Is this a good mortgage deal?

Asked by Ivonne, Indio, CA Sun Jan 2, 2011

We are getting a fha mortgage. Purchase price is $153,600, interest rate 5.25% discount points 2.0 and we need to come with $8,500 cash at the closing time. We leave in Riverside county Ca. Is this sound as a fair deal? should we keep shopping around for a better deal? we don't want to lower our fico score running our credit scores to many times. (we have 738 at this time) What is the best option? Thanks for any advice.

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25
, ,
Sun Jan 2, 2011
Roswell makes a good point though. We are very heavily regulated now, so should we have to put our NMLS number in our signature?
it sounded like a quote to me, and also one that they probably wouldn't have done without points in the past week or so, from what I see from my pricing engine. This is not to say that 5.25% with 2 points is a good deal, it certainly is not.
Ivonne, I would ask around for a referral from a friend or colleague who purchased a home recently, or read through answers on Trulia of loan officers from your area who sound like they are giving practical, sound advice. In other words, not telling you to look into a 5/1 ARM. Sure rates went up in the past month, but anyone who talks you into a 5/1 ARM thinking that they are going to return to the low 4's not giving you good advice. APR on an FHA loan can be a bit decieving, because the up-front MIP has to be included when calculating the APR, however those 2 points are going to make a huge difference, and you should definitely be able to get something below 5% without points. Seeing as I am not saying that I can give you this rate, because I am not licensed in CA, I don't have to give you an APR, this is just a suggestion, not an advertisement.
Robin Silverberg
NMLS #18065
1 vote
jjacobsDO, Landlord,
Wed Jan 12, 2011
Ivonne,
Our advice is to not go with an FHA loan. Rather consider what my staff has been advising clients, the "FIRST-TIME HOMEBUYER'S" loan program. Our staff has reported great testimonies in regard.
Below is an email we sent to various clients we are working with:

Notice to first time home Buyers serving the following states: Florida, Alabama, Texas, California, Arizona, New Mexico, and Colorado. BBVA-Compass has a new program available in these states.
DO NOT GO FHA or PLACE 10% DOWN !
Here are the highlights of this unmatched program that our agents have had success with closing deals and saving our clients a lot of money.
1. NO Mortgage Insurance
2. Only 5% down
3. 30 year fixed rate (5.00% estimated)
4. NO payment until the 6th month after closing. (Bank is taking the hit, and I confirmed this with a recent closing escrow doc)
5. NO origination fee, NO points, and NO junk fees !
6. single family home or townhome eligible
7. 680 credit score
** FHA or FNMA nor HPath can not touch this program. It is truly remarkable, and is certainly a way this bank (BBVA-Compass) has demonstrated giving back to the communities it serves.

The Sr. Mortgage Banker that my staff in these area's is using is Tom R. Callahan and you may reach him at E-mail tom.callahan@bbvacompass.com

Take full advantage of this program and save yourself a lot of money by not having the new FHA 1.00 MIP + .90% / monthly which is totally ridiculous! Yes, FHA has nearly doubled the monthly premium amount.

Good luck selling and shopping for the right home. TJ, PhD / Attorney
0 votes
David Pham, Agent, Garden Grove, CA
Wed Jan 12, 2011
For your information, California does have laws enforcing against HIGH COST loans. If a lender is actually making 3 points + 2 discount + other fees, that lender will be in lot of troubles.

David Pham
National Brokers - connecting people to homes
0 votes
Don Groff, Agent, Austin, TX
Tue Jan 11, 2011
With that credit score those 2 discount points are not going to buy the rate down. A par rate as of today with my lenders ( I am also a Texas Mortgage Broker) would be around 4.625%. Your lenders is making approximately 3 points on the rate of your loan plus the 2 discount points. This is not including any other fees or possible origination point.

Shop your loan around. If you were in Texas I would be able to offer you a rate of 4.75% with your credit scores. There would be no discount and one origination point. There are a lot of other factors involved but the rate would remain pretty much the same.

Good luck to you.

Don Groff
REALTOR | Mortgage Broker
Keller Williams Realty | 360 Lending Group
512.669.5599
listings@dongroff.com
0 votes
Dallas Texas, Agent, Dallas, TN
Tue Jan 11, 2011
If you want to shop DON'T provide other mortgage brokers your credit scores ASK them to talk "shop with you " then compare all on excel spread sheet.

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes
David Pham, Agent, Garden Grove, CA
Tue Jan 11, 2011
Ivonne,

FHA in general is a great program that opens doors to many home owners. However, it is a very common misconception that FHA is the only loan program available to first time home buyers or home buyers with low down payments (as low as 3.5% down). With your fico of 738, we do have CONVENTIONAL lender who allows as little as 3% down payment. Of course, the more down payment that you can put down, the better is your file.

