Author Topic: Mortgage Shopping Options  (Read 1461 times)

RangerOne

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Mortgage Shopping Options
« on: April 27, 2017, 04:54:17 PM »
Hey all. I am trying to do my due diligence and find a competitive rate for a 30 year fixed mortgage. I am looking to buy the condo I am renting from family with 10% down. So shopping around requires a little more work since I have to consider PMI.

My initial short search looked at the two major new lenders:

Sofi:
- Higher rate than most, but no PMI with 10% down. There qutoed rate was around 4.375

Better Mortgage:
- 30 year rates between 3.87 and 4.125%, $135 PMI.

Neither have origination fees, which makes them cheaper than any bank or credit union I have looked at. I closely looked at Navy Federal, Capital One, and my local credit union. All 3 had worse fees, slightly worse rates or PMIs than Better.

What I am looking at now is the nerdwallet tool to compare mortgage offers. They seem to come up with some lower interest rates and PMIs even than Better. https://www.nerdwallet.com/mortgages/mortgage-rates/compare-mortgage-rates?trk_referral_pageviewid=164670d9-f7b9-4d2c-b9e5-7fd9a844008a

Has anyone used this tool to help find a more competitive offer? It seems to come up with some slightly better options than I have been able to find just looking at random.

Has anyone found or used another tool to quickly get an idea of who may have the current most competitive offers?

For instance nerd wallet quickly return an offer that was at 4.125% interest with 0 PMI from Home Point Financial. I am trying to confirm details to see if that is accurate since that would make the offer more competitive than SOFI or Better.

My fall back option is to maybe use a family friend who services loans. I am not 100% if he searches for loans in general or always goes through one lender. Or what his fee would be. But I generally prefer to comparison shop online.

Scortius

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Re: Mortgage Shopping Options
« Reply #1 on: April 27, 2017, 08:39:37 PM »
Sounds like you're doing your homework!

I would be careful looking too closely at the base P&I rate. Make sure you stick to APR.  For example, I also called Home Point, they offered a fantastic rate, but then when you look at the final quote, their monthly premium was the same as my credit union.

I'd actually stay away from Sofi because in your case you would prefer PMI (which can be removed) over a permanently higher rate.

Personally, I'd not want to deal with a personal friend for something of this magnitude, but if it's just setting things up it might work ok.

For me it was easier since they all gave me the same 4.125 base rate with 0 points.  The brokers had lower fees, and my FCU had a member discount, so they were all pretty much the same.  We also put 10% down and PMI was comparable across all offers.

I wouldn't over think it.  Find a few in the same ballpark and figure out who you want to service your loan once you start (or ask who they sell to).  Make sure they can handle what it takes for you to close on time.

CptJack83

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Re: Mortgage Shopping Options
« Reply #2 on: April 28, 2017, 08:14:08 AM »
If you are doing a 10% down on a condo, look into doing a 75% first and 15% 2nd mortgage.  On a condo you get a nice rate break at 25% down on the first.  So by doing a 2nd at 15% you eliminate PMI, and get the lowest rate possible on the first.  The 2nd loan/HELOC you could get close to the Prime rate, it typically would be variable but with money/interest you save on the 1st it would likely be worth it.

RangerOne

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Re: Mortgage Shopping Options
« Reply #3 on: April 28, 2017, 12:02:49 PM »
I will probably at least talk to Home Point. I need to see if its a blip but they show PMI as zero on my search. And the 4% to 4.125% is with no points or negative points.

If the stats there are accurate the final APR would likely be a good deal assuming closing costs remain an average $4k.

The only gotcha I can see without talking to them is, are they not showing an origination fee which could be a nasty 1%. I know better and sofi wont have that.

My continuing curiosity with sofi is basically there is almost 0% chance I will stay in this condo for more than 10 years unless I am forced to by market conditions. As soon as we build up enough equity and assuming we get lucky and appreciation keeps us in the game we will probably look to sell at get a 3 bedroom place.

When I do the math removing PMI, depending on tax changes, can save me anywhere from $50-$100 a month for the next 5-6 years which is about how long it would take to clear PMI. With PMI is gone a 4% loan would save me $50-$100 a month on the back end. So it will take 10-12 years to reach parity. Unless we pay down the loan faster than scheduled. Which I suppose I should consider as a real possibility.

Also from what I understand most mortgage lenders will remove PMI upon request once your LTV reaches 80% based on the original purchase price and home appraisal. I assume they likely take into account whichever is lower as the baseline. So to my understanding I can't escape PMI simply because of a market increase in the condos estimate value. I have to pay down the loan. This also in theory protects me from being trapped with PMI if its value dips.

Because there is a high likely hood we wont own the condo for more than 10 years baring a major housing crash, I am focusing on trying to keep the closing cost for the loan low, so zero or negative points and trying to avoid an origination fee, since that APR boost hurts me over a short ownership period.

Beyond that I am just looking at which ever loan gets me the lowest monthly with interest and PMI. PMI seems to hover around $100 a month. Better quoted $135. Both are better than zillow estimate of $198.

Scortius

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Re: Mortgage Shopping Options
« Reply #4 on: April 28, 2017, 02:34:08 PM »
I will probably at least talk to Home Point. I need to see if its a blip but they show PMI as zero on my search. And the 4% to 4.125% is with no points or negative points.

If the stats there are accurate the final APR would likely be a good deal assuming closing costs remain an average $4k.

The only gotcha I can see without talking to them is, are they not showing an origination fee which could be a nasty 1%. I know better and sofi wont have that.

