Is getting a 6.875% FHA with 3% downpayment and $10000 closing costs inclusive of prepaid/non-recurring items

Asked by Anurag, Hemet, CA Fri Jul 11, 2008

a good interest rate in the current scenario for a loan of 435K purchase price?

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ScottSchang, , Orange, CA
Thu Aug 7, 2008
And they don't require 3% down, they max out at 95% LTV but have silent second mortgages - 4% for Orange county. I do a lot of these loans.
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ScottSchang, , Orange, CA
Thu Aug 7, 2008
Right, 7% for the 30 and the interest only 35 and 7.125% for the 40. The rate is irrelevant. The difference in payment from 6.875% and 7% is a couple of bucks. You would use a first mortgage of 95% and there is down payment assistance of 4% that has no payments for the life of the first mortgage.

It's a really good program for first time home buyers. You wouldn't happen to work in a public school or community college?
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ScottSchang, , Orange, CA
Thu Aug 7, 2008
I don't usually like to use this forum to solicit business but if you have any questions about the CalHFA first time home buyer programs you can give me a call on my cell. 714-336-8286
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Anurag, Home Buyer, Hemet, CA
Thu Aug 7, 2008
calHFA has interest rate 7% and I read that they also now ask for 3% downpayment
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ScottSchang, , Orange, CA
Thu Aug 7, 2008
The rates tend to be a bit higher because of the lender paid mortgage insurance and built in fees but it's a great loan program and the rates are still very reasonable.

You may also want to look into the CalHFA program. You would only have to come in with 1% and they have a 35 year / first 5 interest only and a 40 year fixed as well.
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Anurag, Home Buyer, Hemet, CA
Thu Aug 7, 2008
yes I know that, but i do not have 10% down. They initially had 5% down, but the time I decided to buy, it got changed to 10%
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Oc Buyer, Home Buyer, CDM
Thu Aug 7, 2008
If you end up having to put 10% down, you should look at B of A's mortgage plus as they pick up all the closing costs and don't charge PMI.
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Anurag, Home Buyer, Hemet, CA
Thu Aug 7, 2008
Yes the lower score we have is 698
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ScottSchang, , Orange, CA
Thu Aug 7, 2008
Another note: The credit score requirements are becoming more and more strict. You would need a very minimum score of 680 - are you ok there?
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Anurag, Home Buyer, Hemet, CA
Thu Aug 7, 2008
Thanks. I will get that info from lender.
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Luke Allison, , Asheville, NC
Thu Aug 7, 2008
Probably not. Most lenders will require you to work off of the rate sheet that you locked on and if you want to shift your rate will only work off of the rate sheet that has the worse pricing. You could ask your broker to float your file with another lender or just leave it alone (rates could just as easilly jump back up tomorrow to where they were). I'm not saying that what you have now is a bad offer by any means. I priced your scenario out and came to 6.625 with a half point and 6.75 with zero points (about the same fees) and 6.875 with no points and no lender fees. This is just how the market shifts from day to day.
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ScottSchang, , Orange, CA
Thu Aug 7, 2008
Anurag, you may want to verify that you can get Mortgage Insurance. As of Friday, August 1st the Mortgage Insurance companies will not insure over 90% loan to value PERIOD in California, Nevada, Arizona or Florida. If you lender is unaware of this you may want to keep looking.
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Anurag, Home Buyer, Hemet, CA
Thu Aug 7, 2008
Thanks. Can we still get that rate changed if we had locked it.
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Luke Allison, , Asheville, NC
Thu Aug 7, 2008
Yes, that is a good scenario. Obviously your MI will be higher now but that rate is pretty good. Just an FYI, if that rate was quoted yesterday, you may want to check on it again today - rates dropped pretty well today.
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Oc Buyer, Home Buyer, CDM
Thu Aug 7, 2008
that sounds awfully good.
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Anurag, Home Buyer, Hemet, CA
Thu Aug 7, 2008
Okay..The FHA loan could not go through because of two reasons:
1. They had some problem with the my wife residency status. We are non-permanent resident alient with permanent residency in progress
2. Also they did not count her salary as she is been working for just 4 months
So, now I have decided to go with a conventional loan with 5% downpayment, and the interest rate charged to me is 6.75% with 0.625 points and fees $1174. Is this a good deal in current scenario? The purchase price is 432900.
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Daniel, , Baton Rouge, LA
Mon Jul 14, 2008
depends on your credit history
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Tony Vega, Both Buyer And Seller, Irvine, CA
Mon Jul 14, 2008
Sorry for the confusion. I didn't realize that I did not get FHA. I just know that rate is what I got..and like I said the purchase price was very close to yours. I guess 3% down versus 10% makes a difference.

