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Why is financing a condo ding you rate?

We are buying one for my mother-in-law in Irvine, but the lender tells me my rate will be at least 0.25% higher. Why is that? Is he lying? by JosephChang from Lake Forest, California. Apr 26th 2011 Reply


Hans Bruhner (Hans Bruhner)
#2 ranked lender in California - 125 contributions

The answer nobody wants to give is that there is a LLPA which is a Loan Level Price Adjustment on a conventional loan. If you are financing a condo with a less than 25% down, Fannie Mae charges 3/4 of a point. So you can avoid this fee by putting more money down or you can absorb it with a higher rate. It sounds like he is telling the truth but not explaining it fully. Absorbing the cost typically is not going to happen with a direct lender or a broker before or after the compensation changes.

Apr 26th 2011
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Gregorio Denny (GVDenny)
#259 ranked lender in California - 380 contributions

Let me say that they may not be fibbing, but they are not totally accurate. The pricing adjustment is one of discount, meaning the loan costs more (.75% of the loan amount more to be exact) if you put less than 25% down, but it does not have to affect the rate if you pay the fee. Depending on the loan amount, it may or may not translate into a .25% increase in rate if you decide to finance it through the rate. I am licensed in California, if you would like a rate comparison, please contact me. Gregorio Denny - WeFixRates.Com - 800-335-6897

Apr 26th 2011
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Carlos Alers (CarlosAlers)
#40 ranked lender in Illinois - 12 contributions

He can eat that if he wanted to, but he has passed the cost on to you. We usually just absorb the cost for the buyer since we are a direct lender.

Apr 26th 2011
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Lauren Boland (lauren@lblmortgage.com)
#298 ranked lender in California - 1 contribution

also you might want to ask what his "comp" plan is....things changed for borrowers after april 1st and absorb is not the word i would use...Are you dealing with a broker or direct lender?

Apr 26th 2011
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Chris Gummerson (cgummerson11)
#398 ranked lender in California - 648 contributions

I agree with the previous lender. If the Loan Officer knew that you might not be mortgage savvy, its a way for them to make a few more bucks, rather than have them eat the cost, to earn your business. It also depends on the type of loan. FHA there is not a hit for condos. If you dont feel comfortable, you should look elsewhere. Since you are helping another, keeping the payment as low as possible is your best interest. If you would like a second look, please contact me off my page. We are local, in La Palma, and we are a direct lender. Good Luck.

Apr 26th 2011
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Carlos Alers (CarlosAlers)
#40 ranked lender in Illinois - 12 contributions

Feel free to call me so I can run this in the system for you and find out if we can do better for you: 815-690-8000. Or shoot me an email: carlos@yourfharates.com

Apr 26th 2011
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Patrick McCarthy (PatrickM)
#24 ranked lender in Ohio - 196 contributions

Fannie MAE and Freddie MAC have a price adjustment for condos. That is passed along to lenders and borrowers in the form of an increased interest rate. Condos are a property type that is less attractive due to the marketability of condos should the lender have to take back the condo and try to resell it. Sadly, Fannie and Freddie cannot set price adjustments based on individual markets. Hope this helps. Feel free to call on me. Our rates are lower than any I have seen as of late, so you may be able to get a rate with us for your condo, that is comparable to what you are seeing for non-condo properties. Patrick McCarthy, Stonegate Mortgage, 614-395-2393

Apr 27th 2011
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