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1st Time Conventional Borrower Mortgage Interest Question

CruzrWeight1 2 10 July 31, 2016 at 08:17 AM
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I am putting together a strategy for my home purchase. I plan to go conventional & have saved enough for a conventional loan down payments of 20 – 30% since that is the cheapest way to finance (as compared to FHA or VA (I qualify for)). I am looking for a 15 – 20 year fixed mortgage.

I know a I can go to bankrate.com or similar sites to see who is offering that DAY’s lowest interest rate for the specific loan desired; however, I am wanting to get pre-approved by multiple lenders(s) who consistently offer some of the lowest rates that fit my buying profile. I don’t have to have the absolute lowest rate on a given day, since that may change daily. I simply would like to know who the consistently low interest lenders are. That way I can get pre-approved by these vendors in advance and be ready to go quick if a deal arises. If there is website that provides this info, please advise.

Additionally, I am primarily looking to shop interest rates.; however, can someone advise if conventional loan lending fees can vary by institution. If so, would appreciate it if someone could advise how I would identify these institutions.

Thanks in advance!

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1

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#2
I would bet that the companies you consistently see at the top of Bankrate lists will be the companies you wont to get pre-approvals from. Internet based companies will have the lowest rates and fees although you might have 1 or 2 locals banks worth a look.

Fees vary by institution in both name and price making it a real pain to easily determine which bank offers the best deal. Once you get your list of 2-3 companies take a close look at their fees. I would recommend taking a look at Sebonic Financial if you have not already done so.
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#3
Fees absolutely vary between lenders and I am taking the liberty of copying a post I had in another thread as this may also apply when choosing the best mortgage.

THE LOWEST RATE MAY NOT ALWAYS THE BEST RATE: While this goes contrary to the way we think, and especially the way us Slick Dealers think, it is critical to measure the costs associated with any Note Rate. This is easier said than done as there are different areas the fees may be associated.

a) Standard Origination Costs: The word 'points' does not encompass the overall cost of a loan; as it is just one of a dozen possible ways to disclose lender origination fees. Origination, Discount, Administrative, Underwriting, Credit Report, Doc Prep, Tax Service, Flood Cert, and Appraisal Fee are all possible fees that may be imposed by the lender.

On refinances there are Title and Settlement Fees which a lender will quote which may also vary considerably. (Purchases will have these fees however customarily coming from the Title/Escrow Company handling the purchase.)

So, always compare the costs associated with any quoted rate; as in the end while you think you got a great rate you very likely paid for it. More on this in a minute.

b) All Rates Are Available Every Day; and what changes daily (and sometimes multiple times a day in volatile markets) is the price of the Note Rate. In real time pricing there is rarely a true zero point (also known as 'par') price to a specific Note Rate; and there is either a cost or a lender credit associated with the specific rate.

A knowledgeable mortgage broker will show you the stack of rates available; based on a certain rate lock period. As everyone's scenario is unique, having choices can be very helpful to best suit a borrower's needs.

For example (and this is just for illustration purposes and does not constitute a quote in any way):

Loan Amount $250,000

RATE PRINCIPAL & INTEREST PRICE

3.375% 1105.24/mo $1610 (,644 discount fee)
3.50% 1122.61/mo $85 (.034 discount fee)
3.625% 1140.13/mo -$1462.50 (.585 lender credit)
3.75% 1157.79/mo -$3502.50 (1.401 lender credit)

Now, default thinking would lead one right to 3.50% at just about zero points.
However,
First, as discussed above, what other fees may be associated with this stack of pricing?
You must weigh all the lender costs into the analysis!

Second, 3.50% sounds better than 3.75%, BUT, this is not about bragging rights and choosing the best option to suit your needs.

On a refinance do you want to pay closing costs out of your pocket? Or do you want the costs rolled into the new loan where you lose equity in your home? Most people simply opt to have the costs rolled into the new loan amount as they will not feel a thing, but depending on how long you are planning to keep this loan, evaluating a higher rate with a lender credit to absorb costs may be a very valid option.

This also goes for a purchase as well, as depending on how long you plan on keeping this loan, or if your assets are really tight and you really could use less out of pocket at the table, take a look at all options.

For example, on the example above:
The price difference between 3.50% and 3.75% is $3587.50
The difference in monthly payment is $35.18/mo
This means it would take 101.98 months, or 8-1/2 years for the break even point where the extra monthly payment exceeds the credit you received at closing. Over 8 years, and that is not taking into account that the extra $35/mo is tax deductible, so it really is not costing you that much.