As an owner/investor though, if you are putting 3% down, your cash on cash return over the next 10 years is going to be phenomenal...so congratulations!
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Luke Allison, , Asheville, NC
Mon Jul 14, 2008
Anurag-

To make things easier on you, you can go for Down Payment Assistance of the 3% plus closing costs. You don't have to split it between DPA and seller concessions. Just try and get as much DPA from the seller as possible and then you can split the fund payments at closing. I think your key is to find out how much the seller will give you to get this home sold.

Luke Allison
Flagstar Bank
828-777-8828
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Anurag, Home Buyer, Hemet, CA
Mon Jul 14, 2008
The closing costs of $8000 is paid by the bank and they will only allow that for the closing cost, and I dont have 10% down. 10% for 432K is $43200 and that's too much for me. With FHA I only have to pay 3%
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Oc Buyer, Home Buyer, CDM
Mon Jul 14, 2008
I think your rate would be lower if you financed $417K instead of $435K. If you put 10% down, B of A's no fee mortgage plus might be worth looking at. You don't pay any closing costs OR PMI. For loans $417K and under, they are quoting 6.5% today with 1.127 points. You could use some of the funds you were allocating towards closing costs towards the downpayment instead.
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Anurag, Home Buyer, Hemet, CA
Mon Jul 14, 2008
Tony,

Was your loan a FHA and you paid almost 10% downpayment. Is your credit above 750?

I talked to few and no lender seemed to quote less than 6.5% for my istuation, but hey were telling me that before getting all the documents. Also I am not a permanent resident, so I am not sure if that also plays a small part
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ScottSchang, , Orange, CA
Sun Jul 13, 2008
I understand where you're coming from Tony. It's simply a matter of you not being aware of the loan program he was looking for. You got a great deal on a conforming 30 year fixed. Congratulations.

FHA loans under the temporary conforming loan limit increase are slightly higher and Anurag got a pretty good deal.

I obviously was upset you and I apologize.

Congrats again on buying your home!
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Tony Vega, Both Buyer And Seller, Irvine, CA
Sun Jul 13, 2008
With all due respect Porchlight Scott- Just beacuse you can't offer a rate doesn't mean that it does not exist. I put down 7% and the seller contributed 3%. My rate is 5.875 fixed for 30 years.

Your arrogance is appalling. Especially when I would think as a loan professional you would want to use this forum to showcase your knowledge, not your ignorance.

Keep trying to protect your inflated commssion dude. Not all loan brokers are greedy like you. My broker is a family member so yes I got a better deal than most.... but there is a big difference between 5.875% and 6.875%. If you can't handle the truth, go check out bankrate.com. 6.875% would be the HIGHEST rate of anyone on there right now. The only reason I can imagine that you would argue how great a 6.875% rate is to save face in front of the clients you have obviously been charging the same too.

You don't know me, but I don't appreciate being called a liar. What's even more sickening, is how you try to look like a hero by calling me a liar then try to get this guy to send you his docs so you can see if you can beat the rate. Then low and behold, you can like eveyone else can. sickening dude....sickening.

You are exactly why no one trusts real estate agents and mortgage people anymore.
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Anurag, Home Buyer, Hemet, CA
Sat Jul 12, 2008
Thanks. I think I have got the answers.
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ScottSchang, , Orange, CA
Sat Jul 12, 2008
The taxes are based on purchase price, not loan amount. I've got this conversation flagged so i'll keep an eye out if you've got any other questions. I still think you're fine.
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Anurag, Home Buyer, Hemet, CA
Sat Jul 12, 2008
My estimated close date is August 15th
Since the loan amount is 419K I think the tax should be okay

But I will anyway inquire my lender about the tax rate and the 6/9 months tax.

I probably missed two more things:
Interest for 5 days - 400.74 (80.1487 per day)
Hazard Insurance Premium - $800

Thanks for your advice.
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ScottSchang, , Orange, CA
Sat Jul 12, 2008
Check to see if your tax rate is only .92 - 1.15 is more common. Also, with taxes due in November most lenders are collecting 9 months and not 6. That's my experience. You're also missing the interim interest from the day you close to the first of the following month. What's your estimated close date?
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Anurag, Home Buyer, Hemet, CA
Sat Jul 12, 2008
2 Months Hazard Insurance Premium - $133.34
! month Mortgage Ins Premium Reserves - $178.37
6 month Taxes and Assessment Reserves - $2376.00

total - $3888.49
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ScottSchang, , Orange, CA
Sat Jul 12, 2008
The prepaids don't sound right. You should have tax impounds, insurance impounds (unless it's a condo) and interim interest. I don't want to sound like all the others that say "call me" for the answers, but if you want to shoot me over the GFE i would be happy to decipher it for you.

