OK, looking for some feedback for others that have refi’d their mortgage in the recent past. We’re about to do it, and I’m looking at the lender’s ‘good faith estimate’ of costs. This is for a 30-year fixed conforming loan on a principal residence. If you’ve got yours handy, how does it compare?
Appraisal, $450
Credit Report, $10
Flood Cert, $6.50
Commitment Fee, $485 (what the helll is this??)
Messenger, $30
Tax Service, $74
Loan Processing, $300
Settlement/Closing/TC Messenger, $450 (and what the helll is THIS?)
Title Insurance, $500
Reconveyance, $100
Recording Fee, $80
Wire Fee, $7
I’m wondering if there isn’t $500-1000 in junk fees on this thing. Maybe I should try adding some of these fees to the next invoice I write one of my customers.
Replies
I'd ask if they would be willing to throw in a free tube of K-Y to help ease the pain. Looks pretty depressing. Another list of reason to not ever get a mortgage.
Obviously if I was independently wealthy I wouldn't.
That comment wasn't meant as a dig. I just can't understand half those figures either. I'm FAR from wealthy just had a few breaks in life and never had to deal with mortgages and seeing that list makes me feel even luckier.
They are not out of line, and are quite typical.
If your rating is looking sweet and you bark long and hard enough you might be able to get part of those costs removed.
be an animal
'Nemo me impune lacesset'No one will provoke me with impunity
When you said refinancing did you mean moving an existing mortgage to a new institute or increasing the principal amount?
I have done it both ways more times than I can remember and I could not remember a time when I have to pay anything close to what you mentioned.
May be it's a regional thing over here the new mortgagee is just happy enough to offer you a no-fee transfer of an existing mortgage.
No such luck here. I couldn't even make a no-fee deal if I were staying with the same lender.
The committment fee and loan processing fee are the fees that seem to vary from one lender to the next. The rest are standard fees and would be the approximately same from one lender to the next.The Settlement fee and title insurance are standard and are paid to the title company. You can check those fees by going to a local title company's website where they list their fees.Refinancing saves you money if your new interest rate is lower and providing you stay in the home long enough to overcome these fees you're describing. It takes what two or three years?.++++++++++++++++
-Do the thing you fear and the death of fear is certain-
The new rate will be slightly higher. We're taking cash out for a shop building. For better or worse we've had the best loan on the books since we bought the place, so any refi is going to be a step down. The upside is... I get a new shop.
I did some online shopping and see that there are quite a few places that offer lower costs and lower rates than the broker I've been talking to here. I feel a little iffy about it but I think I'm going to try a couple of them, see if I can't stay under 6% with no point and minimal closing costs.
When you say "we're taking cash out" it suggests you are being mislead by lender marketing. You're not taking cash out, you are borrowing money, pure and simple. In this kind of loan you are putting your house up as collateral in order to construct a shop building. Ponder the risk in that.
Why not borrow for the shop building as an entirely separate loan and not put your house at risk?
The interest payments are not deductible from your income as home mortgage interest, but they become business costs and still reduce your taxes, only in a different way. Your accountant can explain it in detail.
When you say broker do you mean a real estate broker or a loan broker? I'm skeptical of the value of loan brokers. You can call around to lots of banks and credit unions yourself to inquire about loans without paying a loan broker to do it for you.
In a transaction of this size, especially if you are unfamiliar with loan procedures, you should get advice from an accountant. If you don't have a regular one for your business it would be worth a couple hundred dollars to sit down with one for a few hours and get good advice.
I've been thru this several times with different houses. I have thoroughly investigated the possibility of a stand-alone second mortgage vs. a refi vs. a separate loan unsecured by the property, and don't need my accountant to advise me. The refi is cheapest, and yes, we can borrow $70,000 unsecured. I was merely asking if the fees I listed were in line with what other people have paid. Do you have any recent experience to comment from? The loan papers from all of our past mortgages are in document storage where I don't feel like digging them out.
My experience is somewhat recent. I've had mortgage loans in 1999, 2003, and 2004. The costs you mentioned are typical.
This probably doesn't apply but you can save money on Title Insurance if Title Insurance was purchased on the property within the past three years.You would need to stay with the same Title Company for the second transaction to get the discount.This is what investors do when they fix and flip a property. They purchase the home and then when they turn around and sell it a few months later they use that same Title Company and receive a discount of 40 to 60 percent..++++++++++++++++
-Do the thing you fear and the death of fear is certain-
Interesting point about the title insurance. I will check into that.
ALL: I considered a HELOC, and yes there are no fees, but they are variable rate and I do not want to do $70K on a variable rate right now. This is a long term situation, not something I can pay off in a year or anything like that. If I can get a full refi at 5-7/8% with no points and closing costs under $2K I think that makes the most sense of all the options. We had a HELOC on our last house.
And yes, it's an expensive building: story and a half, stick framed, ~1400 SF, cedar sided, steep metal roof, top of the line windows, some steel to keep the shop area clear-span, full bath, radiant slab, etc. etc. That's what I wanna build. If I skimp it will be by installing the insulation myself. I am fully aware I could put up a similar steel building for $15K. Our property is an old farmstead and the building I am replacing is a wooden barn. The location is very prominent to the road and I'm not putting something ugly out there. I might do a metal shack if I were putting it way back in the trees.
My wife and I will rent the lower level to our business for whatever amount the accountant condones. That's all the business expense there is, otherwise I just gotta pay for it.
I have a rule... never borrow money unless it makes you more money than it costs...
if you have a good relationship with your bank... and everyone should, then it should cost little to nothing to refinance... they shouldn't even need a reappraisal.... I just redid a few loans and total costs/fees were maybe $200 on one 500k loan so you know they can if they want to...
p
One of the things that I see throughout the thread is a difference in attitude from the banks. Ponytl and others talk about relationships with the banks, and in this metro area of Long Island, I couldn't get a meaningful relationship going with a bank if I brought everybody in the bank coffee for a year. One time, years ago, I had over $1,000,000 in escrow with my bank and they couldn't care less. "Rules are rules", they say, and they blame it on the underwriters and federal guidelines.
