Sound legit?

j · Joined: 26 Apr 2005 Posts: 18

Friend got a "Pre-Approval Statement" for a purchase price of 275K based on "solid credit scores" (609 middle) from Stonecreek Funding. She has nothing to put down or close with. Does this sound too good to be true? Don't want her to find a home and then everything fall apart. thanks

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

definitely doable, but i'd find out what the costs are before getting to far with it. Find out what the rate, the origination fees, and any other fees that aren't title specific or appraisal specific.

j · Joined: 26 Apr 2005 Posts: 18

All i know is they said the interst rate would probably be 6-ish. Does that sound o.k.? Should they be able to tell us others rates and costs up front?

BECCA9892003 · Joined: 20 Jan 2005 Posts: 400 Location: Altoona, PA

they should be able to tell you alot more upfront especially what her rate will be!!...if she doesnt have a seller assist she will have closing costs to pay and on a purchase they can be a bit high with the transfer tax...i would recommend you dig alittle deeper ask more questions and go from there..

j · Joined: 26 Apr 2005 Posts: 18

I wrote the loan lady and asked the questions you advised--specific rate, closing costs, any other costs not associated with appraisial, etc. This is her reply:

"I would just need a little more information if you don't mind. I would need to know what the actual price of the house is and I can calculate the costs and fax you a Good Faith Estimate. I would also need to know how much you are putting down and if you would prefer an adjustable rate or fixed rate. Also if would like an interest only or a payment with principal and interest. I hope you found a house you like. I will fax the Good Faith Estimate to you as soon as I have the above information. I can also have the loan closed for you by the May 24, 2004 or sooner if you need I can rush it as well."

chow

j wrote: I wrote the loan lady and asked the questions you advised--specific rate, closing costs, any other costs not associated with appraisial, etc. This is her reply:

"I would just need a little more information if you don't mind.

#1 I would need to know what the actual price of the house is and I can calculate the costs and fax you a Good Faith Estimate.

#2. I would also need to know how much you are putting down and if you would prefer an adjustable rate or fixed rate. Also if would like an interest only or a payment with principal and interest.

I hope you found a house you like. I will fax the Good Faith Estimate to you as soon as I have the above information.

#3 I can also have the loan closed for you by the May 24, 2004 or sooner if you need I can rush it as well."

okay, my evile twin will come out and lord help jesus......I'll just point out a few issues-as nice as my evil twin will allow.

1. original post/question is this: Friend got a "Pre-Approval Statement" for a purchase price of 275K based on "solid credit scores"

really, what is the sales price? :shock:

her response per your post today????

2. I would also need to know how much you are putting down and if you would prefer an adjustable rate or fixed rate. (and then what kind of loan you want-Can someone explain which does what for me now and how it affects me later or in the loang or short term????

I guess my only question is: Unless you verify or speak with someone about how the loan is to be wrote-you just hand out "pre approvals" based on what?

3# I would hope you could close it nearly a year ago, or someone is yanking my chain. As a Loan Officer I want all of my loans closed yesterday-but a year ago is asking a lot. (IE: is this really true-or a made up post? :shock: )

If this is really all true-I think you need to dump the email and talk by phone and fax. Filling out a on line application and getting a pre approval is almost worthless for a purchase. I call those things "Fools Gold."

j · Joined: 26 Apr 2005 Posts: 18

Oh, I assure you, it is a real post. Thru Stonecreek Funding. What does anyone know about them? Could anyone else please comment on all of this before we go down the slippery slope? Please, we have never bought a home before, and are not too savvy.

j · Joined: 26 Apr 2005 Posts: 18

O.K., this is the Good Faith Estimate: She said the closing costs are paid by seller concessions and would be 4%. And my realtor can help me negotiate that with the seller. She said she can close me in 7-10 days, all she needs is my most recent paycheck stub and last 2 years W-2's and insurance company where i will get my homeowners ins. from. She sadi both the 30 year fixed and the adjustable rate are 2 separate loans, one for 80% of the value of your home and the other 20% of the value which is less expensive than doing one separate loan. These are the lowest rates for your credit (mid 609) and 100% financing. Total est. funs to close: $574.07 and 489.00 (can't read) Is this good??

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

What were these 'lowest rates' that you speak of? and what were they on?

so 4% of 275,000 isn't even enough to cover the closing costs? How many days of interest did she include in that? Did she include setting up an escrow account for taxes and insurance and if so how much?

j · Joined: 26 Apr 2005 Posts: 18

She said--Say on this house they are selling for 242K, but will accept 232K you would still pay 242K and the 10K would be seller concessions for your loan costs. Also, she the chart she gave me said estimated closing costs were 7,150, estimate prepaid items/reserves 3,242, and total estimated settlement charges 10,574. Sub financing 48,400. Sakes price 242K, loan amount 193K. Monthly payment 2,161, which includes Other financing P& D or O- $474, Hazard insuranc $80, Real estate taxes 230. I am so confused! Cannot figure this out. Does anyone know if Stonecreek Funding is a trustworthy lender??

capnmorgan5555 · Joined: 29 Jan 2005 Posts: 29

Ok J, take a deep breath and let's see if we can figure this out.