Here are some pros if you can go the CONVENTIONAL route:
1. No upfront mortgage insurance (MIP) of 1% - saving you right up front
2. Lower monthly mortgage insurance (MI) - saving you every month
3. MI can be waived when accumulated 20% equity (either by pre-paid principle, reduction in principle, or increase in property value). In FHA, MI can only be waived when accumulated 22% equity AND after 5 years.

Good luck on your home purchase.

David Pham
National Brokers - connecting people to homes
0 votes
, ,
Mon Jan 3, 2011
This does not seem competitive. Let me know if I can help. I am a local lender in Palm Desert. We are a direct lender and offer competitive financing options.

Sean La Rue
760-835-5663
Web Reference:  http://www.SeanLaRue.com
0 votes
Kyle, , Scottsdale, AZ
Mon Jan 3, 2011
This is not a competitive deal, based on that FICO score you should be able to save about .5% off that rate and also not have to pay 2 discount points.

Unless there is some other circumstance not being explained here, YES, you can get a much better deal that this.
0 votes
, ,
Mon Jan 3, 2011
The only way I would really know if you're getting a good deal is to review your good faith estimate. Fax me at copy at (661) 255-3336 and I will give you a free consultation.

Is your interest rate locked? If not, there's a possibility rates may edge down in the next few days. Speak with your loan officer , review all closing cost, and ask questions so you are comfortable with everything. You should know exactly what you are paying for.

Good Luck.

Cheryl Garner, Mortgage Expert
Fairview Mortgage Capital, Inc.
Email: cheryl@cherylgarner.com
Web Reference:  http://www.cherylgarner.com
0 votes
Voices Member, , Red Wing, MN
Sun Jan 2, 2011
Hello Ivonne,
Bottom line as I see it as an answer to your question, without knowing all the particulars, yes that seems high especially when paying 2 discount points. It doesn't seem like they are using those discount points to pay your closing costs so this does not sound like a good deal.
As far as the credit score goes, you may have multiple MORTGAGE lenders pull your credit for the specific reason of shopping around for a mortgage. It is not supposed to affect your score if they are done within 30 days of each other. But I have seen some scores drop by 5 points. Make sure to ask your Mortgage Professional for your credit score, they can't actually give you the credit report itself unless they are certified as a credit analyst. Even though it seems most Loan Officers don't realize this and will give it to you anyways.
I would say to tell your current Mortgage Professional that you think its high and not such a great deal and ask for your scores and see what they do.
As far as the comment below about not giving your credit score to them until you are ready to sign paperwor, I HIGHLY recommend against that, if a Mortgage Professional is quoting you rates without knowing your credit scores, trade lines, and over all credit history then they are just pulling numbers out of their nether regions. A mortgage professional should be like a doctor, if you went to your doctor and just said my head hurts the doctor isnt going to just give you medicine, they are going to ask questions and diagnose you. The more and better questions they ask the better remedy you should get. Just like when getting a mortgage, especially in this day and age when one little thing can cause a borrower to be turned down. Better to have the best pre approval as possible before you pay for the inspection and the appraisal on that new home that you end up not being qualified for.
Sean Wait
0 votes
, ,
Sun Jan 2, 2011
Hi Terrence,

I can see your point, but in the spirit of a friendly discussion here, let me put it this way to see if it makes any sense. What do you think of the following hypothetical statement:

"We have been getting loans out at 3.675 on avg last couple months. Give us a call if you want (214) 555-1234 Billy"

Now, could it be said that this statement is soliciting calls based on a statements of a rate quoted? What if the average rate quoted was 2.675%? Does this still give the author a "Get out of Jail Free Card" from providing an APR just because the word "average" is used? I don't think so.

All the best,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite and fund FHA, 203k, VA, USDA, Jumbo, Conventional, loans to Canadians & other Foreign Nationals, on time. NMLS ID 263779 | AZ BK 0903725
Web Reference:  http://www.ezAZloan.com
0 votes
, ,
Sun Jan 2, 2011
Joyce, it is likely that in the past week there were quotes of 5.25% on conventional loans, but FHA rates were lower, and as all those of us who are mortgage professionals have stated, Ivonne should be able to get a rate under 5%, however as was mentioned, if the APR is 5.25%, that is possible, but I would have to enter everything into my system to see what the APR would be. No one can calculate that in their own head.
0 votes
Terrence Cha…, Home Owner, Allentown, PA
Sun Jan 2, 2011
Roswell,

I understand what you are saying and you are totally correct IF she quoted an interest rate. She did not, she said mentioned "AVERAGE" and did not state any particular rate.
0 votes
Joyce Maag R…, , Indio, CA
Sun Jan 2, 2011
I am not a mortgage lender but the rate is comparable for what I am told is available right now. Some people are able to get as low as 4.75% but I don't know the criteria for that rate.

If you are looking for a home in a 55+ gated community, I have 2 listing at the present time. Let me know if I can be of further assistance.

Joyce
714-401-3404
0 votes
Jacob Varghe…, , San Jose, CA
Sun Jan 2, 2011
5/1 ARM is very good for people who are planning to live for a short period of time. That is why the question " How many years you plan to live in the house? " has a lot of significance.