On the other hand, down in rural Virginia, my (New Yorker) cousin walks into the bank where he's never been before, sits with the branch manager and shoots the breeze for 15 minutes and finds out he's already approved for a home loan, like 95% loan to value ratio. That's the way it should be.
Here's hoping your experiences are good ones.
Don K.
EJG Homes Renovations - New Construction - Rentals
Traditional banks are the last place I would consider a home loan. Sure, for a great many people they are the only/best choice, but they only accommodate the more ideal borrower model. When the wife and I first went looking they couldn't help us at all. "Sorry, no loan for you." We fell into an extremely inordinary circumstance and it took a brokerage that had investors willing to take a chance.
After two years of +10APR and us handling the homeowners insurance and property taxes, the ARM loan lock-in was over and we refinanced--and in that time I cleaned up 100% of my previously bad credit. After that the traditional banks still were hands-off, but the online mortgage lenders were terrific. Got 5.625% APR on a standard 30-year mortgage with both on it.
Compared to the original closing, the refi closing was terrific, under 30-minutes, and everyone very professional. Now its been another three years and traditional lenders are still taking that 'hands off' on us. Why? Ask them, not me. I'll take my proven mortgage track record and the refi and forget them, including in recommendation.
As a realtor sometimes I meet buyers who already have their financing in place. At other times, such as when I host an open house, I may meet a prospective buyer and they have not yet gone to a lender.On one occasion I met someone who wanted to purchase a home but needed to "restructure" some debts. This person needed to consolidate his debts into one smaller payment so that he could then afford his mortgage payment. I sent him to the lender I customarily work with and the lender stated he could not make a loan of this type due to federal and state banking laws, regulations, and guidelines.I sent the buyer one block down the street to a nationwide mortgage company, wells fargo, and they were more than happy to do the loan just as the customer had wanted. As a Realtor I receive advertising materials from loan officers who are trying to build up their client base. The advertising says things like "I offer service with a smile", or "We care about you our customer", or something like this.I have contacted several of these loan officers hoping they are "hungry". Several times I've looked at the fees and loan costs and then called the loan officer and said "I'm sorry but your fees and loan costs are too high can you work with me a little". One loan officer with Bank of America told me the fees are non negotiable. She indicated as an employee she recently bought a house, got her loan through her bank, and had to pay all the fees just as everyone else does..++++++++++++++++
-Do the thing you fear and the death of fear is certain-
DonK,
We use a credit union that offers full services. They are moving towards being more commercial bank like but we still have a relationship with them and it has paid off in many ways.
On the other hand I have a good friend who works for Sovriegn/M&T/Wachovia or whoever owns the bank today. He's a commercial lending officer and I hear him talking all the time about how as one bank buys another and the company becomes bigger and bigger, the decisions get more and more centralized.
He tells me that as a manager at a smaller 10 branch bank, he had a ton of lattitude in decision making. With the big banks all decisions are centralized. The Deal fits nice and neatly in the little "Deal Box" or it's a no go. When the last bank he worked for was bought out by a bigger one, businesses that had been doing all of their banking there for litteraly decades and never missed a payment or caused a second of grief were suddenly no longer the "Desired Customer Base".
When my daughter was sick I needed to borrow $25K. I had already burned thru every dime of cash I could get my hands on, had $2500 in an IRA left and was self employed. I walked out of my Credit Union after 30 minutes with check in hand.
Robert-
You are so right. Credit unions are good alternatives.
I've had one personal account with a credit union for about 12 years, and am generally happy with them. I have considered moving other accounts, but they don't have a branch down in VA, where I am headed and I don't like to keep moving accounts around.
MrF. mentions Bank of America. I use them in VA and because they have a NY presence, I get in there as well. The difference between the staff in the two states is like night and day. The smaller local branch folks seem more willing to help.
Too bad the people that write all that marketing nonsense about how helpful they are, are not the same people that grant the loans and do the work.
Don K.
EJG Homes Renovations - New Construction - Rentals
Before my daughter was born and all the bills we incurred from her being so premature, we were planning to build a house on some land we owned.
Even though I was self employed and in the industry, only one local bank would lend me money in the form of a construction loan if it was my intention to build my own house.
Since I was not a customer of that bank I wanted to become one, to ease the process when the time came and hopefully build a relationship so that when I wanted to build a Spec house I would have a bank to turn to.
So, on a nice spring day I got a check from my credit union and took it up to this little three branch bank. I opened the account, handed over a check for $15K, and got a little passbook with an amount listed and an ink stamp to certify it. Just like my little passbook savings account when I was 6.
I damn near fell over right there in the lobby.
"Why not borrow for the shop building as an entirely separate loan and not put your house at risk?"
Unless this it is on separately property you can't do it. The first mortgage covers the legally described property and ALL improvements on it. A second mortgage would cover the same, but be subject to the first.
The only way that could separated would be to get the property divided, which in some cases would be a very major process. And then getting the existing mortgage company to accept that they have a claim on less property or to get a new mortage on the home and it's lot.
"The interest payments are not deductible from your income as home mortgage interest, but they become business costs and still reduce your taxes, only in a different way."
That is true, interest for business loans is deducted on sch C (or if corp on the corp income) and thus it reduces you profit and the amount of SE taxes (or equivalent SS taxes if W-2). That is a big hit.
IIRC home mortgage interest deduction is based on the what property is being mortgage.
Investement interest, and I think business interes is the same, is based on what the money is used for*.
So I think that this could be either way, but the money used for the business structure needs to be proportioned out. A CPA can verify this, but I think it can be done with one loan.
*I remember a case where someone with rental property borrowed on that property to build a new personal residence. He was not allowed a mortage interest deduction as the loan was secured by his residence. He was not allowed an investment load deduction as the money was not used for investment purposes.
As to the orginal question I found out that at least some case mortgage brokers are paid on a commission based on the rate and fees that they can generate. So they first quotes might not be the best that they can provide.
I have done it both ways more times than I can remember and I could not remember a time when I have to pay anything close to what you mentioned.
May be it's a regional thing over here the new mortgagee is just happy enough to offer you a no-fee transfer of an existing mortgage.
