Mortgage interest rate and credits?

[jeromedawg]

Hey guys,

Not sure what happened to the thread I started here asking for advice around preapproval letters and sellers potentially asking for more money depending on what you disclose in the letter. If I violated any forum rules, it wasn't clear to me nor was I informed. So if I mod/admin is by chance reading this, I'd appreciate if someone could reach out via PM to fill me in so I don't make the same mistake again.

That said, I've been looking at different rate options for preapprovals and was curious if you guys recommend trading a lower interest rate for less loan credits or higher loan discount point fees vs a higher interest rate for more loan credits or lower loan discount point fees. I'm checking through PenFed and it seems like the 2.87% rate is the one where they start offering credit (in this case $2920) and the 2.75% rate is where they take fees ($730 worth). This is at 20% down. Seems if I put a higher percentage downpayment down the lower the rate I can get where I can actually get loan credits instead of fees.

This would be the first mortgage I'm taking so not sure what the best route to take is.

[waltworks]

It's a gamble depending on how long you plan to hold the mortgage. If you're absolutely sure you'll be in the house for 30 years, then paying for points/lower rate can make sense. If you end up moving in a year, though, whoops.

So there's not a "right" answer, it'll depend on your own guess as to how long you'll have the mortgage. From there you can calculate the potential payoff of buying a lower rate.

-W

[Another Reader]

PenFed has become a PITA.  They don't perform well.  Shop at AimLoan for starters, then a good broker.  Agree with Waltworks on the rest.

[jeromedawg]

Thanks guys - will avoid PenFed and look into the rest.

What are some "red flags" as far as good vs bad brokers and how to weed them out? I've also been working with a broker at Wells Fargo and just started a conversation with an independent mortgage broker my realtor referred me to.


BTW: slightly off-topic question but does anyone pay much attention or give much important to the price per sq foot in relationship to the overall price? I've noticed with single family homes the smaller sq footage single level/ranch style homes typically go for more per sq ft vs larger homes (commonly 2 story) that are higher in price but less per sq ft.

[waltworks]

1: Things get a little cheaper per square foot to build as they get bigger (2 story house with twice the square footage has the same roof as the one story, drywall guys will bid a little lower per square for a bigger job, etc), all other things being equal.
2: A lot of house value is land, so you can't compare unless the lots are similar size/location/desirability.

-W

[jeromedawg]

1: Things get a little cheaper per square foot to build as they get bigger (2 story house with twice the square footage has the same roof as the one story, drywall guys will bid a little lower per square for a bigger job, etc), all other things being equal.
2: A lot of house value is land, so you can't compare unless the lots are similar size/location/desirability.

-W

Ah ok that makes sense. Right now I'm looking at two SFH homes - the first is a single story at $730k with 1450sq ft and dated interior (built 1971) on a 6000sq foot lot ($503~/sq ft). The second is a 2-story at $905k with 1994sq ft and turnkey modern interior (built 1989) on a 5750sq foot lot ($454~/sq ft). Oh the former has no HOA dues either whereas the latter does but supposedly includes membership to the association gym/pool/small sports facility and is also very close to a lake with good fishing lol.

[apples2apples]

Just went through a similar process. 20% down but on a conforming loan (unclear if you are a jumbo at that price).  Cannot say enough good things about the Costco lending program.  Very easy and buying a costco membership to do it is still worth it.  Just got 2.5%, $250 origination, and 2k in credits through Strong Home Mortgage.