- Find a Real Estate Professional
- Realtors®
- Mortgage Lenders
- Home Improvement Pros
- Other Real Estate Services
- Review an Agent, Lender or Pro
- Marketing on Zillow
- Real Estate Agent Advertising
- Join the Professional Directory
- Popular
- Real Estate Market Reports
- More
Answers (26)
- Clay Branch, "Georgia Loans"
- Contributions:7836
Loan size is important when doing a no closing cost loan, if your current balance is say $80K, then you will probably find most other lenders also quoting 4.25%. The funding fee will be 1/2 point and if the interest rate premium is to cover all closing costs, then that should be included. Your current servicer has the luxury of rolling your escrow account to the new loan where any other lender will require you to set up a new escrow. That is not a big deal as your current escrow account will be refunded to you about 4 weeks after closing the loan. You have 2 options on a new refinance, the new escrow can be added into the new loan amount or you can pay that in cash at closing if you have the funds to do it, and again most of that will be refunded from the old loan. The other consideration is whether the new lender will require an appraisal which Justin addressed below.
- Hamp Yonce, "Zilluminati"
- Contributions:3463
Quoted Rate minus Par Rate equals rebate. Quoted Rate can be lower than Par Rate, and then a discount point, or points, would apply.
Yes, if the rate is higher than par, the resulting rebate, (used to be more often called Yield Spread Premium) can be used to pay the associated costs, including the originators fees, which is usually the whatever is left after paying all other fees.
I was hoping you would come back last night. I was going to suggest that you ask PNC LO what their rebate percentage is at 4.25%, and what he would, as closely as possible, because whether he got the deal or not depends on it, guess the percentage of the loan amount, the other fees and prepaids and escrows would total.
If the rebate over par, or premium, was 3.3%, and the other costs would total 2%, he was pocketing 1.3%. I think most sources should be willing to discuss it in these terms, these days. You may get some salesman like obfuscation, which would indicate a slightly sleazy lack of candor.
The bottom line is you should be finding somewhere to take advantage of your benefit. The IRRRL product is one of the most valuable benefits offered to a Veteran. Now is the time. It isn't too good to be true. Even if you have to do it at 4.25%, it is worth doing. It would be more worth doing at 4.00%. Let me/us know if we can help anymore.
Yes, if the rate is higher than par, the resulting rebate, (used to be more often called Yield Spread Premium) can be used to pay the associated costs, including the originators fees, which is usually the whatever is left after paying all other fees.
I was hoping you would come back last night. I was going to suggest that you ask PNC LO what their rebate percentage is at 4.25%, and what he would, as closely as possible, because whether he got the deal or not depends on it, guess the percentage of the loan amount, the other fees and prepaids and escrows would total.
If the rebate over par, or premium, was 3.3%, and the other costs would total 2%, he was pocketing 1.3%. I think most sources should be willing to discuss it in these terms, these days. You may get some salesman like obfuscation, which would indicate a slightly sleazy lack of candor.
The bottom line is you should be finding somewhere to take advantage of your benefit. The IRRRL product is one of the most valuable benefits offered to a Veteran. Now is the time. It isn't too good to be true. Even if you have to do it at 4.25%, it is worth doing. It would be more worth doing at 4.00%. Let me/us know if we can help anymore.
- Justin Sheftell, "Courtesy Mortgage"
- Contributions:3427
Each lender will have their own wholesale rates. There are a few who allow access to these rate sheets online, most will require a log in and password to access.
There is no set given rate. Each sheet will offer a variety of rates, typically in .125 increments, and assign a base price to each rate, which determines the amount of credit which can be applied toward your costs. There will also be adjustments to the base prices based on a variety of factors such as credit score among others.
Before you search elsewhere, it is most important that you determine if your home would be likley to appraise at an amount higher than your current balance. If you IRRRL with a new servicer, it is high likely you'll need an appraisal (even though VA doesn't require). A few wholesale lenders will IRRRL up to 100% of appraisal for loans they don't service, others cutoff at 90 or 95%.
If you are confident you can appraise high enough, then as alternative to trying to find wholesale rates on your own, finding instead a good loan originator is what you should look for next.
There is no set given rate. Each sheet will offer a variety of rates, typically in .125 increments, and assign a base price to each rate, which determines the amount of credit which can be applied toward your costs. There will also be adjustments to the base prices based on a variety of factors such as credit score among others.