It's normal in the US. Keep in mind a major difference between US and Canadian mortgages. In the US the loan is often for 15 years or 30 years, whereas in Canada a 5 year loan is at the long range end of things.
I used to wonder if Canadian lenders charged the $2,000 or so that is typical to re-finance here. Now I know that they don't.
In the US the loan is often for 15 years or 30 years, whereas in Canada a 5 year loan is at the long range end of things.
You mean in the US the term is usually 15-30 years? That's a long term commitment. Our norm here is 6 months to 5 years with amortization range from 15-25 years. Can't imagine having to pay $2000 every 6 months for renewal.
One difference though the renewal fee is tacked onto the new mortgage which makes the fee tax deductible. While here in Canada it comes out from our after tax dollars and we are too cheap to part with any of that.
Edited 12/28/2005 7:30 pm ET by TomC
Yes, it is a 15 - 30 year commitment by the lender. At either a fixed or variable interest rate, as selected at the outset.
I used to live in Toronto. I remember Toronto's housing market as sometimes heating up like a speculative commodities market and then dropping. At that point quite a few individuals with those 2 to 5 year loans found themselves unable to get a renewal or whatever it is on their mortgages because their equity had fallen below the underwriting minimum.
Ought not to have left TO, but don't think I could reestablish myself there and and make it financially now.
I remember Toronto's housing market as sometimes heating up like a speculative commodities market and then dropping. At that point quite a few individuals with those 2 to 5 year loans found themselves unable to get a renewal or whatever it is on their mortgages because their equity had fallen below the underwriting minimum.
As far as I can remember it only happened once and I'm not that young. That's the housing bubble, of course in retrospect, in '88, '89 when even the homeless were buying pre-sell condos hoping to flip them for profit. One developer would take you in a helicopter to get an aerial view of your prospective estate while others were scooping up downtown property because they were a bargain compared to NYC and Toronto was in their view going to reach the status of a world class city in the very near future.
Then over the next couple of years residential real estate dropped 25-50% depending on the type of housing and where you were. As you said when time came for renewal there was negative equity in the property. Some people walked and there were power of sales everywhere.
The market has been building up for the past few years and again I am hearing people saying Toronto is going to become a world class city. I don't know, may be this time is different.
Tom,
I've read about that housing bubble of 88,89 and the downside afterwards. I left Toronto in 1984, and I think I'd witnessed TO's price spiking and subsequent declines at least twice. Those 2 times though were nothing like the 1988-89 spiral. I went to TO in 1971 for university.
The market has been building up for the past few years
Understatement, at least from the perspective of a guy who is not used to such a volatile market. That's one of the reasons that I doubt I could re-establish myself in TO now. I like the "city" neighborhoods, and these seem to be full of houses that have been partioned into multiple rentals. That would help cover the mortgage. Yet the prices have escalated to the point where the rental income does not contribute so much to the payments.
I went to TO in 1971 for university.
What? Same here. U of T? So we are of the same vintage.
I like the "city" neighborhoods, and these seem to be full of houses that have been partioned into multiple rentals.
There are lots of those alright but with rent control a lot of those are not being upkept. Then there are the individually owned condo rentals which a lot of small investors are getting into. The rental market has been softening for almost a year now and I heard of people holding some close to $1M penthouses in the burbs worrying. For any new money the place to go is probably the stock market although you have to be very careful with the pickings.
Yet the prices have escalated to the point where the rental income does not contribute so much to the payments.
That's my arguing point in '88, '89 but the market had gone up so fast and so much that very body, me included, thought somehow that time was different.
So here is what I found out: history always repeats itself but every time there is enough difference to make suckers out of most of us.
Yes, U of T. St Michael's College. Later a grad degree. Lived at different times to the East, West, and North of the school. Liked the Annex the best.
I did not know that rent controls applied to the partioned houses.
Scarborough College '74, DDS '79.
Wow, talking about 6 degrees of separation.
Yeah, rent control applies to pretty well everything. Used to be more strict but then the market softens and the free market controls itself.
In the US most mortgages are written for 30 years, but some are shorter, as short as 15 years. Interest, but not principal of course, is tax deductible from federal taxes and from income taxes in some states. I'm not sure what you mean by a 6 month renewal; the mortgages are done once and there are only one-time fees when the loan is made.
No fees are deductible, only interest. Points (an up front fee paid to buy a lower interest rate) are sometimes deductible and sometimes not depending on specific tax rules.
If interest rates drop considerably from when the loan was made people may refinance. A refinance is a totally new loan, so all the fees and paperwork are as they would be for any new loan. Banks won't just "refinance" without writing a new loan because that would be just dropping the interest rate when the customer wished. Customers who wish the rate to drop without paying any fees would take out a variable rate loan.
Lots of people get suckered in to low- or no-closing-cost mortgages, not realizing that what the banks are doing (and clearly disclosing in the contract) is that the closing costs are rolled into the amount borrowed. This is a bad deal because then people are paying 15 to 30 years of interest on closing costs.
Interest, but not principal of course, is tax deductible from federal taxes and from income taxes in some states.
What I meant was since the refinancing fee is blended into the principal, then you can deduct the interest on that fees as well which over the term of the mortgage can easily be double that of the original fees.
I'm not sure what you mean by a 6 month renewal; the mortgages are done once and there are only one-time fees when the loan is made.
I see that our mortgage culture is so different so I'd better do a little explanation and I'll ask a few questions as well.
Typically we do our mortgage in 6 month to 5 year terms but the payment is based on 25 year amortization. Of course for any term you can choose closed, open or variable. So if you get a 6 month you'll have to renew it after 6 months. Usually you'll renew it with the same mortgagee and they used to charge a renewal fee of something like $100. As the market place became more competitive they would waive the renewal fee. So you can keep rolling over every six months. Or if you find a better rate somewhere you either ask your existing lender to match or you can move you mortgage to the new lender. Any fees involved the new lender would usually absorb because they want your business.
If interest rates drop considerably from when the loan was made people may refinance. A refinance is a totally new loan, so all the fees and paperwork are as they would be for any new loan.
