Is my Mortgage Broker Greedy? Help! - Posted by Tony Newbie

Real Estate Investing
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Posted by Rob Ricker on May 11, 2006 at 23:32:24:

I totally agree sailor. I don’t suggest anyone gets “cavalier” with their financing as you called it. Fortunately for me, I understand the market and know what the fees vs. rate should be, but for most people it’s just as you said. All fees should be explained by the broker and negotiated within reason. Most brokers are shrouded in secrecy about rates & fees for some reason, but I take the opposite approach and explain EVERYTHING to my cusotmers. I give them the same treatment I would want myself (golden rule) and I give the options to choose which loan works for them. Here’s an example of a typical quote I give:

option 1: No origination, 7.875% rate
option 2: 1% origination, 7.375% rate
option 3: 2% origination, 6.875% rate
option 4: 3% origiantion, 6.375% rate

They can take their pick based on their goals and financial situation, and none of those options make a difference in what I get paid.

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Is my Mortgage Broker Greedy? Help! - Posted by Tony Newbie

Posted by Tony Newbie on May 11, 2006 at 19:56:46:

I am obtaining one loan for $80,000.00 and the other for 20,000. Here is my write up on the loan docs.

80,000.00
loan origination fee: 3.00% at $2,400.00
Credit report: $10.00 / used this broker before
Processing Fee: $500.00
underwriting: $795.00
Flood cert. $10.00
Nationwide 1 year: 487.00
lender discount fees: 916.00
closing escrow fee: 200.00

Government recording & tranfers charges/ clerk of the court is $50.00.

20,00.00 Loan
Mtg Broker fee: 984.02
processing fee: 500.00
Title Ins. 120.00
Title Ins binder: 95.00

Ok I"ll stop there. Is this too much to pay in charges, or is this typical mortgage broker fees.

Thanks

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sharing my response to Tony’s private e-mail - Posted by Rob Ricker

Posted by Rob Ricker on May 11, 2006 at 23:47:26:

for benefit of other newbies or people that might have the same questions and will search the archive …

Tony,
First off, your broker seems like he may be $1,000 or so high on fees. If I were you I’d ask him if he can cut his fees a little bit. You shouldn’t have to pay a lender discount fee to get 8.125, however don’t ask for him to cut it too much because what he gave you is very close to the best you can get the way your purchase is structured.

In order to truly help you, I need you to understand the problem with this loan …

By getting an 80/20 investment loan you are forcing your broker to use “Subprime” financing when your credit deserves better. Subprime means it doesn’t fit conventional loan guidelines, and anything over 90% LTV on an investment property is subprime. 8.125% is a very reasonable rate for what your requesting actually.

If you put 10% down, your broker can use conventional loan sources and get you around a 7.00% interest rate with at least $1,000 less in fees. Ideally 10% down is the way to go when acquiring financing for rental property. Other than subject to’s, wraps, etc. I put 10%+ down on all my deals, but I realize that it’s not always possible for a newbie to do that. If you don’t have the down payment, you will unfortunately pay with a higher monthly payment and fees. You must calculate this into the deals if you want to finance this way. The question for you is are you happy with the cash flow on an 80/20 loan? Do your numbers work? If so, ask for $1,000 back and move ahead. If not, it’s time to find a source for a 10% down payment (HELOC, gift from family, 401K, etc.)

p.s. if you’re not happy with your broker, I can find someone to do your loan right. I only broker in Tennessee, but I have many friends in the business nationwide.

Good Luck,
Rob Ricker
President
People First Mortgage Corporation
Morristown, TN

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This is really up to you - Posted by Rob Ricker

Posted by Rob Ricker on May 11, 2006 at 21:38:32:

What are you trying to accomplish? What rate did you get? How’s your credit? debt? Most people don’t understand what they call junk fees and just figure the more charged, the more you’re getting ripped off. That’s simply not always true. Oh yeah, if you get the highest rate, highest fees, AND your credit and debt deserves better, you’re getting hosed …but I’m not going to assume that.

I’m a broker myself, and I just paid 5% origination fees on a loan! I’m happy as a lark because it accomplished my goal. Why would I as a mortgage broker allow someone to charge me this much? I’ll tell you why! I asked for it!

(1) I asked for 5% origination because 2 of the points bought my rate down to increase my cashflow.
(2) I want other people to prosper from the deals I do. 3% of an investment deal isn’t jack especially when you’re buying at 65 or 70% LTV.
(3) I know how the secondary mortgage market works, so I know that the best rates cost money. The less fees, the more the rate will be. I have to decide what my goals are and base my loan on those goals!

My last words …
I believe in the law of reciprosity …“give and you shall receive”. I don’t spend all my time beating people up on fees as long as they’re making me wealthy.
I SPEND MY TIME MAKING DEALS

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Re: Is my Mortgage Broker Greedy? Help! - Posted by Sailor

Posted by Sailor on May 11, 2006 at 20:15:07:

I don’t use mortgage brokers, but have always stated “I don’t pay garbage fees.” Car dealers try to charge “processing fees,” too. Each extra charge is a separate profit center, & you can’t fault the guy for trying. However, you may find that most or all of the extras are negotiable. I haven’t had a mortgage in 15 years so don’t know if a 3% “origination fee” is competitive. At the very least I’d (1) negotiate & (2) check my regular bank for a competitive quote. If they don’t give the kind of loan your broker offers, ask yourself if it is really a mortgage that is advantageous to you–maybe your bank doesn’t offer it for a good reason. Remember, buyers are scarcer now, so you have more clout than last time. Good luck!

Tye

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Re: This is really up to you - Posted by Sailor

Posted by Sailor on May 11, 2006 at 22:51:50:

Thanks for explaining the possible relationship between higher origination fees & %. However, I do believe that it only takes seconds/minutes to negotiate junk fees, & that much of my time is worth saving hundreds/thousands of $$$. At the very least, all fees should be explained. I check all my sales receipts before I leave the store, too. I’ve never found an error in my favor, but I’ve sure caught a lot of ca$h register mistakes (noticing one today saved me $8). Checking & questioning financial details is a good all-round habit–my bank once made a 10k error. No matter how much we wheel & deal, it doesn’t make sense to me to be cavalier about $$$.

Tye