HELP - Loan Origination Fee

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[quote author="citypicture" date=1253092075]I am currently buying a home and am not quite sure how "buying down the rate" works and am wondering if my lender is trying to pull a fast one on me.



I am being charged a $3,809.20 origination fee to buy down the rate from 4.5% to 4.375% on a 5/1 ARM $387,586.00 loan amount.



Is that correct? Can anyone explain how this works?</blockquote>
The first question I have is why are you getting a 5/1 ARM with 30-year rates are so low??? You should not be charged almost 1pt to buy down your rate by only 1/8%. Sounds like you are dealing with a shady lender.
 
[quote author="USCTrojanCPA" date=1253093298][quote author="citypicture" date=1253092075]I am currently buying a home and am not quite sure how "buying down the rate" works and am wondering if my lender is trying to pull a fast one on me.



I am being charged a $3,809.20 origination fee to buy down the rate from 4.5% to 4.375% on a 5/1 ARM $387,586.00 loan amount.



Is that correct? Can anyone explain how this works?</blockquote>
The first question I have is why are you getting a 5/1 ARM with 30-year rates are so low??? You should not be charged almost 1pt to buy down your rate by only 1/8%. Sounds like you are dealing with a shady lender.</blockquote>


It makes my monthly payments a lot lower with the 5/1. Well, I have to pay PMI as well, does that justify the high origination fee?
 
your monthly payment will be alot lower if you rent.



im probably a fanatic, but anything other than a 30 yr fixed is just, well, uncivilized.
 
[quote author="citypicture" date=1253094379][quote author="USCTrojanCPA" date=1253093298][quote author="citypicture" date=1253092075]I am currently buying a home and am not quite sure how "buying down the rate" works and am wondering if my lender is trying to pull a fast one on me.



I am being charged a $3,809.20 origination fee to buy down the rate from 4.5% to 4.375% on a 5/1 ARM $387,586.00 loan amount.



Is that correct? Can anyone explain how this works?</blockquote>
The first question I have is why are you getting a 5/1 ARM with 30-year rates are so low??? You should not be charged almost 1pt to buy down your rate by only 1/8%. Sounds like you are dealing with a shady lender.</blockquote>


It makes my monthly payments a lot lower with the 5/1. Well, I have to pay PMI as well, does that justify the high origination fee?</blockquote>
If you can't afford a home with a 30-year fixed mortgage, then you can't afford the home no matter what kind of other loan program you get. 30-year fixed (or 15-year fixed) or BUST!
 
[quote author="citypicture" date=1253094379][quote author="USCTrojanCPA" date=1253093298][quote author="citypicture" date=1253092075]I am currently buying a home and am not quite sure how "buying down the rate" works and am wondering if my lender is trying to pull a fast one on me.



I am being charged a $3,809.20 origination fee to buy down the rate from 4.5% to 4.375% on a 5/1 ARM $387,586.00 loan amount.



Is that correct? Can anyone explain how this works?</blockquote>
The first question I have is why are you getting a 5/1 ARM with 30-year rates are so low??? You should not be charged almost 1pt to buy down your rate by only 1/8%. Sounds like you are dealing with a shady lender.</blockquote>


It makes my monthly payments a lot lower with the 5/1. Well, I have to pay PMI as well, does that justify the high origination fee?</blockquote>


Seriously, you (generally) literally cannot afford the home if you cannot afford a 30-year fixed loan. I'm looking for a home as well, and the maximum house I can afford is the maximum house I will buy. When I say "afford" I mean it - afford to save, afford to pay for the myriad costs associated with owning a house, afford to take vacations, have kids, go to dinner - afford to enjoy my life, not enslave myself to a mortgage payment.



With rates at historic lows, an ARM is NOT a good option, as the rates will only go up. Unless you have some sort of upcoming inheritance, structured payout or legal settlement, etc. that you can use to pay down/off your mortgage, an ARM is a bad idea.
 
[quote author="citypicture" date=1253092075]I am currently buying a home and am not quite sure how "buying down the rate" works and am wondering if my lender is trying to pull a fast one on me.



I am being charged a $3,809.20 origination fee to buy down the rate from 4.5% to 4.375% on a 5/1 ARM $387,586.00 loan amount.



The lender said that the buydown cost is .25 pts not 1 pt.



Is that correct? Can anyone explain how this works?</blockquote>


Lots of responses, but none addressing your questions.



I do not know you and do not presume to know your situation.

I also do not pretend to know what's best for that unknown situation.



Some of the lenders here can chime in to verify whether or not those origination costs are reasonable.



Here's a calculator to help you come to your own conclusion:

<strong><a href="http://www.dinkytown.net/java/MortgagePoints.html">calculator</a></strong>



Good luck in your adventure,

IrvineRealtor
 
[quote author="citypicture" date=1253092075]I am currently buying a home and am not quite sure how "buying down the rate" works and am wondering if my lender is trying to pull a fast one on me.



I am being charged a $3,809.20 origination fee to buy down the rate from 4.5% to 4.375% on a 5/1 ARM $387,586.00 loan amount.



The lender said that the buydown cost is .25 pts not 1 pt.



Is that correct? Can anyone explain how this works?</blockquote>


Are you sure you didn't have an origination fee before at 4.5%?



If you didn't, then yes, paying a point for .125 in rate is not a financially wise decision.



Do you have your GFE with the 4.5% rate? I'd betcha there is an origination fee in there.
 
