Refinance rates and fees

8 Replies

I recently had an independant mortgage broker send me a fee sheet on a house I was looking at refinacing. The home is valued at $155K and I was going to pull $116k out. I have excellent credit and ZERO debt. My bank statements showed over $200k a year running thru my accounts so I felt as if I was a solid candidate for refinancing my rental property.  I thought these were very high BUT I am here to ask the pros for help. I have owned the property over 2 years and have a good tenant paying $1,350 a month for the last 4 months.

Terms

That rate is at least a full point higher than I expect to see in the market at the moment for a NOO, even if it is a cash-out. Fees pretty hefty also, but not ridiculously out of line. Unless you're in a hurry, keep shopping.

Originally posted by @Colbi Ight :

I recently had an independant mortgage broker send me a fee sheet on a house I was looking at refinacing. The home is valued at $155K and I was going to pull $116k out. I have excellent credit and ZERO debt. My bank statements showed over $200k a year running thru my accounts so I felt as if I was a solid candidate for refinancing my rental property.  I thought these were very high BUT I am here to ask the pros for help. I have owned the property over 2 years and have a good tenant paying $1,350 a month for the last 4 months.

Terms

 The highest interest rate I could even find for the scenario, from a rando bank that I've never used, was 6.25%. Most of my banks top out in the mid 5s.

But my default parameters are to only for Fannie/Freddie type stuff. I'd have to look into the "non-qm" bucket to find something in the mid 6s, these are sometimes called "bank statement loans" or "DSCR loans." Commercial loans are also sometimes that high, but you're looking at a residential mortgage term sheet, so I don't think you're being offered a commercial loan.

There are some critical details missing, this is beyond "they are ripping you off" (paying $6 for a can of soda) and more into the range of "this is not the real world, there are details missing" (someone advertising a single can of soda for $1,000). What's the full story? Why non-qm? Are you sure they are actually an independent mortgage broker? They would be using the same search software that I use if so, possibly with different banks plugged into it of course, but the gap here is too large (you didn't show a $1 can of soda being offered for $6, you showed it being offered for $1,000).

@Colbi Ight I recently went to Zillow, looked up “shop rates”, put in the zip code and type of home, along with other details and got a refi with AIM loans for an investment home.  Lowest cost, great service.  Did the same thing a year ago for my mother in law.  The refi saved her several hundred in payment and was a no cost loan (no added balance to her new loan!). 

The internet is your friend for competitive loans.

Originally posted by @Colbi Ight :

It was a DSCR loan.

 That explains it. You can have an 80000 FICO score and $20m in the bank, but if you don't check all the Agency FNMA boxes, there's no back end subsidy, and any/all profit for the lender must come from borrower's rate and fees.

A vanilla $500k loan might have a $1000 underwriting fee and get a certain rate, and consumers think the $1000 is the profit center. Not so, the $1k almost doesn't matter. Then on the back end the lender sells it to FNMA for $515,000, $15k in profit. THAT is where the action is. If there's no sale to FNMA, that needs to come from you, or the lender simply wouldn't do the loan at all.

Originally posted by @Chris Mason :
Originally posted by @Colbi Ight:

It was a DSCR loan.

 That explains it. You can have an 80000 FICO score and $20m in the bank, but if you don't check all the Agency FNMA boxes, there's no back end subsidy, and any/all profit for the lender must come from borrower's rate and fees.

A vanilla $500k loan might have a $1000 underwriting fee and get a certain rate, and consumers think the $1000 is the profit center. Not so, the $1k almost doesn't matter. Then on the back end the lender sells it to FNMA for $515,000, $15k in profit. THAT is where the action is. If there's no sale to FNMA, that needs to come from you, or the lender simply wouldn't do the loan at all.

You seem to hit the nail on the head. Thanks for the response I found a little better deal with another lender. Thanks 

 

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