Before you search elsewhere, it is most important that you determine if your home would be likley to appraise at an amount higher than your current balance. If you IRRRL with a new servicer, it is high likely you'll need an appraisal (even though VA doesn't require). A few wholesale lenders will IRRRL up to 100% of appraisal for loans they don't service, others cutoff at 90 or 95%.
If you are confident you can appraise high enough, then as alternative to trying to find wholesale rates on your own, finding instead a good loan originator is what you should look for next.
- zachusaf
- Contributions:8
Just talked to PNC....they weren't willing to go below 4.25% and keep it a no-cost refi.
All things equal, I would have preferred to remain with my original lender. C'est la vie.
So Wholesale rate - retail rate = rebate. That rebate is what the broker uses to pay the fees, keeping what is left, correct?
So where does one determine what the wholesale rate is for a 30-year fixed VA?
All things equal, I would have preferred to remain with my original lender. C'est la vie.
So Wholesale rate - retail rate = rebate. That rebate is what the broker uses to pay the fees, keeping what is left, correct?
So where does one determine what the wholesale rate is for a 30-year fixed VA?
- Pasadenan
- Contributions:21466
HAMP already explained it, but it still might not be clear to a lay person...
The lenders are "selling" the loan, and the rates of the loans are partially determined by what investors are paying for mortgage backed securities, such as Fannie Mae 30 yr 3.5%. The yields on those securities change depending on the demand. And the rates that can be offered are related to the yield with profit and overhead added in.
SO, when you refinance, they are getting the processing fees from a margin of what the wholesale rate of the loan is, and what the retail rate is. As consumers, we never see anything but the retail rates. But the loan officers see the wholesale rates and the "rebates" that the loan officers get.
Thus, it is not out of "being nice" that they offer the refinances; they want the loan processing fees that they will obtain from writing the new loan, even though it is not coming out of your pocket.
Yes, those that bought the loans at the higher rates will have them "paid off" and they won't get that interest that was sort of implied for the length of the loan... but most of them figured that it would be paid off in about 7 years instead of 30 anyway as people do move and sell their houses. Thus they are really not out anything either.
Interest rates really have dropped that much in the past few years, and a lot of that is due to the Federal Reserve buying mortgage backed securities and Federal Reserve Notes (T-Bills). And since the government borrows so much money from China, the Chinese are subsidizing U.S. housing loans too.
The lenders are "selling" the loan, and the rates of the loans are partially determined by what investors are paying for mortgage backed securities, such as Fannie Mae 30 yr 3.5%. The yields on those securities change depending on the demand. And the rates that can be offered are related to the yield with profit and overhead added in.
SO, when you refinance, they are getting the processing fees from a margin of what the wholesale rate of the loan is, and what the retail rate is. As consumers, we never see anything but the retail rates. But the loan officers see the wholesale rates and the "rebates" that the loan officers get.
Thus, it is not out of "being nice" that they offer the refinances; they want the loan processing fees that they will obtain from writing the new loan, even though it is not coming out of your pocket.
Yes, those that bought the loans at the higher rates will have them "paid off" and they won't get that interest that was sort of implied for the length of the loan... but most of them figured that it would be paid off in about 7 years instead of 30 anyway as people do move and sell their houses. Thus they are really not out anything either.
Interest rates really have dropped that much in the past few years, and a lot of that is due to the Federal Reserve buying mortgage backed securities and Federal Reserve Notes (T-Bills). And since the government borrows so much money from China, the Chinese are subsidizing U.S. housing loans too.
- Norm D Plume, "America Needs Nixon!"
- Contributions:1670
- Hamp Yonce, "Zilluminati"
- Contributions:3463
4.00% on a 30 Fixed VA should rebate about 3.3%, on a 30 day lock, to a Lender with decent pricing, today. That is about $7,350. That should cover the fees, and leave some (maybe enough) for PNC. Especially, if they don't have to charge you the Trust Tax, and my understanding is that it is $2.00 per thou, on "new money" which you will not have hardly any of.
You need a Virginia specific GFE. Maybe Merino will do you one. You could get one with Zillow quotes, if you ask nicely. I don't want to see PNC home run you. A Veteran in that post I linked, got 3.875%, last week, rates have improved slightly since, and covered all the costs, in CALI. Virginia can't be more expensive to do loans in than CALI. Can it?
Roll Damn Tide!
You need a Virginia specific GFE. Maybe Merino will do you one. You could get one with Zillow quotes, if you ask nicely. I don't want to see PNC home run you. A Veteran in that post I linked, got 3.875%, last week, rates have improved slightly since, and covered all the costs, in CALI. Virginia can't be more expensive to do loans in than CALI. Can it?
