GFE Interest Rate

[Cyeron26]

I got my GFE from my lender. Everything seemed ok except for the interest rate and Downpayment. I called my loan officer and he said that he had to put it high because he can not raise it only lower it. But he had it at 4.25. Thats kind of high. Also the down payment I need on the GFE he said could change. Is that true?

Thanks

[foofighter74]

What kind of loan is it?

[tooleman694]

I think a lot depends on after you lock in the rate and how many points you are doing.

[Cyeron26]

its an FHA loan 30 years

[Cyeron26]

We are not doing any points.

[foofighter74]

Then yes, that's a really high rate.  It's a full point higher than we have been quoted. Some lender's rates have gone up to 3.50% but 4.25% is huge.

[tooleman694]

Im locked in 3.75 with a negative point.

[Cyeron26]

It is huge. I don't know what to do. I asked him about it and he said it had to be high becuase he can't raise it only lower it. He said when he locks it in he may be able to get us down to 3.8 or so. Either way I feel stuck because i just signed and sent the application back to him....   Is it ok to shop around right now. What happens if I do some shopping at this point would that hurt my chances in underwriting, if I decide to stay with this lender?  I have no idea what to do. Do i take the chance and see it be lowered once the application is approved? 

[foofighter74]

Well, I don't understand the reasoning in the first place.  The fact is, the rate could go up or down depending on points since it's not locked in.  Also, I can't imagine why it's that high to begin with. This is an FHA loan, so assuming your credit scores meet their requirements, the question becomes why is it so high?

Yes, if i were you, i would look for another lender.  Assuming your credit scores are pulled again by another lender within the same 30 day window, you shouldn't even get a credit score ding for another inquiry. 

Tooleman, who posted above, is getting a rate half a point lower, and that's including him taking a negative point...or the rate would have been even lower.  You most likely can do MUCH better.

[Mike_B03]

I've actually heard before that it's better to get quoted at a higher rate initially because as your LO said, you can always go lower but not higher. What they mean by that is say you qualify with a payment of $1500/month at 3.5%. By the time you lock the rate, it could be up to 4.25% which would mean your payment could be $1600/month. That extra $100 could disqualify you if your DTI is at the limit. If you go in with a figure of 4.25% and a payment of $1600, but then when you lock in and it drops down to 3.75%, your payment would go down and that's not a problem. 

A loan officer on another forum actually said this is exaclty what they do and what they recommend, even going as far as saying that everyone should ask to get quoted a bit higher initially so it doesn't cause problems later.

I guess my only sticking point with that would be what incentive would they have to give you a lower rate later, knowing you qualified at a higher amount...but then again I guess they could do that at any time and lie to you, so you just have to trust them that they are doing it correctly.