What I just mentioned was renewal, that's at the end of the term of the loan. When interest rate drops and your loan still has a ways to go, if it is a variable rate loan then you can lock into a fixed rate. If it is a fixed rate then you negotiate with the lender for a new loan with a term longer than whatever is left and usually the penalty is the larger of three month interest or the interest rate differential till the end of the existing loan. I have done it at least three times as far as I can remember even after the penalty I saved enough to warrant the refinance. Again, doing all that there is no fees involved. Or you can pay off your existing loan and move it to a new lender that gives you a better deal. Depending on how much longer you have remaining in the term your existing lender can refuse to let you off the hook or if they allow you'll have to pay penalty as outlined above. Yes, in that case it would be a new loan either you stay or switch.
Lots of people get suckered in to low- or no-closing-cost mortgages, not realizing that what the banks are doing (and clearly disclosing in the contract) is that the closing costs are rolled into the amount borrowed. This is a bad deal because then people are paying 15 to 30 years of interest on closing costs.
Don't people notice the difference in the principal then? Have to be pretty dumb not to notice it.
The question I have is if you are getting a fixed rate loan, is the fixed rate good for a number of years and then renewed at the current rate at the end of the fixed rate period? Or is the rate fixed for the whole term say 30 years? If so and if interest rate drops and you want to refinance, I can't imagine what kind of penalty you have to pay since the lender has already committed the funds for 30 years.
Thank you for the detailed explanation. The cultures do indeed to be quite different.
To answer your question, yes, when a borrower obtains a fixed rate mortgage the rate is the same for the life of the mortgage. If you refinance you don't pay a penalty, you simply take out another loan. Some people would consider that a penalty, though it is not, it's just a new loan.
Many years ago, like in the 1950s, banks wrote into their contracts a penalty for prepayment. Under such an arrangement, if a borrower wanted to pay off the loan any earlier than the payment schedule, he paid fees to the bank. In the last couple of decades it is illegal in most (probably all, by now) states for lenders to do that. A borrower has the right to pay off any home mortgage faster than the original terms without being charged any penalties. This includes not being charged the interest that no longer accrued, in other words, lenders may only charge interest on the actual amount and time the money was out.
For example, I now have a fixed rate 15 year mortgage at 4½%. That rate is good for me for the entire 15 year life of the loan. Since rates go that low only once in a lifetime, I will not refinance a good deal like this. In 1985 I had a loan at 12.125%. When rates came down to around 8% I took out a new loan with another financial institution and paid off the original loan.
So essentially what you are saying is all the mortgages in the US are open mortgages, in that case I can see why the lenders want to charge you as much as they can because in every case they are losing out on interest rate.
One thing I don't understand then, when they make the loan in the first place they commit the loan for 30 years so they are in the hole for the interest payment where they get their money from. So if rate drops do they refinance that or do they just charge the consumers enough interest to cover their ends?
David,
I just closed a home equity loan so that I can put in some new windows and redo the kitchen.
it was huge difference between when I bought the house this loan. I've owned it for ten years. The first mortgage was thru our credit union. They held the loan for five years and then sold it.
The COmpany that wrote the Home Equity loan was real just a brokerage. They'll never see one payment from the loan. They arranged the loan, did all the paperwork, and closed it, but the actual lien holder is someone else.
There are a ton of companies out there that operate this way and because of it, the loan origination fees can be pretty high since thats the bulk of thier income.
Just out of curiosity, is this a bank or credit union you do business with?
A side note. In my area people have developed unrealistic expectations of realestate value. Becuase of this, some of them have gotten thier feelings hurt come appraisal time. They've accused the appraisers of not knowing their jobs and stopped payment on the check. So now, You have to pay by cash or certified funds for the appraisal. I thought the first guy was full of $*** but three other appraisers said the same thing.
Yes, David, you are seeing correctly.
Appraisal fee is high. Typically here in NY (up to last year) was $350.
Commitment fee? Supposedly, a fee for them to agree to loan you the money. A/K/A an artificial, meaningless fee designed to improve revenue - Theirs. Tell them no.
Messenger $30? More BS. For what document? Tell them to mail or fax it.
Loan processing $300? That's their cost of processing the paperwork. Why do you have to pay them to do their job? Do you charge a "blueprint processing fee"?
Settlement/Closing... could be the lawyer, could be who knows? Settlement is when you are entitled to get the money, sort of. You are paying everyone to come to this meeting. Semi-legit.
Reconveyance? Who is reconveying to whom? For what?
Wire fee? (These piss me off. They wait until the last minute to send the money, then charge you for the "service' of sending the money for the loan.)
Your impression is right. The lenders today make the money by packaging loans then selling them to Fannie Mae and Freddie Mac - the feds. they make a big part of their income from artifical fees. that being said, ask which ones they will withdraw or lower, and see what happens. There was a big (federal) stink recently about lenders making profit from the fees, like appraisals. If you don't ask, you won't get.
They will tell you this is only a good faith "ESTIMATE". You know what "estimate " means, right?
Don K.
EJG Homes Renoations - New Construction - Rentals
Appraisal has gotten more expensive due to the shifting of some liability from lender to appraiser. It happened shortly after the S&L scandal 15 years or so ago. I know several appraisers. It's not that great a job and it takes years to get fully certified."Why do you have to pay them to do their job?" Don, don't people pay you to do your job? (Just joking!) Actually, when you deal with a mortgage broker their only pay is from processing and handling since they don't do anything else. The processing fee goes to cover the overhead and time of the person who handles the details needed by the loan originator (loan underwriter). In most of the States, "settlement" refers to the process of handling the "closing" of the loan. Usually it is a title company here in Colorado, but in many places there are companies that don't provide title searches or title insurance, but which only handle the closing. Wire fee is charged since you pay interest from the moment they ship out the bucks. If they mailed them instead of wiring the money they would then be charging you for an extra five or more days of interest plus the cost of getting and shipping a certified check. The wire fee saves you money.Don, having been a contractor and then a real estate broker and now only sort of dabbling in both, I can tell you that your seeming hostility toward the lenders (and associated professions) is no more warranted than the same sort of talk about contractors. Such talk almost always comes from a real lack of understanding.That said, I've had very few positive experiences with mortgage brokers.Life and suffering are inseparable.