Roll Damn Tide!
- Geofrey Merino, "GMerino"
- Contributions:445
No problem. Hamp is correct - you should be able to get a lower interest rate with your closing costs covered within the interest rate.
- zachusaf
- Contributions:8
Thank you for all your responses Hamp and Merino.
From what I *think* I understand--yes, an IRRRL refi can make sense for me, even with the short time I may remain. And it's not "too good to be true" that a lender covers the upfront costs and I get a better rate.
Hamp -- can you explain what
"I wouldn't pay PNC more than 4.00%, as of today's pricing.I think there is room for all the fees at 4.00%. Possibly, even at 3.875%. There may be something I'm missing, but I don't miss much. 3.3% in rebate, should cover the costs, and the Lender's profit, easily."
means?
I think you mean to press PNC for a 4% rate, but I don't understand the terminology of "paying PNC" and "room for the fees," and how that covers lender's costs and profit.
Forgive me if that's an obtuse question; I don't expect you to type out the equivalent of "War and Peace" to explain it. If it is too long to explain, could you point me to something or is there succinct terminology that I could look up to read about it?
And now that I think about my prior conversations with PNC, I think they're using some of my pre-paid to cover something....The interest between payments, perhaps.
From what I *think* I understand--yes, an IRRRL refi can make sense for me, even with the short time I may remain. And it's not "too good to be true" that a lender covers the upfront costs and I get a better rate.
Hamp -- can you explain what
"I wouldn't pay PNC more than 4.00%, as of today's pricing.I think there is room for all the fees at 4.00%. Possibly, even at 3.875%. There may be something I'm missing, but I don't miss much. 3.3% in rebate, should cover the costs, and the Lender's profit, easily."
means?
I think you mean to press PNC for a 4% rate, but I don't understand the terminology of "paying PNC" and "room for the fees," and how that covers lender's costs and profit.
Forgive me if that's an obtuse question; I don't expect you to type out the equivalent of "War and Peace" to explain it. If it is too long to explain, could you point me to something or is there succinct terminology that I could look up to read about it?
And now that I think about my prior conversations with PNC, I think they're using some of my pre-paid to cover something....The interest between payments, perhaps.
- Hamp Yonce, "Zilluminati"
- Contributions:3463
I wouldn't pay PNC more than 4.00%, as of today's pricing.
There appears, according to some Googling, to be a Trust Tax, on refis, of $3.33 per thousand in Virginia. It is way less if same Lender redoes the loan. Maybe nothing in your case, if PNC does it..
The title insurance is $4.68 per thousand, for Owner's, and Lender's policy.
You should post a quote request on Zillow's Mortgage Marketplace. Make sure and write it is a no cost VA IRRRL in the notes. Add that you want costs covered by pricing, not added to balance.
Make PNC do it for the best price quoted, or close to it. I think there is room for all the fees at 4.00%. Possibly, even at 3.875%. There may be something I'm missing, but I don't miss much. 3.3% in rebate, should cover the costs, and the Lender's profit, easily.
Hopefully, a Virginia VA expert will chime in, and correct anything I have missed. Not that this post is a comprehensive discussion of the fees, just me clarifying the one's I would be unaccustomed to.
Fell free to call or email me if you have any questions. I don't loan money for a living so I am Switzerland, in that regard. I did loan money for a living for nearly 30 years, one way, or another. I love helping a Veteran.
There appears, according to some Googling, to be a Trust Tax, on refis, of $3.33 per thousand in Virginia. It is way less if same Lender redoes the loan. Maybe nothing in your case, if PNC does it..
The title insurance is $4.68 per thousand, for Owner's, and Lender's policy.
You should post a quote request on Zillow's Mortgage Marketplace. Make sure and write it is a no cost VA IRRRL in the notes. Add that you want costs covered by pricing, not added to balance.
Make PNC do it for the best price quoted, or close to it. I think there is room for all the fees at 4.00%. Possibly, even at 3.875%. There may be something I'm missing, but I don't miss much. 3.3% in rebate, should cover the costs, and the Lender's profit, easily.
Hopefully, a Virginia VA expert will chime in, and correct anything I have missed. Not that this post is a comprehensive discussion of the fees, just me clarifying the one's I would be unaccustomed to.
Fell free to call or email me if you have any questions. I don't loan money for a living so I am Switzerland, in that regard. I did loan money for a living for nearly 30 years, one way, or another. I love helping a Veteran.
