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Rebate Needed for FHA to Conventional Refi with 80% LTV

We're currently in an FHA loan ($448k balance) at 3.75%.  Based on recent local (92009) sales, we are safely going to assume an appraisal value of $565k on the low end.  That puts us at 79% LTV.  We desperately want to get rid of our PMI.  Based on calculations I've done, we're looking at a 4.5% rate, which should save us ~$300 monthly.

We don't want to pay closing costs, and I know a little about rebates.  Therefore, I have a few questions:
1 - I'm curious what rebate is needed for us to break even, assuming a 1.75% origination fee?
2 - Refinancing from an FHA to Conventional, we will NOT get the UFMIP refunded to us from a refi we did in March of this year, correct?

Thanks!
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August 27 2013 - Carlsbad
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Profile picture for cuencap
"Curious about the 1.75 origination."

Thanks Mike - it was only until I really started doing my homework that we realized 1.75% seems high.  
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August 28 2013
Mike, now I understand the 1.75 which appears to be the broker's set compensation. Meaning that, since he has to make that amount, no matter what, the rates he offers will be at that set level. You might want to find a lender that has a lower set comp, hence a lower rate.
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August 28 2013
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Justin - thanks again for the great information.  The tips about the FHA closing date and the MIP payoff really help.  
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August 28 2013
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"Curious about the 1.75 origination"

Our old broker would take 1.75% off the top and use the rest of the rebate towards our closing costs.  Worse yet, he would inevitably tell us a higher final closing dollar amount right before signing.  We are looking elsewhere and I'm doing my homework before talking to someone else.  Sounds like from what I've read, a 1.75% loan origination charge is high...
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August 28 2013
Mike in my brief summary I'm referring only to actual fees that would typically be incurred on a refinance.    Prepaid items such as setting up impound account and daily interest would also be required at closing.   Credits can also be provided towards those items, of course the higher credits result in higher interest rate, but sometimes it make sense to go this way if you are trying to squeeze in at a certain Loan to Value.

For the payoff, since you are paying off an FHA loan, you want to try and have your loan setup to fund at the end of the calendar month to avoid extended duplicate interest. You also want to make sure it is ordered with a good through date for the end of the calendar month so it doesn't lop an extra month of MIP premium into the amount required.    Take your balance plus one month of interest plus one month of MIP for a proper estimate on your payoff amount and adjust your loan amount accordingly.

Always good to keep in mind that you "skip" one payment as part of refinance and get refund of current impound account, sometimes it makes sense to set a loan amount where you pay these amounts at closing with the understanding that you "get back" the amount shortly after.  This helps to keep your loan amount and payment as low as possible.
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August 28 2013
Curious about the 1.75 origination. Normally a broker wouldn't charge origination and provide a No-cost since they sort of wash each other out. In most cases loan professional's comp is set and can't be changed (by percentage of loan amount) so why charge the borrower then credit them back. You're not confusing this with the UFMIP I presume, especially since it doesn't exist on a conventional mortgage.

Figure about $3000 to $3500 for all one-time costs, not prepaids, and divide by the loan amount and that's an approximation of the amount of "overage" (rebate) that would be required.
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August 28 2013
Profile picture for cuencap
Thanks Justin. Does that ballpark number take care of impound account costs and the payoff amount, or are you only referencing actual closing costs? Again, I realize it's a ballpark number and I really appreciate you throwing those out there. I know additional information is needed for an accurate estimate, but these numbers help to confirm that I'm on the right path.
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August 28 2013
Definitely no refund of UFMIP that only is available if your new loan is also FHA, I assume you already have a high monthly FHA MI factor because it is always tough refinancing out of a such a great existing rate. If you are working with a broker and assume 1.75% origination then other fees to factor in would be ~750 lender admin fee, 500 appraisal, ~1250 for settlement service and ~200 for other small items like recording, tax/flood cert, credit report. For a "no cost" loan you would need a lock price with ~2.4 of YIeld Spread Premium. Your credit score and lender selection among other factors will determine what interest rate would offer this option.
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August 28 2013
"unethical or uneducated"
----
One of the 2 or both would be an appropriate assumption. If you don't want to pay closing costs, look at a rate that would give you a rebate. The temptation is to quote you one but I don't have nearly enough information to do so. 
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August 28 2013
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Would you say that our mortgage broker is unethical or uneducated in telling us that the UFMIP would be refundable during our last refi? He knew we wanted to get into a conventional loan...
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August 27 2013
There won't be any refund on the upfront MI when you refinance from FHA to conventional.
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August 27 2013
 
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