Pre-approved today! Is this a good rate?

[moneypenny02]

I was pre-approved today for a coventional loan up to $600k with 10% down.  (I am in LA, so this is within the higher conforming limits of the city.)

I am not about to purchase a home, but needed it in order to view homes in some cases.  Nonetheless, I was wondering if the numbers the current broker was quoting me sounded good.

My scores are 796/810/813.  My gross yearly income is $170k.  Monthly debt is $500/mo for student loans.  No other debt.

The rate he quoted me was for a 30 year fixed was 4.125%  He also provided options, such that I could purchase 1 pt and end up at 3.875% or 2 pts and end up at 3.625%  .  This was all on a spreadsheet that he sent, but he did not say how much it would cost for each point.  The PMI is $311.  

Do these numbers sound good?  Should I run back to him when I am ready to pull the trigger, or start shopping around now??

[tooleman694]

I would take the LPMI with all of that and go for it.

[StartingOver10]

When he said you could "purchase one point and end up at 3.875%" he means you pay 1% of the loan amount to drop the rate to 3.875%. Naturally, you make any decisions on points and cost at the time of contract because it can't be locked until then.

For example if your mortgage is $540k then 1 pt is $5,400

[moneypenny02]

Thanks for the replies!

So, in general, do you think an interest rate of 4.125% for a conventional loan up to $600,000 with my credit scores sounds like a good rate right now?  

We will be buying within the next 9 months, so I am sure the actual rate will be different at the time, but we would like to know if the rate we are being quoted from this broker sound in line with (or better or worse than) what I would be able to get elsewhere.  

[MovingForward_2012]

I would say it is a good rate IF it is 100% financing. I don't know...do the interest rates go up with purchase over a certain limit? If yes, I would say it is a pretty good rate. If not, I will have to say no. My interest rate is 4.125% on a $347,900 home that I only had to put down $2,000 in earnest money for, no downpayment...that was rolled into a second mortgage. And my rate was income based, not credit score based as I made near the top income approvable for the loan program I went through. I just closed last month so I don't think rates have risen that much. With your scores, you should be 3.something. Especially if you are putting money down.

[moneypenny02]

@MovingForward_2012 wrote:
I would say it is a good rate IF it is 100% financing. I don't know...do the interest rates go up with purchase over a certain limit? If yes, I would say it is a pretty good rate. If not, I will have to say no. My interest rate is 4.125% on a $347,900 home that I only had to put down $2,000 in earnest money for, no downpayment...that was rolled into a second mortgage. And my rate was income based, not credit score based as I made near the top income approvable for the loan program I went through. I just closed last month so I don't think rates have risen that much. With your scores, you should be 3.something. Especially if you are putting money down.

---

hmmm.....thanks for the response.  I am putting 10% down, which is required for a conventional loan above $417k, according to my current broker.  I don't know if that varies at all within California across lenders.  In any event, we would probably want to put 10% down just to make sure that the monthly payment is not intolerable.  

[JM-AM]

You cant compare MovingFoward to your situation..

She used a housing program available to her which is great if available to anyone to use. She is also FHA which generally has a lower rate then Conventional.

Her rate was a litlle higher because of her situation, but overall she had a great deal for her family.

I would tend to agree rates have risen, but I believe with your scores you could do better.

[moneypenny02]

Thanks....

Do you think if I went FHA instead of conventional it would lower the rate if I am going for about $550000 -$600k purchase price?  I could still put 10% down.  

MMI seems to be much higher than PMI, however, and I would only even consider FHA if I got in before the permanent MMI cutoff date. But perhaps the difference in interest rate over the long term would outweigh the increased insurance for the first 5 years... 

[JM-AM]

It is something you would have to do, figuring out the numbers and if it benefits you.

Generally speaking in comparison, even though FHA MIP is higher, the lower rate can offset where the payment is comparable. What you have to take into consideration also is that with FHA you have to pay the MIP for 5 years at minimum as of todays rules and you also have to pay an Upfront Mortgage Insurance which many just roll into loan.

As an example a good friend of ours just did a comparison last month between the different cost and rates between FHA and Conventional, and actually decidied for himself that it would be much better over the life of the loan to use FHA on a financial outlook. Now they are older and not going to move or sell anytime in the near future, and will also pay off whatever is needed to eliminate the MIP for FHA at the 5 year mark. But their situation and your situation may be different. This is why you have to look at all the numbers and compare them through-out the entire life of the loan.

Just a quick look over of your numbers

Conventional 550K at 4.125 = 2665 approximately monthly principle and interest only

FHA 550K at 3.5 (Depends on lender for rates, but is what I could give today) = 2469 approximately monthly  principle and interest only

Thats 200 a month difference in monthly payment alone. You still have to add the mortgage insurance and such, but once you stop paying mortgage insurance lets say in 5 years thats 25 years left at 200 a month in savings, which would be 60K in savings.

So do your due diligence and see what works for you and your situation. Ask your LO or Broker what the FHA rate is and start comparing.

Edited to fix typo...

[MovingForward_2012]

Great post JM-AM but you seemed to have made a typo as it looks like there is a $4.00 difference vs. $200. Maybe I misread or my eyes are getting bad.