Anyone do Real Estate loans for a living?

[jrdavid68]

Specifically in the San Francisco Bay Area.

We are looking for a smaller house with a bigger garage - woo hoo!!

End result will be a smaller mortgage/smaller payment.

Credit scores near 800.

We are already hooked up with a realtor (friend).

We are pre-qualified with a lender, but I think the closing costs are ridiculous and with our credit scores/history, I think we should be able to get a better deal.

Maybe I'm just uninformed as to the process and fees, but I don't remember these costs when we bought our last house about five years ago.

Can anybody explain what I can expect to pay, percentage wise, when buying a house? As I understand it today, the first thing when making an offer is to include a "good faith" deposit of something like $10K. Most of the other fees etc. will be paid by the seller (commissions and all that) and the remaing fees for the buyer will be the closing costs on the loan etc.

Oh wise Pelicans - please educate me!

Thanks,

[EdT82SC]

I have a friend who does loans. He is really good about explaining everything you need to do, and why. He's not like all the others that tell you sign here, sign here, sign here.... The first time he did a loan for me took forever because he explained everything so I could understand it. I've used him five times now. When the interest rates kept going down we did a bunch of no fee loans. You end up with a higher interest rate, but zero closing costs. The next step from there is fees, but no points. The interest rate is lower, but you pay all the fees for appraisal, title, etc. that add up to a few thousand. Then you can pay points in addition to the fees to get your rate even lower.

Now some loan guys will add on extra points just to pad their profit on each loan. Many people don't shop around, and don't realize they aren't getting a good deal. If you are interested let me know, and I will PM my friends info to you.

[jrdavid68]

Originally posted by EdT82SC

Now some loan guys will add on extra points just to pad their profit on each loan. Many people don't shop around, and don't realize they aren't getting a good deal. If you are interested let me know, and I will PM my friends info to you.

Thanks Ed, I'm interested. I do feel like there might be some padding going on for this one, and with our credit scores I should be able to shop around and get a better deal.

Thanks,

[RANDY P]

Originally posted by jrdavid68
Specifically in the San Francisco Bay Area.

We are looking for a smaller house with a bigger garage - woo hoo!!

End result will be a smaller mortgage/smaller payment.

Credit scores near 800.

We are already hooked up with a realtor (friend).

We are pre-qualified with a lender, but I think the closing costs are ridiculous and with our credit scores/history, I think we should be able to get a better deal.

Maybe I'm just uninformed as to the process and fees, but I don't remember these costs when we bought our last house about five years ago.

Can anybody explain what I can expect to pay, percentage wise, when buying a house? As I understand it today, the first thing when making an offer is to include a "good faith" deposit of something like $10K. Most of the other fees etc. will be paid by the seller (commissions and all that) and the remaing fees for the buyer will be the closing costs on the loan etc.

Oh wise Pelicans - please educate me!

Thanks,

right here (branch manager for largest broker chain in WA.

In summary, there are going to be fixed costs with closing - title, escrow, setting up your taxes and insurance, etc.

Who pays the costs is typically determined at acceptance of offer. You can determine the costs of closing based off of purchase price - your LO should be able to figure it out and roll that into closing costs. They WILL be able to determine the final amount to close prior to such assuming that you have chosen a home.

Negotiating who pays closing fees

Negotiate the lowest price the seller is willing to accept, without any concessions, and then add back in to the purchase price whatever you do not want to pay out of pocket (example, total costs to close = $9k. You only can afford $5K after your down. so you add $4k to lowest negotiated price and make that your sale price on paper with seller contributing the $4k back to you in financing concessions)

If you talk in terms of what the seller is "supposed" to pay and buyer is "supposed" to pay it will become messy quick The seller will insist that the closing costs will be too high / wrong/ their experience you the buyer pays for it all, etc. etc So it's easier to have them contribute a fixed dollar amount towards the closing

- all the seller is concerned about is what they will 'net" on the sale.

In regards to closing costs, majority of it is required to make the loan legal and binding, the only real negotiatible factors (besides rate and term) are as follows:

Origination

Discount

Broker Fee

Processing fee -

Pretty much anything payable to the guy writing the loan.

the rest, title, escrow, your taxes and insurance are pretty much fixed costs that will be required with any loan - to make it legal and binding in the USA.

Depending on your loan program you choose, the actual rate vs credit scores, down payment, and so on will influence fees at the lender. Less down payment = higher rate, more upfront costs, and so on.

Hope this helps. Email me at rpizarro at lenderthree dot com if you need more specific help / advice.

[Flatbutt1]

II owmn my home and need to put $100K into repairs. I had an offer of 7.2% that I though a bit high but thay didn/have clear language on pre payment penalty or how quickly prepay would be posted to the principle. I'm 55 years old, under a little market pressure but certain to hold my job for 5 years. So I desire to pay this loan off quickly. What language should I lok for in the contract please?

TIA
Tom
TIA

sorry the evening meds are kicking in

[nestorjw]

If you like, PM me and I can give you some reccomendations of lenders I have experience with.
They may have the ability to be competitive, maybe not... at least it would be a second opinion.

