1. ... how fast the lender could turn around the paperwork. This being a HUD and time running out, the lender would have to be pretty quick in getting their paperwork handed in to the title company. If not, I could be charged a late fee by HUD for each day the closing is delayed (I think it's $25 or $35 a day).
2. ... what fees the lender would impose (i.e., prepay penalties, origination, etc). He said he has them available, but has never used them. Hmmmmm.
He was trying more to push us the following deal ... Put 5% down at closing and finance the remaining using a short-term ARM at 8-9%. Since the loan has no prepay penalty, we would immediately (and I clarified 'immediately' being within a week or two of closing) refinance using an option ARM. He explained an option ARM - at least this specific option ARM - adds flexibility, allowing the borrower to pay either at the full rate, an interest-only rate, or a
My wife and I were supposed to discuss this more in-depth over the weekend, but her parents stayed with us and we all went on an outing those two days. Therefore, we never had the time to discuss it. My wife is very much against any financing that takes more money out of our pocket (which I don't blame her). She wanted me to get this financed at 100% and immeidately retail it. Now, I'm thinking buy with 5% down, refinance to recop our costs, and L/O it. The problem, though, is that the loan officer has to have a decision by the end of the day today.
Also, my agent sent me an email last Friday. Unfortunately, I didn't read it until Saturday. She wants me and my wife to sign yet another amendment. Evidentally, the amendment the HUD title company had us sign wasn't good enough for Southwest Alliance (the HUD processor for our region). They reworded it to their liking and now want us to resign it. My agent said they have had one problem after another with these people and her broker decided to file a grievance (actually, she said her broker asked her company's national representative to file a grievance).
I can't do anything but laugh at all this. What the $%@# else is going to happen? ;-)
6 comments:
Well first off, why couldn't you just start off with the pay option ARM? Why would you have to get one loan and then refinance with another immediately? This seems like a great way to have to pay closing costs twice, although the mortgage broker wont make any moeny off the first one because the lender will charge him back for having it paid off so soon (they will usually charge back if it gets paid off within 6 months). Also, be careful with a pay option ARM - like you know the interest rate can change monthly, which in my experience can mean the rate can rise pretty quickly. Its not a reverse amortization either, its negative amortization, meaning your balance (and minimum payments) would start to increase. Have you considered like a 3/1 or 5/1 interest only ARM? Or if the rate changing doest bother you too much - how about an interest only HELOC? That way you dont have any closing costs (usually). For future refernce, you probably want to find a broker that DOES have some experience in this area. It makes things go alot smoother. The refi boom is over so you'll have the problem of some broker that lived off of refi's (and only know how to do refi's)now getting desperate for business.
Thanks Ryan. I am seriously considering just closing and be done with it. IOW, close and not refinance. The issue is that I've put a lot of money into the deal already, and would like to recoup some of my costs. It's funny because the loan officer was spouting how I could get $16,500 if I refinance to pay off the 5% down and have some for holding/reserves. He completely glazed over the fact that I still have to recoup my closing costs from the first loan and the refinanced loan. That's probably $5k-6k out the window on my end.
You're correct about negative amortization - my fingers were typing faster than my brain was thinking. I am very wary of anything like that for buy-n-hold strategies. I think I'll tell him to go through with the 5% down lender, and do some heavy thinking between now and closing on what I'll do immediately after closing. The cashout refi sounds nice, but I don't want quick relief and future pain if I can avoid it.
You could still look at a HELOC for cash out. Wells Fargo has been pretty good about communicating with me about them. You start at about 5.75% I think and there are some adjustments from there based on occupancy, your credit, etc. I know they will do 100% interest only, so even if you wanted to get it just as a second (which is what its usually used for - but Ive even bben considering them for short term firsts) you could cash out and not have to worry about closing costs (they are minimal if there are any AT ALL on their HELOCs). I'd recommend calling their toll free number off their web site if you want more info, since with local branches it can be hit or miss with the quality of the banker - but I've had good luck with their phone reps being pretty knowledgeable (at least they seemed to be).
Thanks again, Ryan. I may just do that. You do mean HELOC's on the subject property, correct?
My loan officer just called and said I can nix the 5% down deal. He can do an interest-only at 7.875% with an origination increase of 0.75%. This means I'd have to pay about $750 extra vs. the ~$5,000 for the 5% down route. The con is I won't get the $750 back, but I can live with that for now. Still better than going the HML, but I'm sure there are better deals out there.
Yeah, I mean a HELOC on the home you are buying not on your personal home. Remember that things like loan origination are just charges that your broker charges. It should be negotiable. Don't let him tell you that you HAVE to pay it, thats his charge for doing the loan. He can charge whatever he wants to charge. Also, on the Truth in Lending, you'll see a YSP or Yield Spread Premium - thats how much the lender is paying him for charging a higher rate than their "par" rate. If you're paying any points then the YSP should be 0%. The YSP comes from the lender, but if hes charging alot for loan origination AND hes getting a kickback from the lender he may be trying to get as much out of you as he can, so keep an eye out. Maybe you should ask around but 7.875% for interest only seems pretty high to me. Those rates are generally lower than principal and interest rates.I would think youd be able to stay pretty close to 6%, but then again I dont know all the factors. You may want to check with some other brokers and see if any of them can give you a general idea so you can make sure hes not charging you a ton for loan origination AND jacking the rate up to make money off of the lender as well.
Wow, Ryan. Thanks for the tips! I'll definately check out the YSP percentage and do some more research. Anything that can lower my expenses will definately be something worth checking out! Also, I thought the rate for the I/O loan was high, too. I figure my current debt is probably a factor - not a huge amount, but enough to tip the scales a little. My FICO score average is good (738), so I'm not a big risk. I'll give the loan officer a ring when I get off work to find out more. I'll also take your suggestions regarding other lenders and the HELOC refi. Thanks again, Ryan!
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