (assuming you're buying not refinancing) so that the seller pays your PMI up-front, so you don't have to pay it at all!

We are able to do some pretty creative stuff to keep your payments AND fees very low. We do not overload you with junk fees. We charge a processing fee and underwriting fee. Our title company charges a closing fee (which includes the closer, title search, title commitment, etc.). You would also have to pay for Title Insurance and recording fees that are charged by your city/county. In the state of MA, the seller pays 100% of the transfer taxes, so you don't have to worry about those.

As others have mentioned, NO ONE will give you a good faith estimate prior to pulling your credit, especially with the new government restrictions that began 1/1/10. We could give you an "initial fees worksheet" that would outline and breakdown all the fees for you though. Most of my clients find this more helpful than the new Good Faith Estimate forms anyways.

I hope this helps... please call me with any questions, or for more information. My cell is 603.661.6259. Email is tfleury[at]envoymtg.com (replace [at] with @)
1 vote Thank Flag Link Tue Jan 26, 2010
Hi D

Congratulations on seeking to purchase a new home!

As you've seen, recent regulations pretty much restrict those nasty "junk" fees that some brokers would add onto their Good Faith Estimates. Borrowers should look at the bottom line and shop around.

I would be happy to provide a Good Faith Estimate without pulling credit (why would I want to pay for that at this point anyway?) and tell you about FHA and conventional financing you could use. It won't be a pre-approval without more details but it would allow you to shop around.

Let me know a bit about the homes you are considering (single family, condominium, etc.) and if you plan to live in it or not, then I'll shoot back something to you as soon as possible!

Thanks - and happy househunting!

Tom
Eagle Nationwide Mortgage Co.
0 votes Thank Flag Link Mon Feb 22, 2010
Because of the change to a Good Faith Estimate as of Jan 1, 2010, it is most likely you will no longer see doc prep, email ,etc.. Those specific fees are typically title companies fees which are out of the control of whomever provided you with this estimate you are speaking of. But again, because of the new regulation changes, most title companies no longer charge for this or that. Instead they have one that includes everything. And I'm not sure how your state works but in Oregon, all title companies must charge the same with very little tolerance.

You will probably find that you will not longer be given a Good Faith Estimate without an application because Travis is correct, what is not listed on it is paid for by the person who gave the estimate in the first place. And how are we to know your specific situation without seeing the whole picture? Is your goal for an estimate to get a general idea or to have something in writing to hold the mortgage company to? There is always a solution and I'm sure your goal is to see who you feel would best fit your needs. I would suggest going over costs verbally to achieve this goal. Also test the knowledge of your loan officer so you feel good in working with someone who knows the guidelines just as well as the agencies putting them out.

The debate of whether FHA or conventional is best for you is really going to depend on your specific scenario. If it ends up being FHA, I would act fast as the FHA fees (e.g. up front MIP) increases April 5, 2010 as well as seller contributions toward closings costs decrease significantly. If your credit score is 700 right now (remember credit scores change each month), conventional may be difficult as pmi (private mortgage insurance companies) have minimum score requirements aside from the actual home loan program. You may find that you qualify for the program but not for pmi. There is also USDA, a zero down home program which has no pmi and allows for lower credit scores. There are income and area restrictions to this program but most do qualify.

Everybody has an origination fee. And everyone has a different way of presenting rates & fees. This is because everyone is different. For example, you may want to see the best interest rate with normal closing costs. Maybe you wish to have a low or no fee loan option. In this case you would be presented with a higher interest rate in exchange for less closing costs. And there are some whom wish to pay extra to buy down their interest rate.

If you communicate your goals & needs to your loan officer, odds are they will hit the nail on the head for you. I can tell by your omission of name, you probably are not hesitant.
0 votes Thank Flag Link Sat Jan 30, 2010
Travis:
I heard this was coming, I just wasn't aware it went into play yet. The NEW GFE! Thanks for bringing me up to speed...
Question, is the new GFE from a BANK versus a mortgage lender such as Envoy different? Are Mortgage Brokers still around? Is the GFE from them at all different? When you say ZERO tolerance, on what items?
Janet
0 votes Thank Flag Link Wed Jan 27, 2010
Thank you for backing me up Travis.
0 votes Thank Flag Link Wed Jan 27, 2010
I was a mortgage originator for close to 9 years. These charges should be reasonable and customary. Have your representative go over the Good Faith Estimate in detail with you. If they can't tell you what the fee is for, I would question it, and find a new knowledgeable LO who can.

Fees such as doc prep, doc review and funding fees could easily be a component of the lender's charges to the broker, and are not necessarily BOGUS fees.

A loan officer is able to provide you a GFE withouti running your credit, however, they don't necessarily have to do it unless you are in a transaction with them, whereby they must provide it by law. If you are just shopping lenders/brokers, and you are not committed to working with one loan officer, I don't know why they would make the commitment to give you information without a serious chance you are going do business with them. I know of two highly professional Loan Officers who are licensed and experienced in MA who could do the job for you.
Janet
0 votes Thank Flag Link Wed Jan 27, 2010
Ken: I think that preparing the loan documents is part of the job, and it should not require an extra cost.