[quote author="diane09" date=1253132723][quote author="LoudRoar" date=1253095292]your monthly payment will be alot lower if you rent.



im probably a fanatic, but anything other than a 30 yr fixed is just, well, uncivilized.</blockquote>


I agree with this. I'm thinking exactly the same thing.





Regards,

Diane

Pret travaux</blockquote>
<img src="http://www.deskpicture.com/DPs/Miscellaneous/spam.jpg" alt="" />
 
I recommend ARM loans where appropriate. ARM loans in today's environment are a reasonable risk choice for some.



Sub $417k ARM's are at 3.75% (Conforming, 1.0 point or so...) with a 2% cap per year. Assuming worse case scenario 3.75, 5.75, 7.75 the average rate over 7 years is 4.6% - lower than today's 5.0% 30 fixed. Seven years is a long, long time. If the rate goes to 9.75, it's cap, the average is 5.25%. Depending on circumstance an ARM can be a correct choice.



I've said earlier that handguns aren't for everyone, neither are ARM loans. Both handguns and ARM loans can work well in the right circumstance. Informed and educated buyers are best served when given all choices, including ARM's.



That said, the ARM cost to buy rate down is tossing good money after bad. If the break even point is 4 years or longer. Pass.



My .02c



Soylent Green Is People
 
That's a great, if blasphemous, post from SGIP. I don't recall the OP saying they couldn't afford a 30 year fixed. This speaks to the fundamental misunderstanding many people suffer from.
 
[quote author="Soylent Green Is People" date=1253155142]I recommend ARM loans where appropriate. ARM loans in today's environment are a reasonable risk choice for some.



Sub $417k ARM's are at 3.75% (Conforming, 1.0 point or so...) with a 2% cap per year. Assuming worse case scenario 3.75, 5.75, 7.75 the average rate over 7 years is 4.6% - lower than today's 5.0% 30 fixed. Seven years is a long, long time. If the rate goes to 9.75, it's cap, the average is 5.25%. Depending on circumstance an ARM can be a correct choice.



I've said earlier that handguns aren't for everyone, neither are ARM loans. Both handguns and ARM loans can work well in the right circumstance. Informed and educated buyers are best served when given all choices, including ARM's.



That said, the ARM cost to buy rate down is tossing good money after bad. If the break even point is 4 years or longer. Pass.



My .02c



Soylent Green Is People</blockquote>
Maybe Soy, <strong>but</strong>, it seems to me most folks do not choose the ARM for long term or well thought out reasoning. It seems they choose the ARM because either it is the only way they can get into the house they want, or some knucklehead is making more money off them with an ARM, and they do what their mortgage broker says they need to do.
 
Let us consider arm loans with the information we have today.



We already know they want to lease the REO's. Basically hold until a market rebound. This is backed up by the fed. There are several possible senarios and factors. One would assume that renting REO's would increase the supply of rent property, therefore reducing costs. However, the backing of all this is by one entity, the US government. Therefore, it seems they have an interest to keep rents high. The reasoning is two fold. First, keeping rents high influence home buying. Why throw away money when you can buy, the old adage goes. Second, the actual lease is producing income, when as the primary lender, the US gov needs it. So not only does it assist the governments investment, but it helps the public by igniting the market.



If incomes don't increase, or prices do not fall, ARM's will be all the craze, again. Why? Because people cannot afford these homes on their income. Ask yourself, what is the bigger deal killer: the down payment, or the income? Kool aid income requirements started this mess. 0 down started this mess.



Good luck with a zero down today. Can you still screw with the income requirement? You need both but because everything is still disproportionately unaffordable, ARM's are here to stay.



I for one welcome our price fixing overlords.
 
Awgee - The post assumed that the lender had some level of ethics and experience. That's a pretty big assumption I'm sure you'd agree with!



I'm a firm believer of informed choice. It's best to present all options in their best and worse case scenario so that the borrower can make a decision without looking backwards saying "why didn't that sumbich tell me about this or that".



At least the ARM loans have tighter underwriting guidelines than fixed loans to hopefully prevent a relapse into bad borrowing.







Loud Roar - ARM's will not make a comeback for a great period of time. Too many people fear them - some for great reasons, others based on misconceptions - and thus it will take years before ARM's are more than 10% of all originations (currently I think it's 3%)



Zero down and ARM loans were logs on the woodpile. Stated and No Doc loans were the napalm that turned a campfire into the bombing raid on Dresden. If I knew how to load a picture I'd put one up - rows and rows of bombed out houses. That is the end result when morally challenged borrowers knowingly took out dangerous financial products via criminal loan officers egged on by the greatest collection of adults with a third grade education: Realtors.



My .02c



Soylent Green Is People.
 
[quote author="Soylent Green Is People" date=1253166691]



and thus it will take years before ARM's are more than 10% of all originations (currently I think it's 3%)



My .02c



Soylent Green Is People.</blockquote>


I just want to make sure I am reading you correctly. Are you saying that ARMs are currently only 3% of loan originations?
 
[quote author="Soylent Green Is People" date=1253166691]If I knew how to load a picture I'd put one up - rows and rows of bombed out houses.

My .02c



Soylent Green Is People.</blockquote>


putting a picture up is EASY.



If it is on your computer:



1. Go to imgur.com

2. click browse

3. find file

4. upload

5. on the left hand side find "message board" -- copy and paste





If it is online: right click, copy image location, paste



http://www.ourgreatyarmouth.org.uk/images/uploaded/scaled/0ag200ih_s.jpg
 
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