Commitment questions regarding broker fees and points

[LouLouNJ]

My broker just sent me a copy of my commitment and I'd like some advice. First the background: DH's mid score is 660, house is in New York State and is $435k. The broker has a fee of 2% plus an application fee, processing fee, and of course I have to pay for the appraisal. I haven't questioned the integrity of my broker because she has really been working hard on getting us a good rate, we are doing 100% financing and we have no assets. Here is the commitment:

The broker got us an 80/20 that is ARM with a rate of 5.9% with two points, otherwise the rate would be 7.5%. The 2nd loan rate is 8.9%. In reading the commitment, it states that the broker gets a 1% rebate from the lender on the first loan. Am I correct now in my guesstimate that the broker is actually now getting a total of 5%? Or are the points being paid to the lender? On the commitment it states "NA" under points and just lists the broker rebate.

I'm sure you'll need more info, but any expertise is appreciated. Between the points and broker fees, plus the legal side of closing costs, this is getting to be very expensive and I do not want to go in blindly. Thank you in advance.

[Radio_Guy]

Hi Dawnoholic,

First off -Welcome -

Second, it sounds like your broker is getting 2 points from you and 1 point on the back end from the lender. However, this is a little muddy... You didn't state where this information came from:

The broker got us an 80/20 that is ARM with a rate of 5.9% with two points, otherwise the rate would be 7.5%.

Is this what the committment letter says or what you are saying?

Also, How MUCH is the application fee? Sometimes this fee is 1% additional.

How MUCH is the processing fee? Sometimes the processing fee is a flat $250.00 or so, sometimes it is an additional 1%.

IMHO with raising interst rates I suggest that you might want to go with a fixed rate loan even thought the rate is higher. This is just my opinion at first glance.

[LouLouNJ]

OMG, I did remove it, I didn't even realize it was in my profile! Can you please edit your post to remove my name? Thanks!

The broker is the one who told me she had to buy down the rate to 5.9%, on the commitment it only states the rate as 5.9%, doesn't list and points, and lists 1% rebate to the broker.

[LouLouNJ]

The application fee is $495, the processing fee is $450, plus credit report fee and appraisal.

[Radio_Guy]

Done

[Radio_Guy]

The application fee is $495, the processing fee is $450, plus credit report fee and appraisal.

Well this is NOT an additional 1 % this is 0.1% and probably goes to the brokerage house and the loan processor. This doesn't sound excessive.- (Charles - a little help here !!!)

As far as buying down the rate, It is somewhat unlikely, you need to buy down the rate if the Broker is getting and additional 1% percent on the back end. AND

On the commitment it states "NA" under points and just lists the broker rebate.

supports this position.

So it sounds like the Loan Officer is getting 3% Plus the fees of (about,) 0.2% for the brokerage house and the loan processor.

The moderator (Charles,) is a curent mortgage loan professional who can weight in with more information if I have mis-read this information.

Best wishes,

[LouLouNJ]

As far as buying down the rate, It is somewhat unlikely, you need to buy down the rate if the Broker is getting and additional 1% percent on the back end.

So it sounds like the Loan Officer is getting 3% Plus the fees of (about,) 0.2% for the brokerage house and the loan processor.

The moderator (Charles,) is a curent loan professional who can weight in with more information if I am all wet.

Best wishes,

But if I'm paying the broker 2% plus two points, plus they are getting 1%, they are getting a heck of a lot of money! Far more than 3%, right? What should I do? The house will be done in approximately 4 weeks, and did I mention that the builder is the broker's close relative?

[Radio_Guy]

But if I'm paying the broker 2% plus two points, plus they are getting 1%, they are getting a heck of a lot of money! Far more than 3%, right? What should I do? The house will be done in approximately 4 weeks, and did I mention that the builder is the broker's close relative?

Yes - it does sound expensive for a variable rate loan.

I think you need to contact Charles, the moderator, he is in a better position to advise you and current rates and terms. ( I left Banking 5 years ago so my knowledge and experience is somewhat dated.)

Charles Clark www.bestmortgageinfo.com

http://debt-consolidation-credit-repair-service.com/phpBB2/viewtopic.php?t=3870

Also there is a great thread for more info. You can click on Charles PM button to send him a private message asking him to look this thread in partiular and help you.

[Radio_Guy]

You know if I could spell I would be dangerous...

You can click on Charles' PM button

[firstsource]

Well, it is a bit confusing, if you will send me a copy of the GFE (Good Faith Estimate), I might understand it better, but from what I can tell....

1) Application/broker fee, probably goes to the broker she works for, processing does. 495 application/broker fee is about average, Processors charge between 325-375 for a first, and another 100.00 or so for a 2nd.

2) there is probably a 695-895 "underwriting fee", which goes to the lender That should be listed on the GFE also

3) If the GFE states that she is getting 1 % from the lender, then she is. If it is listed as 0-3% that is just a range, so the lender is covered if they have volume specials etc. I would for sure ask her.

4) If she is getting 2 points for loan origination, and you are happy with that, then that is good for both of you.

5) Now, a key point. It is not legal to list a loan discount point, unless it is truely going to the lender to buy down your rate. I would ask her to make sure that she is using that 2% to buy down the rate, and that the 2% will not be moved from line 802 to line 801.

So, if she is listing things properly, then great, if not, then that is an infraction.

Now, I usually don't stick my nose in other LO's business, but my concern about the loan is how long your ARM is for.

Unless there are some unpaid collections or charge offs/or judgments/ or BK in the past 7 years, For that rate you should not be a 2 year ARM.

I suggest that you have a 5 year ARM at the least. I have a "Asher banking report" that I can send you, that shows that most people either refinance or buy a new home every 5-7 years. One of the things in the report that sold me on the reality of that is the fact that lenders base their 30 year rates on the 10 year bond-they would not do that if their experience was that loans lasted longer than that.

Charles

[LouLouNJ]

BIG misunderstanding on my part...to make a long story short, the broker's fee IS the two points, we are not paying both. I misineterpreted based on the fact that I knew the fee was 2% and when they told me they had to pay 2 points on the loan, I assumed that was in addition to the 2%. All that worrying and obsessing all day for nothing!!!

As for the loan terms, we did have a chargeoff in the last 7 years that has been paid, perhaps that is why the 2 year ARM, but I'm happy with the rates so I think I'll just quit while I'm ahead, I did enough damage for one loan period!!

I don't have the GFE yet, hopefully tomorrow, they were waiting on the lawyer to get title, which they got today.....