Bill P.: Internet access fee: Yes, my current credit union applies that fee. I laughed my head off the minute I saw it. Others would charge e-mail fee, ha!
0 votes Thank Flag Link Wed Jan 27, 2010
Yes, if you can get a deal with the No MI option of paying it up front, especially if you can get the seller to pay it, is one of the best deals around, and doesn't get used as often as it should. The one thing though is that the MIP on a 95% loan is only .5; it goes to .55 once you are over 95.
0 votes Thank Flag Link Wed Jan 27, 2010
Hello D- You got plenty of answers and recommendations. All seem good.
Nice to see that our company got a few other recommendations- for Mortgage Master.

The only real "bogus" fees I guess, for a borrower, would be an "origination fee" or paying points on the loan. Other than that, these are all actual costs -whether internal or 3rd party- that must be paid by somebody.
We have a $450 loan processing fee. To you, that may be a bogus fee. To us, that is an actual cost of doing your loan- even if it does not close and fund. So we charge for that.
Hope that helps. Thanks, and good luck,

Ken L.
0 votes Thank Flag Link Wed Jan 27, 2010
Travis, I agree with Paul. I have worked the numbers numerous times, and even with the up-front MIP, the payments are lower with FHA than conventional, not to mention that D may have a hard time getting the PMI with a 700 score because of the new guidelines.
0 votes Thank Flag Link Wed Jan 27, 2010
D
If I were you, I would put 3.5% down and go FHA. The rates are very comparable to conventional rates. Not to mention, the fees are lower, as are the PMI payments. Conventionally you will be charged a fee for all loan amounts below 150K.
I can give a sheet will all fees. Feel free to compare it to any lender, and our fees will be very competitive.
Thanks
Best of Luck
Paul
0 votes Thank Flag Link Tue Jan 26, 2010
Ha! Internet access? wow! Here are some things to know about lending and the new RESPA laws. I'm not licensed in your state so the "name" of the fee may be different. A broker usually has a minimum house fee that they collect from the loan officer, so they have to charge house fees called doc prep or admin fees or application fees. A lender, especially the bigger companies don't have to show a lot of their fees, so although you don't see it, doesn't mean you're not paying for it. Your fees should be around 3-4% of the loan amount. The new RESPA rules require us, yes, require us to take an application before we can issue a good faith estimate. There are some lenders who can give you a list of fees associated with the loan, but it can become a legal nightmare if the borrower brings it up that he/she received it and it doesn't match the GFE. Loan Officers need to make sure their company name is not on the worksheet for legal purposes. The new GFE, now 3 pages, requires the broker/lender to lump the fees together with title fees. It also requires us to give exact amount of fees without the ability to change the fees later. That means that we have to heavily pad the fees up front and then drop them later. Why? because if we don't account for the fee that we don't know about yet, we have to pay for it. Fees that could be title related or employment verification related. If anything else I can tell you, go with someone local.
0 votes Thank Flag Link Tue Jan 26, 2010
D, what you have to do is compare the rate that is being offered to the fees. With the new GFE requirements, those fees get lumped together as origination, so people can call them whatever they want, unless they allow you to shop around for the fees, they have to be accurate. Everyone has various fees that they charge, and on a loan the size that you are talking about there is not that much wiggle room before both the company and the loan officer don't want to do the loan. Because of the restrictions that are now put on us, my company has decided that we will provide our clients with a sample closing cost worksheet. On the actual GFE you will get once you give your social security number and the rest of the information that is deemed necessary by the lender, you will be given 3 choices. One where you have higher closing cost fees, one in the middle, and one with lower closing costs. It will show you what your monthly payment will be and what rates you will pay for each scenario. Unfortunately with these new regulations, if there is any fee that pops up a closing that is not disclosed, the company has to come up with money out of pocket, so it is more likely that people will over disclose, rather than under disclose. What you will find however is that it is less likely that you will show up at closing and find your closing fees are much higher than you anticipated.
0 votes Thank Flag Link Tue Jan 26, 2010
Jason Jastrzebski
Mortgage Masters (which was voted number one in MA in 2009)
jjastrzebski@mortgagemasterinc.com
W- (860)-462-9677

Make sure you mention territory real estate
0 votes Thank Flag Link Tue Jan 26, 2010
Hi there!
I highly recommend Bill Morris at Prospect Mortgage 1-617-699-9309, he is wonderful!
Thanks, Mary Crane
0 votes Thank Flag Link Tue Jan 26, 2010
For a local lender try John Hogan at Mortgage Master 617-429-2236 or Mike Isaac at Wells Fargo 508-616-1015 They work with alot of my clients and do a great job!
Web Reference: http://www.mdmrealtyinc.com
0 votes Thank Flag Link Tue Jan 26, 2010
Hi D

Try Carol Ann Greene at 617-543-5680. She has always taken great care of my clients and the fees are always the best around. Good Luck!
0 votes Thank Flag Link Tue Jan 26, 2010
Hi D...

I don't do financing in Boston but I can lend you some advise form California. With 5% down here that would still be an FHA loan. I'm pretty sure its the same in Boston where conventional loans start at 10% down. There are rumors though here that 95% should be available soon so maybe Boston is ahead of the curve.

A GFE is provided with a loan commitment. I would ask a broker there to list their fees in an email that way you can compare a few.

I hope this helps D. Good luck shopping.
0 votes Thank Flag Link Tue Jan 26, 2010
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