Mortgage people - whats the deal with these new mortgage insurance rules and offers??

[CAMSDADDY]

Wow we are currently purchasing a home. We are able to avoid PMI due to 20% down. I think 4% is pretty good. Sounds like our closing cost are a little steep at $4100. I tell ha buying now is different than it was 12 years ago when we bought our first. There is more paperwork as well as having to show where your down payment is coming from. I can't imagine the process if we had questionable credit or without down payment. At 800+ credit scores it seems like this would be easier

 

[CAMSDADDY]

Chase contacted us a few years ago and wanted us to refi and offered a lower rate and no closing. The rep told me that they looked at as we could refi and get a better rate and they wanted to offer us a better rate to retain us.

 

[mtgldr]

mtgldr Do yo have any information on Region's HELOAN program? Pros vs cons? We will be finishing our loan up and I would like to know if there are any catches to it. I have found VERY FEW people that even know anything about them.

HELOC is Home Equity Line Of Credit, HELOAN is typically Home Equity Loan meaning it's a fixed rate for a fixed term. I just went to the Regions sigite ad read the HELOAN guide. Says they pay for all Closing costs, up to 80% of the value, rate varies from 3% to 8% depending on LTV, credit and collateral type (primary home vs seond or investment).
When seconds were widely available a rate for a fixed seconsd mortgage of less than 6% was about as good as it got. If the are going below that with no costs that sounds like a great offer. Most banks only offer HELOC's, whic for some is prefect but it you only need the fiunds for a specfiic purpose and a specfic amount of time then a HELOAN is better, no rate risk. Most HELOCS cap out @ 16%

Let me know what they offer you based on the value of your home, income and your credit profile. It says you can buy the rate down but be careful with that, do the math beofre you pay extra. It's a pretty easy analysis with rate buydowns. Basically you compare what do I get for free vs what do I save for how much more money. Multiply the savings by how long you feel you will truely use the money, in other words... how long will it be before you will most likely pay off the loan, and see if the cost is worth it. For example, you may get a 20 year loan knowing you are going to retire is 15 years so multiply the savings by 180 months not 240 months. You may have another child in 5 years and sell the place to get a bigger one so multiply by 60 months. Also typically the shorter the term the less the rate. It may be significant or it may be very small. Unless you are borrowering a significant amount don't get too wrapped up in .25% in rate one way or the other. A .25% difference in rate for $40K over a 20 years period is only $1209, yes it's still $1209 but it also take 20 years to realize the savings.

Regions has been around for years, they have never been a big player in the mortgage business around Atlanta. From what I do know they are a good bank, I don't hear complaining about Regions like I do the other Big banks and I know folks that have worked there and were treated well. They just haven't the national footprint some of the larger banks do. Think small towns and tellers that know your name. They are growing though and over the past few years have opened a lot more locations around Atlanta.

 

[mtgldr]

Chase contacted us a few years ago and wanted us to refi and offered a lower rate and no closing. The rep told me that they looked at as we could refi and get a better rate and they wanted to offer us a better rate to retain us.

Chase and Wells both did this several years ago. When the rates kept going down runoff was a HUGE problem for servicers and investors. Refinancing your servicing portfolio used to be a HUGE NO NO in the industry but over time it's become more common. Better to have loans that payoff and get them back than loans that payoff and run away.

 

[captdave77]

Watch out for refi offers. Banks don't do **** for free and for every dollar they put out, they expect four back.

Refi math:

You pay $1,000 per month with 20 years left.
A broker offers to save you money by offering you a 30 year $800 per month plan.
$1,000 X 20 X 12= $240,000
$800 X 30 X 12 = $288,000

That $200 savings cost you $48,000 or 20% more out of pocket.

 

[mtgldr]

Wow we are currently purchasing a home. We are able to avoid PMI due to 20% down. I think 4% is pretty good. Sounds like our closing cost are a little steep at $4100. I tell ha buying now is different than it was 12 years ago when we bought our first. There is more paperwork as well as having to show where your down payment is coming from. I can't imagine the process if we had questionable credit or without down payment. At 800+ credit scores it seems like this would be easier

