Home Buying in 32541>Question Details

Floridarefi, Home Buyer in 32541

we are looking at refinancing for a better rate. The credit scores are 701 690 704 . the ltv 78.8 and mortgage payment to income is 32.76 . Our

Asked by Floridarefi, 32541 Mon Mar 1, 2010

current loan is 6.5 30 year fixed and the new rate is 4.875. The closing costs look out of line to me as we will be financing an additional 10,500.00. For some reason it says we will recieve back 400.00 and some odd dollars. The payment will be lowered by 128.00 , but the loan will basically start out at 30 years again. We purchased 14 mos ago. Does this sound like fair closing costs?

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Good afternoon! This may or may not be out of line. First of all, how much are you borrowing? The loan size dictates your basic closing costs. The larger the loan, the higher the costs. However, if you are looking at a HUD-1, the total amount would include both the closing costs AND the prepaids (escrows). If your homeowners insurance policy is at the end of its term, then those costs might include the full renewal of the policy. As well, by the time you make your first payment, you tax bill will almost be due. Thus, that is probably included as well. Another non-closing cost charge would be the odd days interest. If you close early in the month, they will collect the interest from the day the loan funds until the last day of the month....then the clock starts ticking. This could be substantial.

Regardless, you should still shop around to see what others offer.


Dean Ladick
Lenox Mortgage, Inc.
0 votes Thank Flag Link Tue Jul 27, 2010
Hello Floridarefi--
As a realtor in the Destin area, I would give you the same suggestions that I give my buying clients--be sure to comparison shop with at least three lenders, get their good faith estimates, and put them side by side and see who is going to give you the best deal that fits your personal needs. Generally, lower interest rates have higher up front closing costs. Someone elses interest rate might be slightly higher, but the lender charges are less. Put their good faith estimates side by side and compare apples with apples. Also, the new HUD-1 that went into effect in January makes your job easier--there is a standard form that makes the lenders compare apples to apples. If you know someone who works for a title company, they can draw up a preliminary HUD for you as well If I can be of any other assistance to you, please do not hesitate to call me or send me an email.

Best wishes,

Myke Triebold, GRI,LMC
Web Reference: http://www.MykeTriebold.com
0 votes Thank Flag Link Tue Mar 2, 2010
One of the things that everyone has over-looked so far is that for you to get a rate of 4.875% right now, with a middle credit score of 690, you have to be paying points. You can ask about what the total origination cost will be. Then ask what your rate would be without points, and how much your loan amount would have to be then. Also, are they including escrows? If so, do you have cash to lay out so that you can wait until you get your current escrow balance back? When you refinance, you always skip at least 1 month of mortgage payments. You can skip 2 if you close and fund at the beginning of a month, before you have made your payment on your current mortgage. If you can account for that amount out of pocket, you can also take a lower loan amount.
As far as going back to a 30 year payment, you can always shorten that by making extra payments to principal. In my mind, the best time to refinance is in the beginning, when you have only paid a limited number of months off.
0 votes Thank Flag Link Tue Mar 2, 2010
Hi Home Buying 32541: Without having a copy of the HUD I cannot comment on the "fair closing costs" question. My recommendation is to contact a couple of other lenders and title companies and ask about their closing costs. Write this information down and compare to your HUD. I think that is the best way to know if you are being charged something "fair." In today's market how does anyone know what lender fees are fair? They hold all the cards. Basically it is take it or leave it in their minds.
0 votes Thank Flag Link Tue Mar 2, 2010
Most of the Mortgage Fees and taxes are based upon a percentage of the total loan amount. $10,500 in closing costs for a $400k loan sounds like a deal. For a $100k loan it's pretty high. Also, that amount should include your property tax and homeowners insurance escrows. The best way to ensure if the fees are in line with acceptable limits is to run it past a second mortgage broker. Naturally, that second mortgage broker will want your business and will probably work hard to get you even lower closing costs.

I would be very happy to look over your loan and tell you if I can do a better job for you. My phone number is 800-801-1080.

Take care,

Elena Ollick
Faith Home Loans
800-801-6080 (outside of FL)

skype: napleshomes
0 votes Thank Flag Link Mon Mar 1, 2010
The closing costs will depend on the loan amount. I will take a look at the good faith and tell you if the costs are fair if you'd like. About the $400 coming back to you. Most of us allow for a $500 buffer that allows us to "estimate" and not be short to close. This is a common occurrance. With FHA you can receive back up to $500 at closing and the loan is still considered a rate and term refinance (which gives you a better rate than a cash out refi). On Fannie / Freddie loans (conforming) you can receive up to $2000 at closing and it not considered a cash out refi. Most people look at the two rates 6.5 and 4.875 and only think ...wow I could have a 4.875%. You need to look at the amount saved vs the closing costs...how long does it take you to recoop the costs. In your scenario you would take $10,500 / $128 and get 82.03 months to recoop the cost (6.84 years). This would be the initial assumption, but there is more to it. You need to factor in the fact that you should be skipping two months of payments, if the loan officer knows what he/she is doing + you will be getting an escrow refund back ( you can't swap the current escrow balances, so part of that $10,500 should be your escrows, unless you have already pulled those out). You would then take the whole eqaution and look at the actual cost recoop period: ($10,500 - ( two months of your current payment + current escrow balance)) / $128 = X = total time to recoop costs. My rule of thumb is, if you will recoop in less than 5 years AND you are planning on bing in the house for more than 5 years, the refinance is worth it. We will not be seeing rates this low again any time soon. If you look at the lifetime interest difference, you will see a significat difference between 6.5 and 4.875. A good way to see if it is really worth it, is to look at an amortization schedule of your existing loan vs the new loan. Look at the loan balance at year five and see what the balance is. If the difference is substantial enough for you, then it is worth it. I would say you need to have a loan balance that is ( 10,500 - two months skip + escrow refund ) less than the balance after five years on your current loan. Call or email me. I can help walk you through this if you'd like.

Ryan McPartland
Co-Owner / Licensed Mortgage Consultant
Primary Mortgage Group
239.206.4439 Direct
0 votes Thank Flag Link Mon Mar 1, 2010
How much do the closing costs total? Call me if you would like a comparison - Sue Botelho, Waterstone Mortgage, Ft. Walton Beach, 850-797-7946. I can see what we could do to help you out. :)
0 votes Thank Flag Link Mon Mar 1, 2010
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