One of my lease option tenants is exercising his option to purchase the house after only 6 months. he’s a couple of
days away from signing loan docs and he got the GFE. he got a sticker shock when he saw his closing costs
would be over 6k.
he called me today asking if i could chip in around $2400.
I told him to send me the GFE and HUD1. still waiting on the HUD1 but got the GFE.
his 7.125% first 30 year seems really high for a home owner loan.
His loan officier charged him 1.5% loan origination plus 500 administration fee.
I told him a month ago to spend 10 bucks and buy the book
How to save thousands on you home mortgage
which of course he didn’t.
i’ve suggested he tell his loan officer to drop the origination to 1% and also to ask whether there’s a YSP which I
strongly suspect there is. If so I told him to threaten the officer that he was going to bail on the deal completely.
I haven’t gotten around to committing to a price reduction, and frankly i dont think thats any of my concern how much
he pays for closing.
Unless his credit is crappy, this is a high rate. I get 6-6.25% for cash-out refis on investment properties.
Also, the loan origination should be 1% or less and the $500 admin fee should state “garbage fee” or “pure profit for greedy lender” on the HUD-1.
He should shop this offer a bit. Have him talk to other lenders. He should go in knowing what his credit scores are (approximately) so that they don’t pull his scores unless he get better rates.
My two cents…
I would assume that since this individual is renting land contract, his credit must have some issues. Depending on your tenants credit scores, program type, income, etc. , that rate is not that unrealistic. He/she may be getting some type of ARM (2/28, 3/27) on the first.
Keith is right he needs to know what all of the parameters are and shop around.
Remember credit history “is what it is”. If there are issues with credit, income, assets, LTV, etc., then the rate will increase
If we’re assuming things here it sounds like a typical somewhat expensive loan deal for an unseasoned home buyer with possible credit issues.
He’s only asking for 2400? How about splitting half of that with him? Is it in your best interest for the deal to go through?
If you don’t want to do that. Loan him the money in the form of a note. Get it over time.
thanks for the replies.
yeah i’m thinking of putting a note on the property.
maybe interest only 3rd at 10-12% or something!
The rate and origination are also relative to the loan size. If a broker wants to be paid for his time and service in putting a file together, 1.5% origination is not unreasonable for lower loan amounts. This would also depend upon how much in yield spread that he was making from the interest rate. If for some reason the client was having propblems meeting a debt to income ratio, a broker may have to take 0 on the yield spread for the deal to work. In that case you may see a higher origination.
the loan amoutn is $232k. I dont think its too small.