Hasbeen-
A couple days ago, you posted the following comment:
"Don, having been a contractor and then a real estate broker and now only sort of dabbling in both, I can tell you that your seeming hostility toward the lenders (and associated professions) is no more warranted than the same sort of talk about contractors. Such talk almost always comes from a real lack of understanding."
I didn't respond because it was getting near Christmas, didn't feel like getting into it. Now the holiday is over.
As far as my "seeming hostility", I was responding to David's inquiry on fees. I gave him my opinion, nothing less or more. As far as my lack of understanding, I've practiced law since 1984 and have handled many, many closings. For at least 10 years two of my closest friends and coworkers were bank attorneys who handled tons of real estate work. My father was a licensed real estate broker for about 35 years, and I presently own about ten properties. I've had mortgages through both banks and private lenders in the past. I'll venture a guess that my understanding of the lending business is pretty darn good.
I don't understand why you criticize my comment when you closed with, "I've had very few positive experiences with mortgage brokers". I instinctively distrust mortgage brokers, and many real estate brokers too. I find they will say close to anything to get you to do what they want, truthful or not. I can't tell you how many times fees have come up at the closing that were not justified, rates went up sometimes close to 2 points and these things had to be taken care of at the closing, or after. I can tell you that despite the federal law that says you are entitled to closing figures 72 hours before the closing, I have NEVER gotten them more than 24 hours early. One thing that I truly dislike is the practice of using points as a way of collecting fees. Why, because the mortgage brokers make it seem like they are working for little or nothing, and then you find out that they walk away with 2, 3, 4 points for what they have done. I've seen people pay as much as 12-18 points. Charge the fee and explain what it is. Tell the client what they are paying, so they can compare apples to apples, don't use a bunch of misleading garbage "fees" to cover up what is being made.
Is lying cheating and thievery universal in the finance and brokerage business? Of course not. But I treat every broker with skepticism until proven otherwise, and I have not used a mortgage broker since 1986.
Don K.
EJG Homes Renovations - New Construction - Rentals
don't commit until you try di tech mortgage / may have changed name been bought out but they are ones on TV who advertise whole shooting match for $395 or $400 - all a little vague to me now cuz we have it on autopay and such but all the competitors are well aware of their presence in the lending world
our appraisal failed w/ ditech because I had opened / unfinished walls but another appraiser came in and worked it out w/ lender ( all the while thinking they were still competing w/ ditech ) and completed the loan
that $395 / 400 fee was very clear w/ no hidden fee gibberish
think ditech may be owned by General Motors ( or the like )
Sorry if spoke to strongly for you. Please understand that I've seen a string of misconceptions and misunderstandings about the topics of real estate and lending both in clients and on this forum. Obviously, I over generalized those experiences when I posted to you. Sounds like our opinions on the matter are not far apart.I said, "Such talk almost always comes from a real lack of understanding." I'll stand by that. You just happen to fall outside the "almost always".Since dealing with mortgage brokers is a simple requirement of business for us, we try to encourage people to maintain a positive attitude toward them and to ask questions about all fees before deciding the fee is bogus. Not all documents can be faxed or mailed for all parties of the deal to remain in compliance with the date schedule on the contract they are bound by, but you already know that, right?Despite my preference to avoid mortgage brokers, we find that many people around our area can't qualify without going to one. A complaint we have which you may not have run into is that the lower the price, the more the gouge. Since our market regularly sees old home sales in the $30k to $50k range, the mortgage brokers don't even want to talk to the folks who could benefit the most from a 90% loan to get going with their first home. The nature of our market is that we are often dealing with clients and customers who live all over the States and sometimes out of the country. I used to be surprised to find that what is normal here is often entirely different elsewhere i.e. we see attorneys involved in very few real estate sales, we see sales of land with no legal access and we still see land sales of parcels that HAVE NEVER been surveyed! Since we deal with Texans on a regular basis (Texas is only two flat dry hot hours away from our mountains) and since surveys are required for every sale in Texas (or so we are told), some of our clients jump to some drastic conclusions when the topic of local practices regarding surveys come up in their transactions. Due to my current awareness of these differences in practices and prices, when I saw your comment about the cost of appraisal my first thought was, "unless Don lives nearby, how could he be familiar with appraisal costs in Puget Sound?" Our exchange is one of the things I love about this forum. David asks a question, gets varying responses, who-knows-how-many people read the responses and all of us get to learn something. Some loan broker will probably come along now and decide to set you and I straight about all this!JoeLife and suffering are inseparable.
There's nothing wrong with shopping around for the best deal on a loan.
Several months ago I did this over the phone. I called 4-5 banks and if I remember correctly would simply give them my name, address, social, and the loan terms (I was looking at $40,000 loan to buy an investment house, I was trying for no money down, 30 year conventional fixed rate loan and I was trying to find the best deal with little money down and the best interest rate).Banks then fax you a good faith estimate and you have your quote in writing.I got figures for a loan to purchase the home. Since it was an investment home and I would not be living there I was unable to get 100% financing. I think 90% was the best I found.I tried another angle. I told the bank upfront I would buy the house and pay cash, do some work on it and increase the value of the home. In other words I would pay 30 K for it and after I did some work, two months later, I would come to the bank and, if I had done my homework correctly, the home would appraise for $40 K and I would take out a "refinance" loan on the home even though I had only owned the home for two months.90% of 40 K is $36,000 and I thought this would get me in with a zero money down loan and I don't remember all the details, but I could not find a bank that would go along with this. My credit score is above 700.Anyway, getting back to the original post, what about just spending an afternoon calling several lenders and letting them fax you a GFI and go from there? Around here there are no fees to apply for a loan.,++++++++++++++++
-Do the thing you fear and the death of fear is certain-
letting them fax you a GFI
There are faxing you an outlet??? Does that come with extension cords? Is that safe? Doesn't the Post Office regulate that? Didn't Enron get in trouble for power swapping? If they fax it to you how can they reset it?
LOL
MrF-
Around here in NY, you don't get that kind of cooperation from the lenders. Nobody gets a Good Faith Estimate until they get paid the fee for the credit check ($35) and maybe an application fee ($200 and up)
I don't know that's a good idea even if you can get lenders to do it. Every inquiry on your report is a negative and if you do a bunch, they'll show up for everyone to know where you've been, etc.