For many, this is where they may realize that the lowest rate was not the best rate for their individual needs.

Again, I cannot stress enough that, between their transaction and their individual profile, everyone is unique, and a knowledgeable and experienced Mortgage Broker can provide you all options to choose what is best for you.

Hope you find this information helpful;
-Adam
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-Adam
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#4
Quote from CruzrWeight1 View Post :
I know a I can go to bankrate.com or similar sites to see who is offering that DAY's lowest interest rate for the specific loan desired; however, I am wanting to get pre-approved by multiple lenders(s) who consistently offer some of the lowest rates that fit my buying profile.
You really don't need to get pre-approvals from multiple lenders; just one will be fine. The pre-approval doesn't really make the financing process go any faster, but can ease the seller's mind and give them confidence you, as the buyer, are able to secure financing. Just get one pre-approval from your nearest bank or credit union. You can then shop the rates and fees separately while you're searching for a home.
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Marshall: Have the rest of you guys figured out by now that mmathis is the smartest guy on SlickDeals?
#5
Adam always has great advice on these types of topic, not more I would add, however I will say that rates are at it's lowest right now.

I just refinanced a few months ago and rates are even lower since then! I personally went the online based vendor route. Two banks, a credit union and a broker in my area could not beat the online rates. Out of 4 different online vendors Sebonic (Cardinal) Financial gave me the best rates after comparing all fees/costs/lender credit, etc. I'm very organized and prepared and knowledgeable enough on the topic and they met my expectations on their part. Ended up closing in 3 weeks, which could have been even sooner if there wasn't a short holdup on something.

If the rates ever go crazy low to the point of making another refi worth it I would definitely consider them again, although I would shop around as well. We may actually buy again too in a few years so I'm hoping rates stay low like this, but that's one thing you cannot predict that far out....
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#6
Opinions needed...

2.5 rate (2.508) 15 year fixed for 0 points

-or-

2.25 rate (2.392) 15 year fixed for 1 point
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#7
Quote from 91stealthes View Post :
Opinions needed...

2.5 rate (2.508) 15 year fixed for 0 points

-or-

2.25 rate (2.392) 15 year fixed for 1 point

As mentioned in previous posts, it is always good to evaluate the 'stack' of rates.
In this case I would want to see the pricing for 2.25%, 2.375%, 2.50%, 2.625% and 2.75%.

What is the Principal & Interest $ difference between each note rate?
What is the $ difference between each note rate?
When is the break even point between each (not taking into account the tax deductible difference of a higher rate).
Consider the term you want to keep the house. THIS is one of the most critical factors when choosing whether or not to buy down a rate. (Many get hung up on acquiring the lower rate but have no intention of keeping the house for more than a few years, when buying down the rate will make much less sense.)

Finally, the rates you are quoting are indeed very low for even a Fixed 15. Make sure there are not excessive lender fees associated with the. (Zero points does NOT mean zero lender fees in most cases.)
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#8
you need to look what the payment would be the way fees and other stuff is calculated can make things weird.

Also ask if the lender is going to sell your loan as soon as it closes or not, getting great rate and having the loan sold 3 times in the first year is a real pain. New laws help against them changing addresses not really telling you then charging a late fee, but you can run into issues getting your insurance or taxes paid and the escrow amount.
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#9
Quote from tiedyed1 View Post :
As mentioned in previous posts, it is always good to evaluate the 'stack' of rates.
In this case I would want to see the pricing for 2.25%, 2.375%, 2.50%, 2.625% and 2.75%.

What is the Principal & Interest $ difference between each note rate?
What is the $ difference between each note rate?
When is the break even point between each (not taking into account the tax deductible difference of a higher rate).
Consider the term you want to keep the house. THIS is one of the most critical factors when choosing whether or not to buy down a rate. (Many get hung up on acquiring the lower rate but have no intention of keeping the house for more than a few years, when buying down the rate will make much less sense.)

Finally, the rates you are quoting are indeed very low for even a Fixed 15. Make sure there are not excessive lender fees associated with the. (Zero points does NOT mean zero lender fees in most cases.)
Quote from komondor View Post :
you need to look what the payment would be the way fees and other stuff is calculated can make things weird.

