DO ALL FHA LENDERS CHARGE MORE INTEREST RATES FOR LOWER PRICED MORTGAGE LOANS????

[mwr1ght]

Today I am shopping around for better interest rates for my purchase of HUD home with FHA financing for the $100.00 DOWN, promotion. I keep running into lenders charging higher interest rates for lower priced mortgage loans. I was told by one lender that it cost MORE MONEY to originate the lower priced mortgage loans. NOBODY SEEMS TO WANT TO EXPLAIN TO ME ~~~WHY??? 

[granny031350]

are you in Michigan?   If so, check out the MSHDA lenders as well.  Similar to FHA

[DallasLoanGuy]

What is the loan amount?

There are adjustments to the rate for lower loan amounts.

[mwr1ght]

Thanks for the reply Dallas~Yes I am in Michigan. The purchase price is $63000.00 HUD paying 3% of closing, I pay $100 down FHA 203(b). The interest rate 7.25%.  My FICO are 672,683,699.  I keep gettting the same run around when I inquire about interest rate on this. Which I am being told it cost more to originate lower mortgages so the rate is higher, to me this is hog wash. No one is willing to explain WHY.

[DallasLoanGuy]

The lenders I sell to charge me an additional .375% add to the origination fee or it can be consumed by the rate by raising rate .125%

Also, we make money by charging a rate higher than what we are charged. Think of it like I get wholesale rates, and mark it up to retail. So if I charge 6.75% I will make 1% of the loan amount more than if I charged 6.375% or so.....

It doesn't cost more to originate a lower loan amount. But I have to charge a higher rate on lower loan amounts to make the same money as I would on a higher loan amount.

Bottom line. We don't just make money in origination fees. We make money on the rate too.

[mwr1ght]

Thanks for explaining that to me Dallas~ I was right when I figured it was for the LO to make more money. So do mortgage companies and credit unions practice this same method?  The explination is understandable.

Message Edited by mwr1ght on 07-28-2008 10:23 AM

[DallasLoanGuy]

Well, servicing a loan costs money. They would likely charge a little more so they can make reasonable interest.

You should be able to call them and get a quote over the phone.

[mwr1ght]

Thank you. I just spoke with my credit union. They have not even heard of this program so they do not honor the $100 down promotion. For some reason I figured that since it was a FHA 203(B) that it would automatically be honored at all HUD approved FHA lenders. Guess I was wrong. Good learning experience for others.  My credit union has good rates though 6.5% But they want the 3% FHA down. Since I am planning on doing the promotion of $100 down. ALSO my credit union does not even do the DPA assistance, what kind of crock is that. The LO told me the CU does not allow that. Nor do they do FHA 103% loans. WOW.............I would have thought the CU would be the way to go. I was wrong.

Message Edited by mwr1ght on 07-28-2008 11:01 AM

[DallasLoanGuy]

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mwr1ght wrote:

Thank you. I just spoke with my credit union. They have not even heard of this program so they do not honor the $100 down promotion. For some reason I figured that since it was a FHA 203(B) that it would automatically be honored at all HUD approved FHA lenders. Guess I was wrong. Good learning experience for others.  My credit union has good rates though 6.5% But they want the 3% FHA down they probably dont understand the program . Since I am planning on doing the promotion of $100 down. ALSO my credit union does not even do the DPA assistance, what kind of crock is that. some lenders do not agree that borrowers should be able to circumvent loan guidelines with loopholes The LO told me the CU does not allow that. Nor do they do FHA 103% loans. WOW.............I would have thought the CU would be the way to go. I was wrong.

Message Edited by mwr1ght on 07-28-2008 11:01 AM

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credit unions are great if you dont need 100% financing with all costs paid.

[mwr1ght]

I got Flagstar to lower the interest rate! When my LO called me yesturday to see if I had found a better rate than his. I told him the truth "Yes I have!" I was waiting on the estimated GFE from the lenders with the lower rates. In the mean time he calls me today to tell me rates have dropped and he can offer me 6.75% on the FHA/HUD $100 down program. I told him I had to think about it and finish combing through the GFE from the other lenders. Flagstar has a better closing cost, NOW similar rate. So I am going through with the mortgage at Flagstar Bank.  Whew this was quite the learning experience!

Reminder to other buyers out there. The lower cost home may = a little higher interest rate unless you grab the bull by the horn and seriously shop around, at the same time let the original LO know how unsatisfied you are with their rate. Either they will drop the rate, or you will move on to someone else.

I will keep you all posted. The home has a plumbing issue. HUD says it is minor I am going to get the water turned on and make sure I get that checked out real well. BEFORE I close. Just incase I need to have more money added to the repair escrow account. The FHA 203 (b) now allows for a repair escrow account for repairs under $5000. You can close on the home before certain types of repairs have even been made. I am sure it is just for the minor stuff.