Mortgage help

Ok, we are set to close in a few weeks. We are getting an fha loan. While speaking to a friend who is in the industry last night, I feel like we are being taken advantage of. Our broker never locked us into a rate, so we called him last night and was inquiring about the rate. He told us anywhere from 5%-5.25% which seems very high to us. Also, the closing costs are 25k. When we initially sat down with him he said the highest it would be is 5.25% we have excellent credit, putting down 30% and stable income. Our friend who is in the industry says this is outrageous and he could get us a 4.375 interest rate and 16k closing costs. I'm not sure what to do. Do I play hardball with our current broker and show him the GFE that we got from our broker friend? Advice pls!

Re: Mortgage help

why are you going FHA if you have 30% to put down with excellent credit?

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My DH owns his own business and a lot of it is cash, so his income on paper isnt a lot, so we were told we had no other options

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Re: Mortgage help

First- anyone can tell you they will get you a certain rate..but does that include points? Rates change everyday, sometimes multiple times a day. there are different factors to consider which determine rate. I'm not saying anything bad about your friend. Different banks can be a more competitive with their rates. There's so many different factors.. I'm assuming your friend knows it's an FHA?

Second- I'm not sure how your closing costs can be $9,000 less with your friend. The bank chanrges are the smallest portion of your closing costs. Mortgage tax and title insurance are mandated by the state, so you can change those. I'm not saying they will be $25K, because I don't know your situation. Did you get a Good Faith Estimate? Did your attorney review it? I'd speak with your attorney about the closing costs, he would have a better idea of them anyway.

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I think 4.3% sounds low. We have a mortgage partner who comes to our weekly sales meeting, and for weeks he's been telling us the rates are hovering in the high 4s/low 5s, so around 5 sounds right to me. Rates are going up (they've been artificially low for awhile).

As far as when to lock - - you usually shouldn't do it until you are sure that a closing date is imminent (within the next 30 days). If you lock for a longer period, you will pay, and if you don't close within the lock period and have to extend the rate, it will cost you. I am not a mortgage expert, but to my knowledge, the rates have remained relatively consistent for the past couple of months.

Closing costs can be up to 6% for a buyer, and I know that an FHA mortgage involves more upfront fees/costs than a conventional.

That being said - - I don't know enough about the details to comment on the vailidity of your friend's info, but I would definitely share it (both the rate and the estimated closing costs) with your current mortgage guy to see what he says. Perhaps he can explain it (or maybe your friend doesn't have all of the pertinent info).

Also, just curious: How did you choose your current mortgage broker? Why didn't you go with your friend (or your friend's company) to begin with?

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That sounds a little suspicious to me. We were told not that long ago that rates for an FHA were lower than conventional right now and are around 4.5% for under $417k and around 4.75% for above $417k...that was a few weeks ago and I know the rates have dropped a bit since then. I would DEFINITELY look for other rates. This is literally THOUSANDS of dollars you're talking about.

If you're not locked in, you can shop around. Try Continental Home Loans, I have a contact there if you're interested.

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Initially, the rate seems a little high but you mention of your husband's cash business makes the rate somewhat reasonable.

You have excellent credit but the low income might not qualify you for a traditional full documentation mortgatge. The loan you are getting might be a Stated Income/Stated Asset (SISA) loan. Such a loan does generally have a slightly higher rate.

So, your friend telling you he can get below 5% might be telling you the truth but w/ limited info.

As for the closing costs;
compare them to what was stated in the GFE that you got from the bank/broker. Keep in mind that the GFE is only an estimate, what matters is the HUD1.

The HUD1 will show you the actual costs.
Closing costs consist of fees that you give to various companies involved w/ the loan as well as fees that are basically your money anyway.

For ex. part of the closing costs are 1 yr of prepaid home owners insurance. This is your money anyway so it's nothing to worry about. There will also be some interest charges. What's important is parsing through the charges and separating what is being paid out and what are prepayments.

IMO, Banks can be royal PITA about the HUD1. I've seen cases where the borrower received the HUD1 as little as 24 hrs before closing and cases where they got the HUD1 the day of the closing. That is not enough time to go through the closing costs.

I would suggest hounding them for the HUD1 as soon as they can get it to you, this is usually w/in a day or 2 after final underwriting is approved.