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Ok, so I planned on refinancing with the same person who originally gave me the loan for my house. She "claimed" she got me a 5% FHA loan and estimated 3-5K (depending on where we appraised) for closing. The next day she jumped us into a 5% Indiana loan. When all was said and done, our loan would be jumping from 218 to 228 almost 229. She didn't offer to let us pay our funding fee, which ended up being 2K more than originally quoted. We had the cash to put money down, but she worked it to roll it all into the laon and then claimed we were only paying $556 in closing costs. I looked at the almost 11K that got rolled into the loan as closing costs. We'd move from a 40 year fixed to a 30 year fixed and save $250 per month. I stopped the loan process as soon as I saw the GFE and loan packet. She is angry and said that she gave us a great deal, while I feel she tried to rip us off. I understand saving $250/month, but we'd be going upside down on our loan (appraised at 224 now owe almost 229) and owing almost 11K more than we do now. Am I right to think she's absolutely crazy? I have no problem making my current payments, I only wanted a 30 year and better interest rate than I currently have which is 6.8, but didn't feel owing so much more than the house is worth is wise in this market. Thanks for your input!
That makes no sense at all. Im doing loans at 5.5% on Indiana and FHA closed both today at that rate. And I paid every dime of their costs. They came in with a 225K on one loan and a 300K on the other loan. thats what they started. We closed and the 225K loan was a new loan at 225K and got 50 dollars back. The 300K loans closed at 300K and they got back 75 dollars. Closing another one tomorrow FHA, same thing but had to go 5.75 because its only a 110K loan but it will leave as a 110K loan. No cost to the borrower. The lender pays it all from the YSP. (yield spread premium) Sure I will only make 1000 on the loan but im not greedy. I would rather do 20 loans a month making 1000 each then 1 loan making 20K. Their was still plenty of money for me to pay all the title fees and lenders fees and still make money. They didnt pay a dime (got 50 bucks back) and their principal didnt move 1 penny. If you want a 5% that is doable. Maybe a 1% origination (no processing), 1000 in title and 785 in lenders. Thats what you should be looking at. The LO still makes 2400 bucks thats good enough. So yes she was screwing you, or as one said didnt know what she was doing. *** UPDATE *** No its not a good deal. The person below me mentioned that she had to take you Indiana because you didnt have enough equity for a FHA loan. Well the maximum loan on Indiana is 100% So that makes no sense. With FHA you can go 97.25% of the value of the home. Sure you might have to bring in 2-3K to close to loan at the 97.25%. But why dont you take a 6% rate. The lender might have 3 points to help pay the costs. So they pay all lenders fees, appraisal, title. So now you have an FHA loan at 6% its a high rate. But you had YSP to help you. Now you have a 6% rate but it didnt cost you a penny. You came in with 2000 but it lowered your principal balance to compensate that you can only have a 97.25% LTV. Now you can use it for Indiana as well but that makes no sense at this time. 4 months from now you can streamline your FHA mortgage (no credit qualifications, no income qualifications, and just drop the rate.) Still not costing you a penny to your principal. Your last loan will be the Indiana since there is no mortgage insurance. But if you do it first its .0.5% upfront mortgage insurance no monthly. If you streamline it its 3.5%. Thus its your last loan in a process. They loan she structured I dont even think is possible even with VA. I guess I dont understand why she would take you Indiana unless you already are. I have to assume that, otherwise it makes no sense. Dont look at this as a one closing deal. Might take you 2 or 3 to get where you want. But never raise your principal.
There was no way for her to do an FHA loan because you do not have enough equity so she switched you to a Indiana loan because Indiana will allow 100% ffinancing. If you do not want the funding fee($4,704 paid to VA) rolled into the loan just tell her that you want to pay it at closing. So lets look at the numbers. Appraised value is $224,000 with a balance of $218,000.00, your payoff will be higher due to interest. She is showing $5,560 in closing costs which sounds right given the 5% rate. Add the funding fee of $4,704(paid to VA) plus the actual closing costs of $5,560 to your payoff and you have your new loan. In my opinion you are getting a very good deal. Edit to response: It is very possible that she did structure the loan with you bringing money to close and the automated system would not approve the loan. It's also possible that she simply forgot that you wanted to pay down the loan. There are also some brokers who would absolutely recommend not investing liquid assets in a mortgage for several reasons the main ones being 1) Is the money working for you(earning) in a mortgage? 2) Can you access that money in the event of an emergency?
I agree with you. You definitely don't want to be upside down in a mortgage right now. If you don't trust your broker, move on. Refinancing can be a very complicated process, on that you want to be comfortable with and understand. If she's not helping you do that then I would find someone else. And as a sidenote that extra $11k she added to your loan beefed up her 1% fee by $110 and increased her loan out quota for the month. $11000 for closing costs is absurd. Sounds like a very shady deal and I think you were smart for not signing on the dotted line.
Hard to say if it was a rip off, depending on what you told her you wanted. If you wanted to lower your payment and get a fixed rate loan, (like most people want right now) then yes, she helped you. If you wanted to modify your loan to a lower rate without paying anything, then I guess she screwed you. Did you think you were going to re-do your loan for free? She made it so you dont even have to pay out of pocket, which is good for most people right now. Honestly, it was crazy that you were originally in a 40 year loan... I would have taken the loan she offered if you plan on owning the house for about 8+ years... it would pay off at that point. Hope that helped.
Good for you, you pulled the plug before it cost you more. Now, here is what I used to tell my clients: Be sure your current mortgage has no prepayment penalty. If there is no penalty, just make additional payments- one or two extra mortgage payments that you tell the lender is to be applied to principal ( that is very important) will save you a huge amount of money over the long haul, and can reduce your forty year mortgage by a decade or more ( depending on how long you make the extra payments). Since you had extra cash that you could have used to pay closing costs, use that to pay down your mortgage faster.
It doesn't sound like she really knows what she's doing. And she's just looking for the commission. I'd talk to another LO and see what they have to say.