Hi,

I am first-time home buyer. I am trying to shop around for mortgage pre-approval. I called up a lender institution and the broker there provided me with a good-faith estimate. He also said that as I'm shopping around, should I find a better deal, they will match it. Since I am new to this, I am trying to figure out if his estimate represents a 'good' deal. So I have some questions.

Basically, he provided me three scenarios. I told him a condo with a price of $245,000 with $2450 in state tax and $200/month condo fees. He provided me with a) 80% loan, 20% down b) 90% with 10% and PMI and c) 80% with 10% 2nd loan and 10% down, no PMI. The assumed interest rate is 6.75% with 30 year fixed mortgage. My yearly income is $77K and I have no debt at all.

My credit scores are 694, 724, and 801 so I will probably either get the above rate or a little lower I suspect.

I will provide the breakdown of one case (90%-10% w/ PMI):

800: Items Payable in Connection with Loan
Loan Origination: 0.25% $551
Application Fee: $375
Fedex: $15
Underwriting: $165
Doc Preparation: $85

900: Items Required by Lender to be Paid in Advance
Prepaid Interest (16 days): $652
Hazard Insurance Premium (12 mo): $300

1000: Reserves
Hazard Insurance Reserves (2 mo): $50
PMI (3 mo): $208
Tax/Assessment (14 mo): $4088

1100: Title Charges
Notary: $50
Title Insurance Premium: $1425
Overnight Fee: $16

1200: Government recording/transfer charges
Recording Fee: $200
State Tax/Stamps (1%): 2450
Endorsements: $200

1300: Additional Charges
It says 0 for survey fee (home inspection) and 0 for pest inspection although I understand I will pay to get these things done.

Total closing costs: $5532.25
Total reserves: $5298

Total Monthly Mortgage Payment: $2016

For 80% 20%, the mortgage payment is $1788 and closing costs are $5471 with reserves at $5018

For 80% 10% 10% no PMI, mortgage payment is $2044 and closing costs are $5471 with reserves at $5018.

My questions are as follows:

1. I plan to call up Wachovia/Bank of America. Will they provide me a good-faith estimate without having me complete an application/run credit check? I want to know if they can do better than this. If so, then I can apply for pre-approval there and/or take it to this broker and see if he'll match it. Btw, these guys also do free pre-approvals and provide a formal commitment letter also free of charge good for 4 months. I was reading on Wachovia's website, that they will provide a good-faith estimate within three business days of receiving my application. This means they are going to run a credit check etc which I don't them to do (I don't want every bank running a credit check) and charge me an application fee. Also, I was reading about BofA Mortgage PLUS but I am not a US citizen so I will not qualify. Plus I suspect you need credit scores in excess of 800 to qualify.

2. The closing costs look quite minimal. Are they? I am not sure since I don't know if these fees are reasonable or not. Can banks like Wachovia/Bank of America and/or other lenders do "significantly" (i.e. a difference of at-least $500) better in their fees, assuming they are giving the same rate of 6.75? Many banks on bankrate.com advertise a lower rate but with points. I don't have the money to purchase the points nor believe it is in my interest to do so.

3. I am not sure what kind of closing costs I can ask the seller to pay or share with me?

4. Can someone give me a ball-park estimate of what a reasonable closing cost is for a property with a value of $245,000?

5. Also I have only 10% for down payment. Given this, 80% 10% PMI would be better than 80% 10% 10% no PMI because PMI is tax deductible right? From the above, going with the latter actually means I'm paying slightly more and not getting deductibility.

6. Is there anything else you'd advice I watch out for?

7. Finally, what is the general sense of mortgage rates? Which way are they heading in the next 3-6 months?

Thank you for taking the time to answer so many novice questions.

I am NOT a mortgage professional but since no one else has answered yet I will try to give you some advice.

- I used a local mortgage broker - one credit pull for the whole process and they present your file to a myriad of lenders in order to get you the best deal. They do the work for you.

- A good mortgage broker should use a lender that doesnt charge a lot of junk fees. SHOULD

- As a part of the offer on the property you are to purchase you can ask for a Dollar amount in closing costs. On my recent purchase the seller paid all of mine. Most of my clients go this route too. Use the GFE to approximate what to ask for.

-m I have no concrete advice on where rates are going, but since I bought they have only gone up. You may want to lock with a free float option.