- zachusaf
- Contributions:8
Clay -
That's what I was saying....if they are paying all costs, then the refi is something that seems to provide good benefit regardless of how long I'm planning to stay in the house.
Unsure on the appraisal value.
I'm just trying to make sure that paying all closing costs = paying all closing costs, and that if it is that good of a deal, I'm getting the best that I can. Guess that's hard to do without seeing it all on paper.
That's what I was saying....if they are paying all costs, then the refi is something that seems to provide good benefit regardless of how long I'm planning to stay in the house.
Unsure on the appraisal value.
I'm just trying to make sure that paying all closing costs = paying all closing costs, and that if it is that good of a deal, I'm getting the best that I can. Guess that's hard to do without seeing it all on paper.
- Geofrey Merino, "GMerino"
- Contributions:445
- Geofrey Merino, "GMerino"
- Contributions:445
I am sure that the closing costs will be covered with that interest rate and none of them should roll over. Perhaps, they they don't provide a Good Faith Estimate which would be silly if they want to retain you as a customer. I think what many of us here are saying is that the rate that PNC is offering seems a little high. You really can do better interest rate wise. Really nothing that comes from the bank stand point comes from the kindness of their hearts.
It easy to prepare a Good Faith Estimate - reach out to a few of us here and that will be provided so that you may compare numbers when you speak to a PNC rep. If they have your best interest than you most likely need to continue but if you know you could do better, than you should go with who is providing you a better deal.
Geofrey M Merino
- Clay Branch, "Georgia Loans"
- Contributions:7836
zachusaf, there is no break even point if they are paying all closing costs, you start saving from payment 1. Your balance is 222,664, will it appraise for that much? If not, that is important if you look for a better offer/lender since many lenders will require an appraisal.
- zachusaf
- Contributions:8
Merino - That's one of the few concepts I understand-- the break even point.
But that's what I'm trying to get down too. PNC just keeps telling me they're covering all the costs, and I'm trying to understand the whole situation without the benefit of intricate mortgage knowledge and a hard-copy GFE. If they're covering all the costs, then I'm even/ahead immediately, am I not?
It just sounds too good to be true, so I'm trying to understand more/all of it before I talk to them again tomorrow.....like if I'm more than likely going to sell (or try to) in the next 12 - 24 months, does it make sense.....is 4.25% the best I could do rate wise.....is there anything I have to look out for.....what fees make sense on a VA IRRRL and which ones are superfluous and/or too high....and understanding why they're doing this.....I'm positing they're not dropping my rate out of the kindness of their hearts....etc.
Lots and lots of reading tonight...
But that's what I'm trying to get down too. PNC just keeps telling me they're covering all the costs, and I'm trying to understand the whole situation without the benefit of intricate mortgage knowledge and a hard-copy GFE. If they're covering all the costs, then I'm even/ahead immediately, am I not?
It just sounds too good to be true, so I'm trying to understand more/all of it before I talk to them again tomorrow.....like if I'm more than likely going to sell (or try to) in the next 12 - 24 months, does it make sense.....is 4.25% the best I could do rate wise.....is there anything I have to look out for.....what fees make sense on a VA IRRRL and which ones are superfluous and/or too high....and understanding why they're doing this.....I'm positing they're not dropping my rate out of the kindness of their hearts....etc.
Lots and lots of reading tonight...
- Geofrey Merino, "GMerino"
- Contributions:445
Thank you for your information, that is great information to start with. Hamp should give you some great information. If you would like to compare please click on my profile and I will provide you detailed information.
Geofrey M Merino
- zachusaf
- Contributions:8
I do have the HUD-1 available.
My homeowner's insurance is $617.00/year.
My property taxes are $2,447/year.My taxes are paid from escrow, 2 payments of $1223 per year.
I don't see any mortgage taxes, or any "weird" taxes, not that I would be an expert. PNC just keeps telling me the local and/or state fees will be lower due to the refi and all the info staying the same more or less.
Original loan was $229,837.00. The principal is now $222,664.66.
My homeowner's insurance is $617.00/year.
My property taxes are $2,447/year.My taxes are paid from escrow, 2 payments of $1223 per year.
I don't see any mortgage taxes, or any "weird" taxes, not that I would be an expert. PNC just keeps telling me the local and/or state fees will be lower due to the refi and all the info staying the same more or less.
Original loan was $229,837.00. The principal is now $222,664.66.