$242,000 purchase price doing an 80/20 so your first mortgage amount would be $193,600 and the 2nd would be $48,400.

You say the payment is $2,161, taxes are $230 insurance is $80 the 2nd mortgage payment is $474 so that makes the first mortgage payment $1,377.

So with a $1,377 payment on $193,600 the interest rate is 7.68%
a $474 payment on $48,400 makes the interest rate 11.36%.

So the 6ish rate they originally quoted is not true.

I don't know what state you are in so I don't know about the closing costs- I am in Missouri and our costs are fairly low- I had a friend in FL have me take a look at his Good Faith Estimate and I nearly had a heart attack- but the costs in FL were much different than in Missouri so they were fairly accurate. That being said, unless your state has some really high state doc stamps or something similar and your title work is very high then $10k in closing costs and prepaids seem to be excessive.

An 80/20 with a 609 credit score should give you better rates- I am not sure if you are being quoted a 2/28 or a 30 year fixed.

The bottom line is if ANY lender quotes you an "ish" rate with no Good Faith Estimate and Truth In Lending after they have your application and have pulled credit then I would run not walk away from them. Assuming these loans are fully amortizing and not Interest Only, if they are telling you 6ish and give you 7.68% on the first and 11.36% on the 2nd- (which is a blended rate of 8.44%) then I would tell them to stick it. I can't stand it when lenders are not upfront and honest with people, it gives the whole industry a black eye.

IMHO any lender that doesn't take the time to explain the rate, program, good faith estimate, Truth In Lending, possible pre-payment penalities, closing costs, prepaids- I could go on- then I WOULD NOT DO BUSINESS WITH THEM. Especially if you are a first time homebuyer.

I don't know anything about Stone Creek but with what you have explained here, find another lender that you can trust. Find someone that will explain everything to you to your satisfaction and even if the rate you get is in the ball park of this one, at least you will know why.

I hope this helps.

chow · Posted: Wed May 11, 2005 7:12 pm Post subject:

Gang, we all probably figured this backwards based on information obtained, and we could be looking at the APR. We all know that is going to be higher-depending on what LOS they are using and how they structed the GFE. We don't know who's paying what-so how can we tell if the rate is really the rate-they have 4% seller consessions, that would affect the APR-and our judegement of this being a "truthful" estimate or not.

I'm just playing Devil's advocate..

capnmorgan5555 · Joined: 29 Jan 2005 Posts: 29

Chow,

If the payment numbers, purchase price and that it's an 80/20 are correct or anywhere near correct then what does apr have to do with anything? I calculated what the rate would be with that payment on that loan amount- that is the rate the APR would be higher than that unless it's an ARM that has a start rate higher than the fully indexed rate.

I know we don't have the entire picture, but it doesn't sound like j has been given the full disclosure or j hasn't been able to figure out the GFE and TIL.

So if you are being a devil's advocate what does that make me? :wink:

j · Joined: 26 Apr 2005 Posts: 18

Well, guys, here is the latest after I emailed her your comments (as mine!):

Both of these estimates are fully amortized. We do have interest only however the rates are a little higher but the payment is lower. Let me know if you want me to calculate those for you.

The interest rates that are in the 6% range are adjustable like the one I sent you which can adjust after three years. The one that you are seeing for 7.68% is a 30 year fixed rate. You can buy down the interest rate further for more discount points. I would suggest for now using the adjustable rate while your credit scores are sub-prime. After three years you can look at refinancing when you have had three years of on-time mortgage history and corrected the collections on your credit reports. One more good trade line reporting on your credit would also help improve your credit scores like a credit card with a low credit line and keep the balance under 50% of the the available credit.

The closing costs are competitive. The prepaid items on a new home are higher since you need to start you escrow accounts for taxes and insurance and again these are just estimates since we don't know yet how much insurance or taxes are going to be. The prepaids are $3345.00 of the $10,000.00 which don't count as part of closing fees. You do not have to escrow you taxes and insurance in your payment. A lot of people now feel that is better use of ytheir money to pay you taxes and insurance yourself so you can be making money on your money instead of the mortgage company. It is your choice.
Wadda ya' think?????

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

It's difficult to say without seeing a credit report and your whole scenario. Your score is not the only important part of your credit report. It's possible you're getting a decent deal, but it's also very possible you're getting raked over the coals.

What is your collection history like? Are they paid? Do you have any judgements or bankruptcys? When were the collections?

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