My continuing curiosity with sofi is basically there is almost 0% chance I will stay in this condo for more than 10 years unless I am forced to by market conditions. As soon as we build up enough equity and assuming we get lucky and appreciation keeps us in the game we will probably look to sell at get a 3 bedroom place.

When I do the math removing PMI, depending on tax changes, can save me anywhere from $50-$100 a month for the next 5-6 years which is about how long it would take to clear PMI. With PMI is gone a 4% loan would save me $50-$100 a month on the back end. So it will take 10-12 years to reach parity. Unless we pay down the loan faster than scheduled. Which I suppose I should consider as a real possibility.

Also from what I understand most mortgage lenders will remove PMI upon request once your LTV reaches 80% based on the original purchase price and home appraisal. I assume they likely take into account whichever is lower as the baseline. So to my understanding I can't escape PMI simply because of a market increase in the condos estimate value. I have to pay down the loan. This also in theory protects me from being trapped with PMI if its value dips.

Because there is a high likely hood we wont own the condo for more than 10 years baring a major housing crash, I am focusing on trying to keep the closing cost for the loan low, so zero or negative points and trying to avoid an origination fee, since that APR boost hurts me over a short ownership period.

Beyond that I am just looking at which ever loan gets me the lowest monthly with interest and PMI. PMI seems to hover around $100 a month. Better quoted $135. Both are better than zillow estimate of $198.

Sounds like you're on the right track.  A few things...

Home Point's direct quote to me was a little bit worse than their online generic quote.  Just make sure you check.

You can drop PMI through value appreciation, but you're also at the mercy of who your lender chooses to appraise your property.  PMI drops automatically when you hit 22% equity.

If you're absolutely sure you're staying 10 years or less, you should strongly consider a 5/1 ARM.


RangerOne

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Re: Mortgage Shopping Options
« Reply #5 on: April 28, 2017, 06:48:57 PM »
I will probably at least talk to Home Point. I need to see if its a blip but they show PMI as zero on my search. And the 4% to 4.125% is with no points or negative points.

If the stats there are accurate the final APR would likely be a good deal assuming closing costs remain an average $4k.

The only gotcha I can see without talking to them is, are they not showing an origination fee which could be a nasty 1%. I know better and sofi wont have that.

My continuing curiosity with sofi is basically there is almost 0% chance I will stay in this condo for more than 10 years unless I am forced to by market conditions. As soon as we build up enough equity and assuming we get lucky and appreciation keeps us in the game we will probably look to sell at get a 3 bedroom place.

When I do the math removing PMI, depending on tax changes, can save me anywhere from $50-$100 a month for the next 5-6 years which is about how long it would take to clear PMI. With PMI is gone a 4% loan would save me $50-$100 a month on the back end. So it will take 10-12 years to reach parity. Unless we pay down the loan faster than scheduled. Which I suppose I should consider as a real possibility.

Also from what I understand most mortgage lenders will remove PMI upon request once your LTV reaches 80% based on the original purchase price and home appraisal. I assume they likely take into account whichever is lower as the baseline. So to my understanding I can't escape PMI simply because of a market increase in the condos estimate value. I have to pay down the loan. This also in theory protects me from being trapped with PMI if its value dips.

Because there is a high likely hood we wont own the condo for more than 10 years baring a major housing crash, I am focusing on trying to keep the closing cost for the loan low, so zero or negative points and trying to avoid an origination fee, since that APR boost hurts me over a short ownership period.

Beyond that I am just looking at which ever loan gets me the lowest monthly with interest and PMI. PMI seems to hover around $100 a month. Better quoted $135. Both are better than zillow estimate of $198.

Sounds like you're on the right track.  A few things...

Home Point's direct quote to me was a little bit worse than their online generic quote.  Just make sure you check.

You can drop PMI through value appreciation, but you're also at the mercy of who your lender chooses to appraise your property.  PMI drops automatically when you hit 22% equity.

If you're absolutely sure you're staying 10 years or less, you should strongly consider a 5/1 ARM.

Yeah I suspect numbers from Home Point would change when getting a real quote. Worth checking its seems like.

I don't think I could ever be 100% certain I will leave in 10 years. Mitigating factors could keep us there. A really huge housing price dip might be the only thing that would.

I have considered a 10/1 arm as an in between, but it really only gets you about a 3.75% @ 0 or negative points, and saves maybe $100 a month.

From what I have seen a 7/1 arm is probably the sweet spot. Its interest rate gets very close to a 5/1 with 2 more years of reprieve.

10/1's seem fairly uncommon. Better has a decent one right now at 3.75% @ 0 or slightly negative points, assuming 10% down on a condo.

CptJack83

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Re: Mortgage Shopping Options
« Reply #6 on: April 29, 2017, 12:12:36 PM »
Your thinking is correct with the NO PMI vs LPMI, in that you need to consider the break even point and how long you expect to keep that mortgage.  However don't forget to include in your analysis the difference is amortization schedules with traditional PMI and LPMI.  Both with pay to $0 in 30 years, but they amortize at much different schedules.  With the LPMI you will be paying LESS principal with each payment initially

For example.  On a 200K loan at 3.875% or 4.375% with NO PMI  The payment at 3.875% is $941/mn and $999/mn at 4.375%. So one would think that is $58/mn more in interest at the higher rate.  But if you breakdown the payment component it starts off at ($646/mn - i & $295/mn -p) vs ($729/mn - i and $270/mn p)  So you are paying $25/mn less principal with the higher rate....

So in your break even calculation for the PMI and NO PMI, you need to also run an amortization table and see what your principal balance will be at any given time....over the 30 years the amortization will match up, but for the first few years especially the higher rate amortizes slower...