|Posted by: sandyh Aug 15 2003, 06:23 PM
| I purchased my home in early 2003. Obtained loan from E-Loan and during the entire application period I was told my rate would be about 6 or 7%. Granted, not good, but my credit hasn't been that good til now. To make a long story short, when the loan was getting ready to close, I was told the ONLY rate I could have was 7.50% for 3 years w/a prepayment penalty of 28%. At the beginning of the loan process the owner of the home and I wrote up a contract (which was required by E-Loan) stating that the loan would close on date certain. When I was informed of the rate I felt as though I had no choice in the matter due to the contract and to the fact that I purchased the house for 28K less than the appraised value. I also had paid up front for the appraisal and lastly knew that I would not be able to find another house I could afford. I went ahead and went through with the loan which looking back was not the smartest thing I have ever done.
IndyMac purchased the loan from E-Loan. I contacted them and asked if there was any way I could refinance, with the prepayment penalty being waived. The loan officer informed me that they would be glad to refinance the loan, but they do not own it - they only manage it.
So, any suggestions or am I stuck? We are talking a $28,000 prepayment penalty so paying that is impossible.
|Posted by: loanuniverse Aug 15 2003, 08:40 PM
Let me start by saying that I am not a residential lender and my expertise is mostly on commercial loan underwriting. However, I can give you my take and direct you to a place that can give you more information.
First, My educated guess on your situation is that you are going to have a hard time getting the prepayment penalty waived. On the other hand, while your rate is a bit high if it is for a 30 year mortgage then it is only 1.50% over the current market rate. It is more of an expensive lesson that is reminded every month with the monthly payment. If the penalty is only for the first three years, you have something to look forward to hoping that rates are this low in three years . Assuming that the loan is for $100,000 the 1.50% difference is roughly about $1,500 in extra interest a year.
While this is of not much help to you, I hope that other people that read about this understand that there are certain things about the home buying process that one must keep in mind. I hope you don’t get upset, but your case is great to use as an example. These things are:
1- The purchase contract is usually a template where you get to add/modify the conditions of the purchase. In most cases this contract is initially a buyer’s offer that becomes a contract once the seller accepts. Among the things that can be done is making the purchase conditional on obtaining financing according to terms that are to the buyer’s advantage. I would have marked it as subject to financing with a rate of 6% to 7%.
2- You can walk away from the closing without owing a cent. The $250 for the appraisal is a small fee to pay. I walked away from a refinance five months ago when my original lender offer me to refinance with no closing costs. The only money that you lose is the one that they ask you in advance for the appraisal and credit report. You are not responsible for anything else since the loan was not closed.
Finally, I can point you to a couple of resources on the web.
This is a great message board for personal credit issues
Sorry I could not give you more encouraging news, you can always try to connect with Eloan and see if they can do something about waiving the penalty. Do not contact the servicer, although you might have to speak to a supervisor or someone that knows about who is holding your loan, Eloan should be able to give you an answer on the posibility of refinancing. Unfortunately, I think that it might not be succesful and that your loan is not seasoned enough.
|Posted by: sandyh Aug 17 2003, 10:04 PM
| Thank you very much for your reply. You didn't really tell me anything I didn't already assume .... and I too, think my case is a good one to use as a example - an example of what not to do. I am not as concerned about the rate being what it is as I am about the rates being sky high when the three years are up. I guess I will just keep my fingers crossed and hope that the rates are where they are now.
Thank you again for your reply!