GFE loan need some help!

Metrix1234 · Joined: 04 Nov 2009 Posts: 2

I am currently looking into buying a house. I have a 711 credit rating, looking to put about 5% down, and looking for a 175k FHA loan. Can someone help explain where my money is going on this GFE?

I would like to know what item lines I can negotiate on lowering or possibly removing, what amount of the closing cost is going towards down payment, tax/insurance and loan fees, and what would be the best way of comparing different GFE's.

Please help, thanks!

Josh Harmatz · Joined: 08 Sep 2009 Posts: 18

I know what you mean there are so many things to account for. Your loan officer will be able to tell you how it works good luck to you.

Metrix1234 · Joined: 04 Nov 2009 Posts: 2

That was absolutely no help at all. I actually asked around at a couple of places hoping to get some better incite on my GFE then from the person actually issuing it to me. Thanks for the.. response?

m2c · Joined: 03 Aug 2005 Posts: 937

Well Met, you’ve got a point. Actually I was surprised your inquiry set dormant so long. Let me try.

First, FHA is a rather simple loan … at least compared with a decade or so ago. Minimum down payment is 3.5% -- so for a $175,000 purchase price, the BASE loan amount is $168,875. Then you get to the upfront FHA MIP (UFMIP) at 1.75% either paid FULLY in cash or financed except for the odd cents - $2.951.31. Initial monthly MIP is based on the average scheduled outstanding balance – in reality $76.88 versus the amount of $77.39 indicated on the GFE. Monthly will turn out to what it really it but I am surprised at how sloppy the GFE was. OK, all “us” LOs have trouble adding 1 + 1.

Overall the quote you were given is not obnoxious depending on the DATE which was not given. In general the 5% note rate (4.5% MBS coupon) has been trading a bit under par. The gross or theoretical gross would include YSP (or SRP) plus lender fee ($625 less cc credit of $150). With your enviable position, I’d estimate an actual or imputed YSP/SRP of 2.5 to 2.75 points – possibly making the quote a bit “rich” depending on date. Still it’s in the relative ballpark and every market area is different.

The mortgage outlet giving the GFE was not required to indicate YSP on the GFE since it had no meaning. Do NOT make a big deal out of this when requesting comparative quotes – it all comes out in the wash. Target a zero-point note rate, get GFE and ask specifically what the company’s “junk fees” are (processing, origination, etc.). Most LOs will not take offense to your approach but if you’re too much of a PITA expect addons. Most comparative quotes will come out in a narrow range and remember we LOs have to make a living and that ROCK BOTTON price is not always in your best interest.

Comparison of APRs is a good idea but this assumes you keep mortgage to maturity and there are some garbage-in-garbage-out issues.

Third party fees stand out in the GFE you presented. Appraisal of $500, survey of $450 and Doc Prep of $125 would be very high in my area but markets differ. FHA does not permit “mark up” of third party fees but with Realtor owned mortgage companies there is a “government-approved” other cost reimbursement technique. May not be happening here but look at these items with comparative GFEs. Home inspection is a rather weird line item – choice item driven by your desires in sales agreement.

Hope this supplies a bit more information. Don’t believe the horror stories in the media. Most of your comparative quotes will be close – just remember the time differences. After all you can’t compare a stock purchase price for IBM yesterday with a quote today.

EricJ · Joined: 09 Jan 2009 Posts: 321 Location: New Jersey

Those fees seem to be in line. Yes a couple seem a little bit high but this is an estimate and the broker is probably aiming on the high side. New regulations require them to give you a new GFE if the true costs are greater than the original GFE. So, if they estimate on the high side, then it will not cause delays for you.

m2c · Joined: 03 Aug 2005 Posts: 937

Eric, from you prior posts I assume you have more optimistic projections on whether the new GFE/HUD1 is going to benefit borrowers. I’m in the neutral to pessimistic camp right now.

Perhaps this GFE is a foreshadowing of the brave new world. A rational tactic for a broker who is forced to estimate charges for servicer providers over which he has no power of selecting would be to aim high. [Caveat: the charges might be “normal” for this market. I’m not saying they are exorbitant for this market but just “stand out” a bit]. Ultimately the new GFE may result is less “accurate” GFEs as brokers (and by extension lenders) hedge their “bets”. Could even increase end cost – consider the closing agent who looks at the GFE and thinks “I was going to charge $200 but the GFE says $350, so what the hell!”

There’s always the “list of provider (singular) ploy” which right now seems the best alternative. Even with this tactic, there could be items unearthed after taking application which could increase third party charges and might not fit under “change circumstances”. Strange the real estate companies with captive title agencies haven’t raised more hell. Around here, these title agencies are the highest priced with the worst service. New GFE will bring this added cost to the fore. Course the “trusted Realtor” might “encourage” the broker to be a coconspirator and quote their exorbitant fees on the GFE.

Still on the lower end of the learning curve. Perhaps I’ll become more enthusiastic later on but right now I think all the new GFE will do is give the borrower a false sense of security and encourage them to do little or no thinking about their decision. Only thing I know for sure right now, is that I don’t want to disclose YSP; all it will do is confuse the borrower.

EricJ · Joined: 09 Jan 2009 Posts: 321 Location: New Jersey

m2c

Yes I am optimistic. I think it will help borrowers but it will also help ME. I am always up front and honest with the costs associated with my loans. Never has a customer arrived or walked away from the closing table surprised or unhappy. I lose A LOT of business to other companies or loan officers who manipulate their customers and hide certain costs. Many of my potential customers will take the bait that someone else is offering only to be disappointed at closing.

Anything to make those OTHER GUYS up front and honest AND to type up the GFE the same way I do would be a great help.