Shopping for rates on the phone is a different story.
Don K.
EJG Homes Renovations - New Construction - Rentals
Those are good points Don. I bought the house I live in 2 and 1/2 years ago. I shopped around and compared interest rates and closing costs and eventually got a loan that I was happy with.If I remember correctly, the loan with the highest fees & loan costs was about $1,000 higher than the lowest.How does one go about finding this out without shopping around?The things I look at that vary from one lender to the next are things like:*Application fee
*Loan Origination Fee
*Underwriting fee
*Processing fee
*Committment feeI don't mind paying the application fee if it goes toward the appraisal. It seems like the loan origination fee is common with all lenders and it's typically 1% of the amount of the loan and I don't mind paying it.That's about where I draw the line. I think in my example above where one loan had costs totally about 1,000 higher than the lowest, it was due to additional fees for underwriting, processing, committment and these types of fees some might call junk fees.Several months ago I contacted 4-5 lenders about purchasing an investment home and I noticed each company required me to pay a 2% loan discount fee. I could not find a lender that would not charge me these fees.I don't intend to offend anyone with my next comment but I think these fees are why banks today are making so much money. We pay significant fees even on a low priced home. A home loan is a secured loan and if the house goes through foreclosure and back to the bank they probably lose very little money. They make a lot in penalty fees and even prepayment penalty fees in some situations. I wonder how much money comes in each year in PMI private mortgage insurance premiums which many are paying.Some will say "don't do business with the banks if you feel that way".
Believe me, that is what I'm trying to do right now. I haven't gotten it worked out yet but I'm trying. If I could find an individual who would loan me $, I would pay them a fair or good interest rate, I would pay no fees, and it would work for both of us. The private lender would have a secured loan, he would be first in line if something went wrong, and it could be a reall win-win situation..
++++++++++++++++
-Do the thing you fear and the death of fear is certain-
MrF-
I don't pretend to have all the answers. If I did, I would be writing books and sleeping in a hammock in Hawaii.
I can tell you that the fees are major moneymakers for the banks and lenders. Part of it is that the feds now buy the bulk of the loans thru Fannie Mae and Freddie Mac. So, the days when banks made money on the loans themselves are gone. you aren't going to do business with most banks long after the closing. they take your loan and "package" it with some others, then sell the package for a discounted present value, then take that money and go back and loan it again. Where do the profits come from? The fees. They can call them whatever they want, they are all income. Some banks charge more up front (application and processing fees), and some charge fees later (commitment fees). The fees are profit centers, the sold mortgages are virtually no risk. The ones that they keep, they require 20% down or PMI. Little risk there either.
Want to save money? Do what you did - ask in advance, and in my opinion, get the answer in writing.
I've had mixed results with private lenders. My first house was financed in part through a family "loan" that never showed up on my balance sheet. My first office was financed partly through a personal note, that was I believe three years, and paid off in less than two. But that lender lost money on another note he did with one of his other friends because it was unsecured. He did one thru me for one of my clients, but he was protected because there was a mortgage. So, yes, it can work sometimes. I also know I tried to get money many years ago thru a "Pennysaver" ad - a small local newspaper. My logic was identical to yours where everyone wins, but I had no takers at all.
Good luck with the search.
Don K.
EJG Homes Renovations - New Construction - Rentals
If I could find an individual who would loan me $, I would pay them a fair or good interest rate, I would pay no fees, and it would work for both of us.
That's not hard to find MrFixit. The most common indifidual that loan $'s is the seller/owner. Here in MI it's called a Land Contract. I've bought several properties using a land contract: no fees, no credit check, no hassles!
blue
Blue -
How did I know you were going to chime in? LOL. I had a line in my post saying, something along the lines of, Wait until Blue gets here, he'll tell you how...then took it out.
Hope you had a Merry Christmas, guy.
Don K.
EJG Homes Renovations - New Construction - Rentals
Don, maybe I'm the only guy broke enough that needs to use other people's money and have found ways to do it.
blue
It is my understanding that multiple inquiries in a short (1-2 week) period of time into your credit report as would be done by several lenders as you are shopping for a loan do not negatively affect your credit score. Someone chime in if I'm wrong.My wife and I have an interesting scenario. We lived next door to each other before we got married. Now she owns the house we live in and I rent mine out. We're getting ready to build a new 3 car shared garage across the lot line with an easement drive.She's owned her house since 2000 and has quite a bit of paper equity in her home because of property tax assessed value increases over the year. I've owned mine only since 2004 and used a significant HELOC on top the 80% mortgage to to come up with the 20% down payment.Since we're both building garages at the same time, and we've always kept the rental house and the live-in house finances separate, we're getting two loans to finance the project.She first went to her mortgage lender, a well established local business, whom she's had a relationship with since 2000. They scheduled a meeting, went over some options, and she settled on a 2nd mortgage at 8% for 20 years. She closed about a week later and recieved her check in the mail about 10 business days after the first phone call. Piece of cake. (Her 1st mortgage is I think at 5.5%) By the way, both of our credit scores are very high and both about the same, so that's not the issue.For my house, I first called the lender who holds my mortgage and my HELOC. They offered me a new HELOC with money to close the original one and the additional improvement money and offered quick (5 day) closing and no required appraisal... at a variable rate that today equals 10.65 percent!So I called several (4) other lenders through online loan comparison services and the requirements for each are ALL different. Some want a full appraisal (prepaid), some will do what's called an "online appraisal" which I assume is just checking some nearby comps, others will do a "stated value" type appraisal. It's all real shady, to say the least.Here's the deal:
I got 4 total offers for the $28,400 that I needed to close my HELOC and do all of the work to the house.