Also ask if the lender is going to sell your loan as soon as it closes or not, getting great rate and having the loan sold 3 times in the first year is a real pain. New laws help against them changing addresses not really telling you then charging a late fee, but you can run into issues getting your insurance or taxes paid and the escrow amount.
Total fees (outside of points) would be right around $2,500 to close the loan. That includes origination, Title, etc). Loan would be sold off.
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#10
Quote from tiedyed1 View Post :
Fees absolutely vary between lenders and I am taking the liberty of copying a post I had in another thread as this may also apply when choosing the best mortgage.

THE LOWEST RATE MAY NOT ALWAYS THE BEST RATE: While this goes contrary to the way we think, and especially the way us Slick Dealers think, it is critical to measure the costs associated with any Note Rate. This is easier said than done as there are different areas the fees may be associated.

a) Standard Origination Costs: The word 'points' does not encompass the overall cost of a loan; as it is just one of a dozen possible ways to disclose lender origination fees. Origination, Discount, Administrative, Underwriting, Credit Report, Doc Prep, Tax Service, Flood Cert, and Appraisal Fee are all possible fees that may be imposed by the lender.

On refinances there are Title and Settlement Fees which a lender will quote which may also vary considerably. (Purchases will have these fees however customarily coming from the Title/Escrow Company handling the purchase.)

So, always compare the costs associated with any quoted rate; as in the end while you think you got a great rate you very likely paid for it. More on this in a minute.

b) All Rates Are Available Every Day; and what changes daily (and sometimes multiple times a day in volatile markets) is the price of the Note Rate. In real time pricing there is rarely a true zero point (also known as 'par') price to a specific Note Rate; and there is either a cost or a lender credit associated with the specific rate.

A knowledgeable mortgage broker will show you the stack of rates available; based on a certain rate lock period. As everyone's scenario is unique, having choices can be very helpful to best suit a borrower's needs.

For example (and this is just for illustration purposes and does not constitute a quote in any way):

Loan Amount $250,000

RATE PRINCIPAL & INTEREST PRICE

3.375% 1105.24/mo $1610 (,644 discount fee)
3.50% 1122.61/mo $85 (.034 discount fee)
3.625% 1140.13/mo -$1462.50 (.585 lender credit)
3.75% 1157.79/mo -$3502.50 (1.401 lender credit)

Now, default thinking would lead one right to 3.50% at just about zero points.
However,
First, as discussed above, what other fees may be associated with this stack of pricing?
You must weigh all the lender costs into the analysis!

Second, 3.50% sounds better than 3.75%, BUT, this is not about bragging rights and choosing the best option to suit your needs.

On a refinance do you want to pay closing costs out of your pocket? Or do you want the costs rolled into the new loan where you lose equity in your home? Most people simply opt to have the costs rolled into the new loan amount as they will not feel a thing, but depending on how long you are planning to keep this loan, evaluating a higher rate with a lender credit to absorb costs may be a very valid option.

This also goes for a purchase as well, as depending on how long you plan on keeping this loan, or if your assets are really tight and you really could use less out of pocket at the table, take a look at all options.

For example, on the example above:
The price difference between 3.50% and 3.75% is $3587.50
The difference in monthly payment is $35.18/mo
This means it would take 101.98 months, or 8-1/2 years for the break even point where the extra monthly payment exceeds the credit you received at closing. Over 8 years, and that is not taking into account that the extra $35/mo is tax deductible, so it really is not costing you that much.

For many, this is where they may realize that the lowest rate was not the best rate for their individual needs.

Again, I cannot stress enough that, between their transaction and their individual profile, everyone is unique, and a knowledgeable and experienced Mortgage Broker can provide you all options to choose what is best for you.

Hope you find this information helpful;
-Adam
Thanks TieDie! Your Sebonic looks like it is going to save me about $4,000 less than USAA's quote. Still haven't recieved Pentagon but I suspect they will be closer to USAA. Question: I suspected that Sebonic would simply have many of the same multitude of fee types as USAA, only less. However, Sebonic simply does not have many of the closing fees that USAA has.

Are these simply "made up fees"?
Also, do I need to add back any of the fees that they chopped out? Not that I want to pay more, just want to protect my investment.

I'd buy you a beer if I could!
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#11
If you're getting a jumbo loan Chase offers a competitive rate. Better than anything I saw online and the various direct lenders I got quotes from.
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