- Geofrey Merino, "GMerino"
- Contributions:445
It is a great program for VA loans. You should receive some great rates from anyone of these lenders who have provided you information. Reach out to all of us, click on our profiles and get in contact with us to provide you with additonal information.
The best way to calculate whether this is worth it or not is to take the total amount of closing costs and divide that amount of money you will save each month.
Geofrey Merino
- Hamp Yonce, "Zilluminati"
- Contributions:3463
I saw that after the fact Zach. Shop the situation with other Lenders. Do you have the HUD1 closing statement from when you bought the house? Your fees will be very similar, the funding fee will be way less. I'd like to be able to estimate what the closing costs will be, in order to help you get the best available rate. How much is your Insurance? How much are your property taxes? Are taxes paid once a year at the end of the year? Does State of VA have any weird transfer taxes, or Mortgage taxes? How large is the loan?
- Justin Sheftell, "Courtesy Mortgage"
- Contributions:3427
If you get ALL closing costs paid including funding fee then you can't go wrong on short term/long term benefits. As mentioned already if you also get the credit for the prepaids, you very likely end up "earning" money on the transaction.
Espcially so if you plan to sell in 1-2 years, take whatever rate gives you the maximum allowed credit to cover all settlement charges.
The only red flag is why they would not want to provide you a Good Faith Estimate upon request. If they cannot meet this basic requirement, take them up on their statement that "some other lender" will offer you the same or better and this other lender will do so without a reluctance to disclose it on paper without requiring a cost or obligation on your behalf prior to your commitment to proceed.
Espcially so if you plan to sell in 1-2 years, take whatever rate gives you the maximum allowed credit to cover all settlement charges.
The only red flag is why they would not want to provide you a Good Faith Estimate upon request. If they cannot meet this basic requirement, take them up on their statement that "some other lender" will offer you the same or better and this other lender will do so without a reluctance to disclose it on paper without requiring a cost or obligation on your behalf prior to your commitment to proceed.
- Hamp Yonce, "Zilluminati"
- Contributions:3463
Yes, it is found money. 4.25% is paying nearly five points, today. Even if, you have to pay the funding fee, that should be more than enough to cover all closing costs, prepaids, and escrows. You might be able to do the same thing at 4.00%. I would shop it, hard. Who is your current Lender, WF? BofA?
- Pasadenan
- Contributions:21466
If it were me, I'd do it, but I probably would look for closer to 3.75% for 30 yr fixed. From the average quote on ZMM (in right margin), 4.25% seems to be too high unless there are other issues.
Of course, if one "knew" they are only staying 2 years more instead of just "planning", they might want to go variable instead to get the rates even lower.
Of course, if one "knew" they are only staying 2 years more instead of just "planning", they might want to go variable instead to get the rates even lower.
- zachusaf
- Contributions:8
So even if I only plan to remain in the home a short while longer (12 - 24 months), if they are in fact covering all costs, would the short-term savings be worth it?
- Brian Goetz, "bri_gets"
- Contributions:295
Not too good to be true!
I just locked a VA loan at 4.25% with a credit big enough to cover all of his closing costs AND the money for the impound account. This was a purchase too, so the closing costs are more expensive than a refi.
They will get paid, so that is what is in it for them. Nobody is going to work for free.
I just locked a VA loan at 4.25% with a credit big enough to cover all of his closing costs AND the money for the impound account. This was a purchase too, so the closing costs are more expensive than a refi.
They will get paid, so that is what is in it for them. Nobody is going to work for free.
- Hamp Yonce, "Zilluminati"
- Contributions:3463
No, it could possibly be even better. Here's an interesting discussion on the subject.
You might have to actually apply to get a GFE. They can't refuse to give you one after that.
You might have to actually apply to get a GFE. They can't refuse to give you one after that.
Is this IRRRL offer too good to be true?
Here's the thing: They claim they are covering all the costs.....not rolling them in; covering all the costs. They said whatever fees there are, they will credit the same amount. I asked for a good faith estimate, and he said "they don't even let us send them out." They stated the principle of my loan would remain the same, with the exception of the interest diff accrued during the month and the escrow needed to cover (~$1000 total). So they claim my loan amount will only go up $1000.
I asked what's in it for them.....they said if they don't offer it to me, some other lender is. Sounds too good to be true....is it?
Stating a discriminatory preference in an advertisement for housing is illegal. If you think this content is discriminatory or otherwise inappropriate and feel it should be removed from Zillow, please let us know by completing the information above.
We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.