hi all,

I'm trying to put together a pckage to offer for refi prospects of a truly no-cost loan. I know that many people do "no money out-of-pocket" loans and roll fees into the loan amount, but with regard to a true no-cost loan I'm a bit stumped.

Here's the premise: I hear ads on the radio in my market for a company that says they do a no-cost loan. Where you "come in with a $300,000 dollar loan and you're gonna leave with a $300,000 loan." OK, so far so good, they simply charge a high enough rate where the YSP will cover what they want to profit PLUS the cloasing costs. Only here's the thing I'm having trouble with: I just cloased a cash-out refi. These were the particulars:

L/A: $195,000
rate: 6.875%
Loan type: 30 yr. fixed -SIVA-
Non-owner occ property
Credits scores in the 760's
Self employed

The fees:

Loan origination: $457.50 -was for an aquaintance-
Appraisal: $550 -rent survey - P.O.C-
Credit Rpt: $34
Tax service: $60
Processing: $595
Underwriting: $315
Doc prep: $200
Flood Cert: $25

6 days prepay int: $206.82
Haz Ins Premium: $300
Windstorm Policy: $2041

Haz ins. escrow 10 mos.: $455.80
Tax reserves 2 mos.: $422.67
Flood ins reserve 2 mos.: $340.16

Title closing charges/escrows: $600
Title Insurance: $647
Courier/fax/wire: $75
ALTA Supplements: $50
FF9 Florida Form 9: $64.70

Recording fee: $183
State tax/stamps: $682.50
Intangible tax: $390
Doc storage: $55 <---Title co. charge
Record CMA: $10 <--- don't know what that is

All together that's $8,632.82

Now, it's obvious that almost 25% of that is the Windstorm policy. Here in South Florida everyone has to get a windstorm policy. When these people bought the property that wasn't the law. Now that they've refinanced, they had to add it. So let's say we eliminate that charge because people already have the wiindstorm policy on the refi's I'll be chasing.

that still leaves: $6591.82

That's still 3.38% of the loan. If I want to make even 1.5 points on the back with no origination fee, i need a 4.88% rebate.

And [if this were a different borrower with lesser credit] that's assuming there's no hits to the price for loan amount or LTV or whatever.

So my question is how do you guys, or anyone else, put these packages together? How can I offer this to anyone who reads my ad when i don't know what the heck they have in terms of credit, capacity, etc..?

Is it a bait and switch deal that I'm hearing about?

I work for a lender not a broker so let's pretend for now that I can't go bank shopping. Any suggestions?

Thanks in advance,

Dan

I have originated dozens of no closing cost loans. When rates would dip by a quarter of a point people would call and want to do it again and again. I also had people doing them when they weren't going to stay in the house for much longer. First things first. Escrows are not part of the equation. I let the borrower know that their escrows are theres to take care of. If they want to escrow through the lender they would have to pay that part at closing and get refunded the money from their prior lender. If they were waiving escrows it made it easier but you had to factor the .25 hit for waiving them with most lenderss.I would also only do these on full doc primary residences with loan amounts over 150K. Your scenario shows it is an investment property which has hits as well. Also when doing a no closing cost loan you shouldn't bother charging an origination fee as you are ultimately paying it, it is going in one pocket and out the other. I also negotiated lower fees from the title company. Paying 200/200/200 for settlement fee, title search, title exam is high.
Take out the escrows and you have about 4200 in closing costs including the companies processign fee. On a $300K loan making 2.25% in YSP pays $6750 minus the $4200 you have a $2550 gain. Not bad at all for a couple of hours work. If they waived escrows you would have $6k for $1800 in pay. When I did a bulk of these I used ABN who at the time had a $375 underwriting fee which would have meant more money for me as well. Find a lender with minimal underwriting fees and dump that title company who is making more on the deal than you are

greg4mtgs has no idea what the heck he is talking about...

just kidding.

wud up greg? how's the fam?

Well Well Well. A screen name from the past. Family is doing well. Little one just turned
2 1/2. Still waiting for the tiles to be put on my roof though. I see you found this site. I just got back from Marco Island a couple of weeks ago for a statewide FAMB meeting. How are things with you and yours on the west coast. I am trying to sell my mother and grandfathers house they both passed away last year

Yeah you have to have a higher loan amount to make it work.

But, long term it is usually better to pay the closing costs. Short term is where this is better.