1. Countrywide: 10.65% variable with a $500 prepay penalty. (I plan to sell the house shortly after finishing the work)
2. Lender A: 8.65% variable with $500 prepay.
3. Lender B: 8.25% variable with an estimated prepay of $1500! (Read the fine print...)
4. Lender C: 7.25% variable with a 4.99% 3 month introductory rate, $300 prepay penalty and no closing costs.Needless to say I went with Lender C.I worked out a spreadsheet where I could plug all of the information for all of these loans in and it turns out that if I sell the house in 12 months, the cost difference between the Countrywide Loan and the Lender C loan is something like $1,200 after figuring in interest paid and how that affects the paydown on the principal (and hence, equity).In conclusion all I'd say, is keep shopping and BE SURE TO READ THE FINE PRINT. I almost closed on the Lender B loan because they were willing to close in 2-3 days, until I saw their prepay penalty was so high.Good luck to all.
Rasher -
I admire the homework. That's half the battle most of the time. Reading the fine print, when they give it to you, is probably the other half.
My only question is why you would build the garage across the property lines? It reminds me of my fifth grade teacher and her husband who bought tow houses next door to each other, then consolidated them into one big one. Guess what? Yeah, some years later, they had to be separated again...
The title to that property is going to be around for another 100 or 200 years or so, and that easement is always going to show up. As much as you guy love each other, I would still put two separate garages up. But that's me.
Don K.
EJG Homes Renovations - New Construction - Rentals
I don't suppose I made myself clear about the nature of the garage project. There is an existing (dangerously delapitated) detached 2-car garage built abutting both the rear and side property lines at the wifey's house. There is an existing 8' wide driveway running smack up the middle of the side property line. The deeds for both properties lists a 4' easement for this shared driveway. It's alway been a bit unfair because the wifey's house has a garage and a large pad in the backyard where my house has neither a garage nor a slab. We intend to tear down the existing and build a 2-car on her lot and a 1-car on my lot. Both abutting the common side property line, hence they will be "touching". The shared wall is a floor-to-ceiling fire barrier. This is allowable in the local zoning ordinance and is not uncommon around here. What this gives us is a much more equitable situation where both houses share the common drive and both houses have off-street parking. Also note, that these are narrow urban lots and so to even be able to provided off-street, especially in this neighborhood, is a very tangible bonus.The two houses are nearly identical in design and elevation and so the garage is designed and detailed in a manner that is complimentary to the houses. It is also detailed with trim down the split-line to allow future homeowners to "go their separate ways" in terms of paint colors and siding materials.
The appraisal fee might be a little high. Call around to a few appraisers and ask what they charge for a residential appraisal in your location. Here (rural Colorado) an appraisal currently goes for $300.
The commitment fee is probably how the mortgage broker gets paid. Ask them!
The settlement fee would be lower here by $100 or so. Ask who does the settlement. Call that office and ask what they charge. Explain what you need. Then call a different company that does similar and ask what they charge. We have recently had a major problem with title companies and mortgage brokers and developers being to cozy. Our AG recently put a stop to it.
Title insurance is based on the price of what is being insured. Ask to see a rate sheet if they don't have on online.
Reconveyance? I'd ask a lot of questions about this one, but it is probably the cost of getting the old mortgage released and the new lender recorded. Both are legal instruments which must be recorded in your county courthouse. There is a charge (scriveners fee) for writing the legal document and there are charges for recording at the courthouse.
Now, all that said, here's the big question and the one you make or break on as far as your ability to get an excellent loan: Are you trying to borrow more than 80% of the appraised value of the property? If you are, you probably will get stuck paying for most of these fees because you are not going to qualify for a better loan.
Life and suffering are inseparable.
David, just wondering: If your current mortgage rate is lower than what you can get now, why not keep it and access your equity (for the new shop) with a second mortgage or "home equity loan"?
If this is a Single Family Home that is not unique the appraisal fee of $450 is way high. I look at hundreds of appraisals every month from around the country, and I rarely see one over $300. Typical fees are $200-$300. If your credit is good the lender may not even require an appraisal, in which case you are really getting screwed.
On any third party service such as the appraisal demand to see the invoice at closing. If they can't produce it refuse to pay the fee. If they fight you on it threaten to turn them into the state regulatory agency. Believe me, they will not let you walk away from the table and give up their big commision.
There is a federal regulation called Regulation Z which requires lenders to disclose all fees upfront. If you see a "mystery" fee at closing that was not previously disclosed they have broken the law. Again threaten to turn them into the state agency and refuse to pay it.
It's your choice, roll over, or play hardball.
Hope this might be helpful to some of you:
A primary lender is an institution (or individual) who actually loans their own money. Usually this means a bank or a savings & loan or a credit union. If you qualify for a primary real estate loan you will usually save considerable money on all fees. The catch is that you will have to have 20% to 25% down (or in unused equity if were talking refi). No broker to pay. Primary lenders often do their own closings and settlement and some don't even charge for it! My prejudice is that the smaller the lending institution, the better. You can read Consumer reports and find that some of the biggest banks (Wells Fargo comes to mind) are now some of the worst at gouging customers.
The "secondary loan market" refers to those who don't make loans (no money!), but who only arrange them. Mortgage brokers, mortgage companies, and even banks and S&Ls can arrange loans through loan "underwriters". An underwriter might be thought of as a primary lender who doesn't want to deal with the public. Instead, such a lender deals through a broker. You all know that a real estate broker isn't offering to sell property they own, they are simply doing the job of administration and marketing. Same with a mortgage broker. They are offering to arrange for you to borrow from the underwriter.
Don't be fooled by advertising offering super interest rates. If you have perfect credit and plenty of equity you may get that rate, but think of it like this: How can a mortgage broker tell you what rate you can get when they haven't yet checked your credit and the other details upon which the underwriter will make the decision to loan or not loan?
The appraiser only gives a trained opinion of the value of the property. In any mortgage, the appraisal is paid for by the buyer, but is ordered by and for the lender. Technically, the appraiser is always hired by the lender even though you pay for the appraisal. Why? Because if you want to use someone else's money and tie it up for what will be years and could be decades, that lender wants to know with as much certainty as possible what the value of the property really is. Of course, the lender also wants to know your income and track record of making regular payments.
The title insurance "lenders policy" protects the lender in the event that something shows up after the fact that damages the "merchantability of title" and causes you to lose your "quiet enjoyment" of the property. Yes, those are the legal terms.