Hi,

Thanks for taking the time to respond. I've been calling up more banks/lenders. Some are happy to provide a GFE. Many offer a 5 minute sales marketing pitch saying GFE is a waste of time without knowing the 'actual' interest rate you can lock in. They were pressuring me to file an application. Until I got fed up and said either give me a GFE or you are wasting my time. Eventually they relented. Some flat out refuse to do so unless I file a pre-approval application (and I'm a customer of their bank hah!). Sounds like a very cutthroat environment to be doing business in.

Do mortgage brokers charge fees from me if I use their service or do they collect them directly from the lenders as result of getting business for them?

Thanks

There is an origination fee - usually 1-2 % - I got a 1% on mine. Not too bad, think 1k on a 100k mortgage. Then they make money when they sell it as well.

I would check into a local broker, they will usually give you a pre-qual amount based on the numbers that you give them. Then you can actually apply where they run credit, check employment etc. Throughout my entire process with a broker my credit was only pulled once from each bureau, and that report was used for the entire App.

Also a Survey and Home Inspection are NOT the same thing.

A survey is required, whereas a Home Inspection is not (although highly recommended).

The offer looks good. Closing costs look reasonable. I have a question about your status in the United States. Are you here on a work visa?

It is federal law that any lender taking a loan application on you sends you loan disclosures including a Good Faith Estimate within 3 days of your application.

Brokers can do either or on collecting fees. It is normally only collected at closing. You typically pay for your appraisal.

It is up to those 2 lenders on the details you ask about.

Ball Park closing costs are usually 3000-6000.

Usually the seller could pay all of your closing costs on a transaction that large.

Ask these lenders about FHA. Only a 3% down payment is required, less expensive monthly PMI, and you might even get a better interest rate. However, they are a little more strict on requirements on a condo.

Yes I'm on a H1 employment visa (been in the US for 10 years, first 8 as a student, last 1.5 years working). I am in the middle stages of my permanent residence application and that may take a couple of years to get processed/approved. I talked to my realtor and asked if my immigration status would be an issue in purchasing a property/getting a loan. She said no, but I'll double check with the loan officer. Are there any restrictions on that?

I was looking at FHA for PA. I believe I don't qualify since my income is a bit higher than the limits (If I remember correctly, the limit is $72K for my county, and I make $77). Also since its a government assisted program, there might be citizenship requirements.

I have 10% down payment saved and readily available. My family members might be able to loan me another 10% to avoid the PMI but I'm keeping that as a worst-case option. I just want to minimize the closing/settlement costs as much as possible.

Thanks for your time and help.

800: Items Payable in Connection with Loan
Loan Origination: 0.25% $551
Application Fee: $375
Fedex: $15
Underwriting: $165
Doc Preparation: $85
---------------------------------------------

Axl- These are the actual lenders fees that they will be charging for you loan, and these are the only fees that could be negotiated with the lender.The other fee you listed are based on Title company and Insurance you can negotiate directly with those companies as they determine the cost not your lender. State and County fees such as Taxes if you can get those reduced let me now how you did it.

The PrePaid Interest is paid at closing, and is based on what day your loan closes on. If you close on the 15th of August your First payment will be due on October 1st, but you will pay the interest for the days remaining in August which would be 17 days. If you closes on the 30th of August you would only pay 2 days of Interest at closing, but your first payment would still remain October 1st.

I did not see an appraisal fee which is probably between $300 and $500 where you live. Some lenders require this to be paid upfront as the appraiser will be charging if you close on the home or not for their work.

Based on the interest rate and your Visa status I think you may be closing on an FHA loan. The income limit you mentioned is for Govt. Bond home first time home buyer programs which offer a lower rate and payment to people making less then a certain amount of annual income. FHA is an excellent loan. If it is FHA your Mortgage Insurance will be attached to your loan for a minimum of 5 years no matter the size of your down payment. FHA's mortgage insurance will be removed once your have carried the loan for 5+ years, and your loan amount is 78% or less then what your purchased the home for.

From a fee standpoint I would say those are pretty good. You are correct that other lenders may be offering a lower rate, but as we all know there is no such thing as a free lunch. If it sounds to good to be true it probably is, and other lenders will be making up the money somewhere else.

Also since you are a first time home buyer don't forget to check into the $7500 tax credit that the President just signed in. I am not a Tax Professional so you will want to check your scenario. http://www.federalhousingtaxcredit.com/


Good Luck and Have Fun!

Hi TN-Mort-Broker,

Thanks a lot for your advice. I will ask the bank if I'll be offered an FHA. I was not aware of the first time home buyer tax credit but reading through it, it looks I will qualify and it will be an immense help. Thanks for making me aware of this.

Kind regards.