Many lenders are providing fee agreements that state exactly what the fees are - origination, rebate etc....A GFE does not have to be accurate and it many times is not. It just depends on the honesty of your lender.

According to Flagstar rates from Friday (wholesale rates) 6.625% would be par with no cost and no rebate on a loan amount over $362,790. It's possible that Luke works in Retail and can offer better rates.
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Anurag, Home Buyer, Hemet, CA
Sat Jul 12, 2008
I have got the GFE
Estimated Closing costs - $6767.44
Estimated Prepiad Items/reserves - $3888.49

Total Settlement Charges - $10,655.93
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ScottSchang, , Orange, CA
Sat Jul 12, 2008
No, it simply means that you have locked in "that day's" rates with that lender. You may change lenders and you will have an opportunity to lock your rate at that time.

Your lender should be willing to be completely transparent and show you what they are making on the loan and a breakdown of their costs. It is not unreasonable to ask the lender to make between 1 & 1.5% on a purchase loan. Whether they make it with origination or rebate would be something you can discuss.

Ask for the GFE and a detailed review of all costs. Ask your lender to see the rate lock.
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Anurag, Home Buyer, Hemet, CA
Sat Jul 12, 2008
If I lock a rate with a lender, does this mean I have to go with that lender or I can still shop around?
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Anurag, Home Buyer, Hemet, CA
Sat Jul 12, 2008
I will talk to my lender. Thanks for your answers.
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Luke Allison, , Asheville, NC
Sat Jul 12, 2008
I think part of that $10,000 is probably your up front MIP, which technically does not come out of your pocket at closing but is added to the loan amount (you'll pay it when you sell or refinance). Off the top of my head 6.875% is not horrible but I think you can get 6.375 for no extra cost. I would venture to say that 6.875% is going to pay your broker 2% on the back of the loan. If you are paying 1% in origination then your broker is going to make $13,000 off of your loan. I work directly for a bank and the most we can make off of an FHA loan is 3.5% so you are on the high side. Go tell your lender that a guy at Flagstar Bank offered you 6.375% and ask that he do the same. You are still in the driver's seat on this. If he does not comply, call me and I'll get you that rate.

Luke Allison
Flagstar Bank
828-777-8828
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ScottSchang, , Orange, CA
Fri Jul 11, 2008
Again, it sounds like you've made good decisions. Enjoy your new home!
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Anurag, Home Buyer, Hemet, CA
Fri Jul 11, 2008
Thanks. Total money I have to pay at closing is $15000 which includes the $2000 closing costs from my pcket as the seller is paying $8000 of closing costs, Looking at the market I also felt that I was getting a good deal ..thanks for confirming that. I haven't heard of anyone getting a rate of 5.875% for 30yr fixed FHA probably since Jan/Feb 2008.
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ScottSchang, , Orange, CA
Fri Jul 11, 2008
That question can not be accurately answered without knowing everything about the loan. There is a 1.5% PMI fee from FHA - if that is not being paid by the seller or financed into the loan that could contribute to your "closing costs".

Also, if you are putting 3% down on a $435,000 our loan amount falls under the temporary loan limit increase that is in effect until the end of this year. That loan amount will carry a higher rate. 6.875% sounds reasonable. I'm sure you could find a lender that would offer less but not significantly less.

I have to also respectfully challenge the answer by Tony Vega because as a lender I know that 5.875% is not available on a 30 year fixed without it being at a cost. Also, $2,000 is not close to being possible for "all closing costs". There is something not right at all with that scenario.

Closing costs on a purchase will also include your impound account - lenders are collecting 9 months of advanced property tax payments currently. Your tax impounds alone will be over $4,600. It sounds to me like you are getting a pretty good deal.

Unless you have reason to believe that your lender is not being transparent with you. Ask them to show you everything they are making on the loan. You may even want a second opinion on the GFE.

I honestly believe that tony vega is a plant from a mortgage company or he's being grossly misled by his loan officer because there are many things wrong with that answer on so many different levels.

Congratulations on your purchase Anurag - it sounds like you're in pretty good shape!
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Anurag, Home Buyer, Hemet, CA
Fri Jul 11, 2008
But how much was the downpayment?
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Tony Vega, Both Buyer And Seller, Irvine, CA
Fri Jul 11, 2008
I locked a very similar amount at 5.875% today with no points and just over $2,000 in closing costs. on a house in Fullerton. If you are not buying down the rate, a good chunk of that 10K is your mortage brokers commssion.

Let me know if you want my mortgage guy's phone number.
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