A mortgage broker only gets paid when you close on a loan they arranged with an underwriter they have a relationship with. The fees (regardless of what gibberish they call them) shown on the good faith estimate that ARE NOT for things such as settlement, title insurance, recording, (think of these items as being provided by subcontractors, that's not far from the mark) are the only way for the mortgage broker to make a living.
Most mortgage brokerages (companies) have someone (manager) who handles problems and prods the individual brokers to get their work done. They have someone(the loan processor) who mostly deals with the underwriters. Remember, if the underwriter isn't satisfied that every i is dotted and every t is crossed THERE WILL BE NO LOAN! The individual mortgage brokers are essentially sales people similar in some ways to real estate brokers, but mostly MUCH less regulated by the gubmint.
An aside to anyone with an independent streak: Often older folks, or anyone with abundant cash, might be interested to loan you money. Of course, you will need good credit, appraisal, etc. but if they can loan to you $ at 6.5% or they can put it in a CD at 2% you can see why some will be interested. Got any rich relatives or business associates or customers? You might be surprised! I've borrowed this way, saved money and had the satisfaction of telling the other lenders that they just weren't competitive with what else I'd been offered. If you work hard and are known in your community some folks simply want you to do well and stay put.
If you can't come up with 20% down are having a hard time getting a loan, you should look carefully at what you can do to improve your credit and whether or not you really should be borrowing so much. Know why mortgage broker loans for more than 80% of the value of the property cost way more to get? (in both interest and fees) It's because there is a MUCH higher default rate on those loans. YOU DO NOT WANT TO RUIN YOUR CREDIT NOR LOSE YOUR PROPERTY!
I'll try to answer questions if anyone has one. (If you don't already know, I'm in the real estate business (owner with wife of small rural company), although I don't sell real estate any longer. My wife is so much better at it than I am. (To quote Charles Bukowski: I don't hate people. I'm just happy when they're not around.)
Life and suffering are inseparable.
Know why mortgage broker loans for more than 80% of the value of the property cost way more to get? (in both interest and fees) It's because there is a MUCH higher default rate on those loans. YOU DO NOT WANT TO RUIN YOUR CREDIT NOR LOSE YOUR PROPERTY!
Hasbeen,
The day after my appraisal the broker called me to tell me that he had gotten me a better rate and could loan me much more money than I had originally asked for.
I've been in my house for ten years. I put a fair amount down and it has doubled in value. My first guess as to it's value turned out to be $30K low.
It appears as if he wasted not second one figuring out EXACTLY to the penny what 79.99% of the value would be and getting me on the phone to let me know the good news, that I could own even less of my own home if I were so inclined.
On the day we closed he called to let me know he would check back in six months to see how the renovations were going and to see if I needed and more money.
He seemed kindda disappointed by the fact that I didn't think it was wise to finance a new truck or snowmobile with a home equity loan.
I'm continually amazed at how many home owners think they can set a price for their property (when they want to sell) based on what they borrowed for their new truck or car. Duh.Borrow, borrow, borrow! It's the solution to everything a loan broker needs!Life and suffering are inseparable.
hasbeen,
Wife and I have a rule. IF we borrow against the house, it goes into the house. Had $80K in equity and took $30K. The way our area is looking if I put all $30K into the house i'll get end up with about $80K in equity again.
I have tried to explain to more than one friend that $300 a month for 12 years ends up being more than $500 a month for five years. And, that the truck will be in the scrap heap long before the payments are all made. In the end, not too many people see it that way.
I have at least two neighbors who " Have no car payments" but after close to ten years have about $6K in equity.
Oh Well!
David - home equity loans, at my bank (and I'd assume others) have no closing costs - the bank eats the appraisal and all fees.
If you keep your original (lower rate) mortgage, and tack on a loan or line of credit, you will not pay any closing costs. I think rates are typically variable and in the 4-5% range.
David
A refi at a higher rate, doesn't make any sense here. The cost to you to build your shop must also include the additional cost of interest on the refi. That, plus these and other closing costs not listed (such as escrow and county recording fees), plus the actual cost of the building, will make this one EXPENSIVE building!
You can do a HELOC for up to $100,000 (it can be greater than this, but the interest on the added loan amount wouldn't be deductible), typically much cheaper than doing a full refi with a different lender. The rate might be a bit higher, but if you calculate total cost, I'll probably be cheaper.
And how flexible the MBroker (or principal lender) is on those fees you listed, depends on how much work they have.
One other thing. If you do refi, make it clear to the broker that you expect a copy of the closing documents BEFORE the closing date. Some MBrokers are not above sneaking in additional charges, or padding existing ones. If you've got a gripe with them, its best to resove it before the scheduled closing, not during it.
BruceM
Some others has suggested a second or a HELOC(which would be my suggestion). After talking to our loan guy, for the people who were buying our home in Ocean Shores Wa., Our loan guy suggested that the buyers talk to Wells Fargo. Some of these type loans have no prepayment and you only pay as you need it and if you pay off early, just keep the loan open, unused and there is no fees.
As to the shop on your property, it is part of your residence so, you have a interest deduction, and some of this can be written off with your business. the rest of the shop becomes a % of business deduction based on the size of the home/shop This will be decdudted from you business expenses and that amount will/could be added back to you value of you home. So if you were to sell later, it could come back to haunt you. In my case 2 1/2 yrs ago, it didn't hurt us.
So my best advice would be to talk to your CPA before you think about any kind of loan.
I had my shop for 9 yrs or so, and never paid rent to someone else. And when we sold, we more than doubled or investment. No thats a win-win situation
Kind of make those Ditech no-cost equity loans and $399 refi loans look attractive. Of course, not sure I'd do anything with Ditech mind you, but its an example. How about getting quotes from someone else?
The wife and I did not do any research when we refinanced out house, and the closing costs were about half of the closing costs on our (then) two-year old home. We were exiting an ARM-style mortgage.
It doesn't hurt to shop around. BTW, Commitment Fee? Was this underwritten by Ben Dover & Asc.?
I'm going to be looking into some of the online brokerages, or whatever they are. Seems like quite a lot of them will go under 6% with no points and closing costs under $1000. Of course, I have no idea how easy or hard it is to get that rate.... maybe it's like going to the auto dealership and trying to buy the car they advertised in their Sunday ad for an unbelievably good price.