Regards,
Jeff
(San Francisco)

[RANDY P]

Originally Posted by Flatbutt1

II owmn my home and need to put $100K into repairs. I had an offer of 7.2% that I though a bit high but thay didn/have clear language on pre payment penalty or how quickly prepay would be posted to the principle. I'm 55 years old, under a little market pressure but certain to hold my job for 5 years. So I desire to pay this loan off quickly. What language should I lok for in the contract please?

TIA
Tom
TIA

sorry the evening meds are kicking in

It's OK, i sometimes self-medicate.

as of the terms, I would assume that it's a 1st mortgage they are offering.

Concerning PPP - there are two types - 1st is a "soft" PPP - that means the prepay is active if you refinance the loan within a certain timeframe. Most lenders these days offer them with a 3 year PPP. If you sell the home, no PPP applies.

the other type which is the rougher one is a "Hard" PPP - this one no matter what, will be active if you pay off the loan through any means - whether it refi, or sale. Usually found on w.orse case loans - more marginal borrowers.

Now, usually with a PPP they have it as an addendum to the "Note" so there should be a subsection in the final document set that explains the exact terms of the PPP.

From my experience, the PPP is triggered if:

1) you pay off more than 20% of the principal in a given year - so, ON TOP of the regular payments, if you drop a lump sum and the balance decreases more than 20% within the last 12 mos. then they charge you 6 mos. worth of interest on 80% of the balance.

Translation again - if you pay more than 20% of the principal they tack on another 6 payments to the payoff. This will be in effect during the first 36 scheduled payments.

A few things about PPP - it is considered an interest charge so it's tax deductible. PPP isn't bad if you honestly have no way of paying more than 20% of the principal in the first 36 mos - most people don't. The lenders exchange a rate deduction for a PPP, that is real.

Ask how long the PPP is active, typically it's the first 36 payments. In practice the only way most borrowers trigger the PPP is if they win the lottery.

On the 2nd thing, the rate - that is widely variable on several factors (Duh) like credit, and loan to value (how much equity is remaining in the place after they give you the loan)

I can tell you this, the best rates are usually given to those with generally trouble free credit over the last 5 years, have 20% equity or more in the property after the loan is granted, can show all their income and prove they can afford it, and have typical properties - stick built homes or condos and without problems.

Now, how it all ties together I assume by reading this you are borrowing $100K on the place. That could be due to the fact they know it needs repairs.

If your intention is to pay the loan off within 5 years, I'd be highly hesitant to get charged more closing costs or paying "points' for a lower rate.

Say, the bank offers you $100K loan at 7.2% over 30 years with 2 points and 3rd party costs for a grand total of $105K financed. So-

$105K @ 7.2% over 30 years =$712.73

option #2 bank says they will charge you -0- points if you accept 7.625%-
no points so your amount borrowed goes down that much. Now it is $103K financed. So

$103k @ 7.625% over 30 years = $729.03

Total difference in loan amount = $2k

Total difference in payment = $16.30 monthly

time it takes to RECOUP the points paid = $2k / $16.30 = 122.7 months. Otherwise 10 years 3 months.

Obviously, if you plan on paying off the loan sooner, this scenario will COST you money if you pay points up front. Sometimes paying for the lower rate (if there are higher fees involved) doesn't make sense.

Now, whether or not it's a good loan - $100k @7.2% over 30 years = $678.79

@6.2% = $612.47

@5.5% = 567.79

worst case a $90 / difference in payments between best case (what it could be potentially) vs. worst case (what you are quoted now) over 30 years.

If you want to pay off in 5 years the payments look like this

7.2%= 1989.57

6.2%=$1942.59

5.5%=$1910.72

so, a $78 difference wost to best case. Is it enough to kill you? that's up to you. Remember that over 5 years that $78 turns into $4680.00. $4680 turns into 2 extra payments - that's it.

Don't beat yourself up over the rate if this is what you're seeing. it's not gonna kill you at this (lower) loan amount.

If you can find a lower rate without increasing your fees then go for it, but for a 5 year payoff don't even try to pay more closing costs than you have to. Insist on paying less bank fees if any if it's a short term deal.

By my calculations if your intent is to pay it off in 5 years, I'd be hesitant to allow a PPP - you're damn close to the 20% limit the 1st year out if you do a 30 year loan and start doing 5 year payoff payments so be careful. Opt for a shorter PPP or elimination if you can.

Good luck

rjp

[RANDY P]

ask the LO specifically if there's a PPP. make sure you ask the closing agent to identify any documents that say there's a PPP. SHe has to be truthful with you.

Look for a "Prepayment addendum rider" checkmarked on the notes - the docset.

rjp

[bt1211]

subscribed

[Charley B]

[QUOTE=RANDY P;3723455] 1) you pay off more than 20% of the principal in a given year - so, ON TOP of the regular payments, if you drop a lump sum and the balance decreases more than 20% within the last 12 mos. then they charge you 6 mos. worth of interest on 80% of the balance.

Translation again - if you pay more than 20% of the principal they tack on another 6 payments to the payoff. This will be in effect during the first 36 scheduled payments.[quote]



Actually, the 6 months interest on 80% of the balance is only charged if the whole balance is paid off. If you prepay, say 30% of the loan in a given 12 month period, they will charge 6 months interest just on the portion paid in excess of 20%, in this case, 10% of the balance, etc.