loan fees question

drb419 · Joined: 31 May 2005 Posts: 7

A local realtor found a mortgage company who pre-approved me for a 90/10 home loan (subprime because of a bankruptcy). I talked to a lady from the mortgage company (Kimberly) and we discussed interest rates, etc.
I then found a house I liked and filled out the paperwork to make an offer. The realtor then informed me that Kimberly would get a fee of 4% of the sale price. Since then I have found out that Kimberly isn't actually with a mortgage company, but merely finds lenders for people like me.
Is the 4% fee normal, and should I have been informed of it before I signed offer papers? Should I have been informed by either the realtor or Kimberly that I wasn't dealing directly with a mortgage company?

Thanks...Sam

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

Drb,

It sounds to me that you are working with a mortgage broker. A mortgage broker basically is what you described; you come to the broker and they find you a loan. It works well because a broker has the capability to go to many different investers and find one that suits your needs.

4% may be kind of high, it's been a while since I've been around in that business. It also depends on your l oan amount though, as 4% of 50,000 is considerably less than 4% of 1,000,000.

However, the realtor shouldn't be the one that has to advise you in how much you're getting charged. You should receive a Good Faith Estimate and a Truth in Lending statement that detail the cost of your loan. The rate, the fees involved, the estimated payment, etc.

I would ask for those items before you continue any further, seeing as how you should have had them 3 days after you apply.

What you need to determine is if the rate, fees, etc. make sense for you to continue. Just because your realtor suggested you speak to this gal doesn't mean that you are required to use her. Just because you have a contract to purchase a house, doesn't mean you are required to use her. Check out your options. How far out is your bankruptcy? What's your credit score? Is it possible you could consider an FHA loan? Many brokers don't have access to FHA loans or don't understand them. FHA is much more flexible than a conventional loan, and the rates are compareable. Also the BK requirements for FHA are considerably less (from 4 years to 2 years). May be something to ask about.

drb419 · Joined: 31 May 2005 Posts: 7

Thanks Travis.....I've been out of bankruptcy less then a year, so maybe I should stick with the lender that the broker found?? The loan amount is $78,000. The seller pays all closing costs and the rate is 7.5%. I plan to refinance at a lower rate (hopefully) a year or two down the road. My credit score is only 597, but I have zero debt and a pretty good income. I'd like to get a 95/5 loan, but don't know if I could find a lender to do that.

Sam

MissionFinancial · Joined: 28 Jul 2005 Posts: 4

why are you trying to do a 95/5? because with the 80% arent you forced to pay the PMI...? I would rather do a 80/20...

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

Most subprime loans don't have PMI regardless of the %.

You'll definitely want to keep that goal of 1-2 years (2 years from your bankruptcy) in mind and make sure that you're re-establishing credit during that time. Also make sure that your loan doesn't have a pre-payment penalty. (This will be noted on your Truth In Lending statement.) If it does, then find out how long the pre-payment term is, and what the cost is to you. You don't want to get the loan hoping to refinance in 14 months only to find out that you have to pay thousands of dollars if you refinance before the 60 month mark.

I would still recommend checking around. Don't settle simply for "Oh yeah, we can do this no problem!" Get the GFE and TIL that I mentioned above and do your homework. If you're picky about your loan being sold then find out who the broker is using as the invester and do your research about them. Find out if they sell them or not. Find out what the common view is about them. Do they take 2 weeks to even underwrite a file or are they on the ball about getting their work done?

"I can do that!" is probably the most used term in our industry and it's very easy to say when you have loads of lenders in the background waiting to back you up. The thing you need to look out for is what is actually the best deal for you. Keeping in mind you're only going to be in the loan for less than 2 years.

chow · Posted: Thu Jul 28, 2005 3:09 pm Post subject:

Most Subprime loans have a pre payment clause. This can knock out any equity you may have gained in the home when you go to refinance. If you are less than 24 months out of BK, then you will be a subprime unless The BK was totally a Medical issue.

FHA will underwrite a loan to a borrower at 12 months of BK IF it was a medical BK. (The trick is to find the underwriter, and your credit is decent, and the medical issue is not likely to arrise again)
Please, Get the details of the loan(s) before you settle on a LO. You can "buy out" a prepayment with a higher rate, or pay discount points to the end lender. Ask the LO how much it is to buy out the prepayment. You will be on a ARM for a few years. I suggest you look at the options. Ask every LO for 3 ideas. Tell them every thing.

drb419 · Joined: 31 May 2005 Posts: 7

Thanks for the help….I’ve already told the lender that I want a loan with no pre-payment penalty. I’m also going to check out other options and other loan officers, so I get the best possible deal.
Travis…..When you say I should make sure I’m re-establishing my credit during the first couple of years…is making my mortgage payments on time enough? Or should I also get a credit card or two and use them wisely? Would getting a small personal loan from my bank ($1,000-$1,500) using my car title as collateral be a good idea? (the money would stay in my bank account)
You wrote….Most subprime loans don't have PMI regardless of the %......But everything I’ve read on the net says that when you get a subprime loan and pay less then 20% down, you will almost certainly have to pay PMI. Should I insist on no PMI even if I have to pay a higher interest rate?
Thanks….Sam

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

I would definitely recommend doing more than simply making your mortgage payment. Obviously that is the *most* important one of them all, but you'll need to re-establish several trades.

2 credit cards in addition to your mortgage and one other tradeline would be excellent for you. Ideally you want to have at least 3, preferably 4 open and active tradelines. Keep in mind that 'using a credit card responsibly' means using it and paying it off each month, not simply paying the minimum payment on time.

Someone else please correct me if I'm wrong as far as the sub-prime loans and MI. I know that *we* don't have MI on our sub-prime, and when I was a broker I didn't have it on sub-prime either. If that is the case now, then someone let me know so that I'm not leading people astray ;) Overall your lender should be breaking down what your payment consists of and if you have mortgage insurance in there (i doubt you will) then it may be best to consider simply an 80/20.

pamortgageman · Joined: 21 Jul 2005 Posts: 31 Location: Pennsylvania

You are right Travis. 99% of subprime programs, if they are true subprime and not alt A, do not have PMI of any kind.

chow · Posted: Fri Jul 29, 2005 4:27 pm Post subject:

If we all can have a debate on a post: Just Imagine what the borrower feels like?

The Internet is information overload.

My own Brother in law was bragging obout his credit score one day. Who lead him to believe that 600 was okay? I'd die-if I found out I fell below 700 now.

I told him when it went up 310 points higher-he could go back to the 6th grade, and tease me on the bus again. Gawd, I have to admit, I just loved slaming him with that information! After years of him calling me names-then he marries my sister, then he acts like....well, I won't put that in print. I loved it. He's bragging about some less than 600 score...and I have a 910.

I was a four eyed, short: but fast kid from the county. I guess I was a geek. But my Geek account is stonger than his geek account. To this day, He still can't manage to keep a dime in his pocket.

The nut didn't fall far from the tree. Sad, but true.

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

Chow you've always been great at pulling out random information at the craziest of times!!