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What is a reasonable APR vs.Interest Rate spread?

I just locked a 30 year fixed loan at 4.375, with an APR of 4.697%.  It costs 2.5 points, but has a short break even point, and we are planning to retire in this home.  I am thrilled with the deal, but can't help but looking at the closing costs of $8,200, and almost second guessing myself.
  • March 19 2009 - Corvallis
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Answers (10)

Is this conventional or fha? FHA you pay an upfront mortgage insurance cost which may be the culprit, but if you have good credit, you are most likely in a Conventional and buying down the rate. Known as "discount points"

Even for a perfect borrower, PAR rate is around 4.625ish. If you are paying 2.5% to buy it down, either you don't have the greatest of qualifications, or your loan officer is hiding their money in the discount points and will move it to origination or another fee at docs.

If you would want to go into further detail, feel free to email me! Otherwise good luck!
  • March 19 2009
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Thank you for your reply.  It is a conventional loan.  It was going tocost 2.75 points to get this rate, but I was able to get the mortgagebroker to drop it down to 2.5, which is $4600 on a $184K loan.  Hisother fees add up to $998.  My husband and I have excellent credit,with our ficos in the 800s.  We are also cashing out on this refi at80% loan to value. 

I really appreciate your advice !!
  • March 20 2009
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The cash out hit is .500 in discount so he also has a hit for the rate but who knows what that is since we dont know the lender. With other fees at $998, sounds like maybe he keeps 1%-1.50%. Just the discount and his fees of $998 = APR of 4.639
  • March 20 2009
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Thank you for your reply Clay.  He said we took a hit of .5 because of the 80% loan to value ratio.  And, I paid a point to bring the interest rate down to 4.5%, and he ate an additional .25% to get me down to 4.375%.  I thought this was an excellent rate.  Compared to the offer I had a day ago of 5 - 5.125%, according to the TIL, we saved $40K and were able to borrow an additional $20K.  I thought the spread on the apr was reasonable at 4.697%.  Is this reasonable?
  • March 20 2009
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yes
  • March 20 2009
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Clay, you are the man!!  Thank you for your input, I'll relax now and enjoy the rate!!


  • March 20 2009
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How about 5% versus 5.462%?

30 yr fixed FHA, 5% down
  • June 29 2009
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weweber3, I get an APR of 5.552 calculating the UFMIP and annual MI, without factoring in any fees. What is your purchase price, origination fee, mortgage broker fee, and/or lender fees?
  • June 29 2009
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Clay, your new name is Mr APR Wizard! Excellent work!
  • June 29 2009
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I remember these rates!  Those were the days.
  • June 29 2009
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