Steep is relative. We used to be able to say closing costs are 3% or 2.5% or 1.75% but it's different now. It depends on how much you are borrowering and the sales price.
There are certain fees that are not loan amount related, fees that are the same whether you are borrowering $100,000 or $300,000. Then there are fees that are based on the loan amount and sales price. Title insurance, intangible tax to the county, transfer tax to the state, these are all variable. Typically the hard costs on a mortgage are @ $1900 to $2100 + the cost of the appraisal + owners title insurance. This is an average, it may be a little more or it may be a little less but not $1000 either way as long as you are dealing with a "market" interest rate. Lenders title insurance is roughly $3 per $1000 you borrow ($300 for $100,000 loan), intangible tax is $1.50 per $500 borrowed rounded up to the nearest $500 ($300 for $99,800 loan), transfer tax is $1.00 per thousand of the sales price ($150 for $150,000 sales price). Then you have the appraisal, typically @ $400 and optional owners title which is completly dependant on the loan amount and the sales price combined but you can figure roughly $1.25 per $1000 of the sales price + $125 ($250 for $100,000 sales price). I tend to estimate a tiny bit on the high side, using these estimations vs the actual cost may be $100 or $150 high but I'd rather estimate a little high than a litte low.

Do the math and see if your Closing costs are steep.

If you are borrowing $180,000 - $190,000 and everything mentioned above is included, you are getting a market rate (that's a rate of 4% if the market is 4% and no points, not 4.25% when the market is 4%) then your costs are about right.

 

[mtgldr]

Watch out for refi offers. Banks don't do **** for free and for every dollar they put out, they expect four back.

Refi math:

You pay $1,000 per month with 20 years left.
A broker offers to save you money by offering you a 30 year $800 per month plan.
$1,000 X 20 X 12= $240,000
$800 X 30 X 12 = $288,000

That $200 savings cost you $48,000 or 20% more out of pocket.

BINGO you are 100% right, any time you are extending your term you are backing up.
But there are a lot of ways to skin a cat. For example, someone with a lot of Credit Card debt, I could show you how extending your term could allow you get you out of debt (no not by including the credit cards in the mortgage) and as long as your take "freed" money and pay it on your mortgage, you dont actually back up.
That also relies 100% on the borrower paying the additional principle every month and that tends to not happen.

Capt Dave is right, banks, lenders heck no one is in business NOT to make money. But if you do have to borrower money there are ways to do it a little better than others.

I seldom extend terms on refinances, when I provide comparisons I try very hard to keep people at their current term or at least within 5 years of it.

I can't tell you how many people I have told NOT to refinance. Find the savings elsewhere, it's not a good financial decision, you are losing more equity than you will ever get back, it's not worth the savings, eat beans and rice for the next 10 months and pay off your car, change your lifestyle, etc..

Ultimately the customer is always right and if they still wanted to refinance I'll do it, but so far I've never had that happen.

 

[mtgldr]

I'm about to head home, if I missed anything or anyone please let me know. I'm working some tomorrow.

 

[captdave77]

BINGO you are 100% right, any time you are extending your term you are backing up.
But there are a lot of ways to skin a cat. For example, someone with a lot of Credit Card debt, I could show you how extending your term could allow you get you out of debt (no not by including the credit cards in the mortgage) and as long as your take "freed" money and pay it on your mortgage, you dont actually back up.
That also relies 100% on the borrower paying the additional principle every month and that tends to not happen.

Capt Dave is right, banks, lenders heck no one is in business NOT to make money. But if you do have to borrower money there are ways to do it a little better than others.

I seldom extend terms on refinances, when I provide comparisons I try very hard to keep people at their current term or at least within 5 years of it.

I can't tell you how many people I have told NOT to refinance. Find the savings elsewhere, it's not a good financial decision, you are losing more equity than you will ever get back, it's not worth the savings, eat beans and rice for the next 10 months and pay off your car, change your lifestyle, etc..

Ultimately the customer is always right and if they still wanted to refinance I'll do it, but so far I've never had that happen.

The problem is brokers claim to do "this for free and pay that for you". People forget that nothing is "free". Advertising in the mortgage industry is probably the most deceitful of any industry.

 

[Deleted member 38641]

If any of you are Veterans, please do not forget about your VA Benefit in the form of a Guaranteed Mortgage Loan with NO Mortgage insurance, even for a 30 year. I only have about 8 years left to pay on my home and would surely not do a refi myself but, I can see the attraction today with the low rates and adjusted PMI. Mortgage company's sell them back and forth like nothing so it really matters not who holds the mortgage because they will probably sell it to another company anyway. Good luck no matter what you decide.

Oh, CaptDave is 100% Correct. Nothing is Free and there is a reason why they want you to re-finance. They are making money