Jacob
NMLS - 327086
0 votes
, ,
Sun Jan 2, 2011
Hi Terrance,

Going by the NMLS study guide:

"If an ad states a rate of finance charge, it must state the rate as an "annual percentage rate," using that term or the abbreviation "APR." The primary lending rate that may be advertised is the APR. If a component of the finance charge is simple interest, the interest rate may be included, but the APR must be displayed more conspicuously. Therefore, an ad for mortgage credit may state 4.675% as the contract rate of interest together with a 5.25% APR (which reflects insurance, discounts, points, MIP and other charges, as well as interest)."

Overall , I think the new laws are good in that they help protect the borrower. I am hesitant to give exact interest rates quotes in this forum because of the APR disclosure requirement & the time involved to generate the APR when we are all so busy. Please note, all my clients receive their APR whenever I quote a rate.

Now, all this raises another question for Ivonne: is the 5.25% rate your actual interest rate, or your APR? If it's the APR, that changes everything.

All the best,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite and fund FHA, 203k, VA, USDA, Jumbo, Conventional, loans to Canadians & other Foreign Nationals, on time. NMLS ID 263779 | AZ BK 0903725
Web Reference:  http://www.ezAZloan.com
0 votes
Terrence Cha…, Home Owner, Allentown, PA
Sun Jan 2, 2011
Roswell, Nikki didn't quote any rate. Even though what she said may have been misleading, she said "... on avg...". And average is not a quote.
0 votes
Eroca Kay, Agent, Indio, CA
Sun Jan 2, 2011
Definitely check with another lender, and ask them for a copy of your credit report. Eroca Kay, Broker
0 votes
, ,
Sun Jan 2, 2011
@Nikki - I'm a little confused by your answer to Ivonne.

Are you quoting rates for an FHA loan from a couple of months ago? Isn't that a bit misleading in this increasing interest rate environment we are in, now? Also, since you are quoting the rate, where is your APR & NMLS ID number? We are now living in the wonderful world of compliance, compliance, compliance.
0 votes
Nikki A, Edw…, , Woodbridge, VA
Sun Jan 2, 2011
We have been getting loans out at 4.675 on avg last couple months. Give us a call if you want 910-875-0291 Nikki. A good deal or bad deal is what you see it as. There are better deals available.
0 votes
Terrence Cha…, Home Owner, Allentown, PA
Sun Jan 2, 2011
ARM? ARM? Really? ARMs are ONLY good if you will be "flipping" the home or if you are absolutely sure that you're getting that promotion. They are never to be used as a "perhaps the interest rates will get better" scenario. Interest rates won't get any lower and in fact they have been gradually rising.

Here's a government link on ARMs: http://www.federalreserve.gov/pubs/arms/arms_english.htm
0 votes
Jacob Varghe…, , San Jose, CA
Sun Jan 2, 2011
Have you considered a 5/1 ARM.

With interest rates improving you may be able to get a better deal. When you check for rates tell them your score and tell them there is not need to do a credit check at every place you shop..

The most important question is when do you have to close. Have your signed the purchase contract? How many years you plan to live in the house?

Jacob
NMLS - 327086
0 votes
, ,
Sun Jan 2, 2011
In my opinion, based on what you have disclosed, your costs are very high when looking at your discount fees plus your rate. You definitely need to shop around some more & don't even give your current lender a second chance. But now I have to ask you, how much did you put down as earnest money with your purchase contract?

Looks like you are bringing in $3,124 plus the amount of your earnest money as your closing costs, (how much are your closing costs?) provided you are putting 3.5% of your purchase price down ($5,376). Your lender may be paying some of your closing costs, but it doesn't look like they are paying that much if they are, unless they have high fees.

Don't worry about your score dropping by allowing another company to pull your credit. If your scores are at 738, you are safe to withstand addition credit pulls (within reason) without your score effecting your rate. Your scores only drop a couple of points per pull & they will go back up.

Please feel free to contact me directly if you have any further questions that I can help you with about any of this.

All the best,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite and fund FHA, 203k, VA, USDA, Jumbo, Conventional, loans to Canadians & other Foreign Nationals, on time.
Web Reference:  http://www.ezAZloan.com
0 votes
Dallas Texas, Agent, Dallas, TN
Sun Jan 2, 2011
You can shop the DEAL however NEVER NEVER give anyone your credit score TILL you are ready sign the paperwork with them.

Mortgage brokers can "talk shop with you" best compare apples to apples.

However what you stated does not present any concerns to me

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes
Terrence Cha…, Home Owner, Allentown, PA
Sun Jan 2, 2011
You can't find a local lender to get you less than 5% on the interest rate without points? Keep shopping around. Remember that you could as the seller for seller's assist of up to 6% towards closing costs. You can shop lenders within a 30 day window and not have it affect your score from what I recall.


Good luck.
0 votes
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