Sir, I think your calculator is broken!

Mortgage and Lending with Fairway Independent Mortgage Corporation Nevin NMLS #69651

question markSir, I think your calculator is broken!  My purchase price is $300,000. My down payment is 3.5% which is $10,500.  My new loan amount should be $289,500.  Why are you showing $296,013? 

I'm glad you asked!


FHA has two types of mortgage insurance premiums.  Up front and monthly.  The combination of the two is what the FHA collects as a reserve to pay for loans that default.  We are focusing on up front only.

The Up Front Mortgage Insurance Premium (UFMIP) currently (September 2010) is 2.25% of the loan amount.  300k- 3.5% = $289,500 x 2.25% = $6,513.75.  $6,513.75 + $289,500 = $296,013.  Any odd change is paid as cash at closing.

This is why a mortgage calculator is a fun toy and not a replacement for a qualified loan officer.  I say qualified for a reason:  I had a client who told me his buddy got a great deal from this other loan company.  The quotes they made were better than anything I saw on rate sheets from banks all over the country so I knew something was wrong.

I called this loan company and acted like one of their customers (sneaky I know!).  I asked him the most fundamental question:  If my loan should be 289,500 after deducting the down payment, why does your good faith estimate have a higher loan amount?  He said I don't know!  I'll have to check with the underwriter.

And these folks at this bank are closing loans...SCARY!


Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. D B 09/14/2010 01:50 PM
  2. Michelle Gibson 09/20/2010 01:33 PM
  3. Michelle Gibson 09/20/2010 01:33 PM
  4. Tammy Pearce 09/20/2010 01:41 PM
  5. Loan Survivor Real Estate Financing Expert 09/22/2010 12:42 AM
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Debe Maxwell, CRS | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

You could have titles this one, "User Error??" ;-)

Sep 13, 2010 02:03 PM #9
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

Great Blog Nevin!  One of our local real estate comptetitors has a mortgage calculator on their website.  What they do not disclose is that the numbers they give are based on 20% down and do not include taxes or insurance.  Once the customers find out the real story they are usually less than pleased.

Sep 13, 2010 02:06 PM #10
Nevin Williams
Fairway Independent Mortgage Corporation - Cary, NC
Senior Mortgage Advisor

Debe - Yes but then they would think it was me! LOL

Damon - Thanks!  Yes, unfortunately so many people underdisclose.  Then they wonder why they aren't trusted : 0

Sep 13, 2010 03:46 PM #11
Doug Anderson
Tucker Associates Real Estate Services - Danville, CA
Bay Area Real Estate Views

I agree with Glenn wholeheartedly Nevin.  For accurate information in a changing environment one needs a true professional such as yourself.  All the best.

Sep 13, 2010 04:31 PM #12
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

And sometimes having a GOOD buyers agent (preferably exclusive, wink) is paramount.  We might be able to get sellers to contribute to closing costs, so there's not "THAT TOO", on top of the 2.25%. 

Sep 14, 2010 07:30 AM #13
Nevin Williams
Fairway Independent Mortgage Corporation - Cary, NC
Senior Mortgage Advisor

Doug - Thank you!

Carla - So true!  A good agent like you is worth their weight in gold

Sep 14, 2010 09:02 AM #14
David Robinson
Lloyd Cullen Real Estate - Murrieta, CA
Call Now (877) 828-0710

Great post! Mortgage insurance can sneak up on you pretty quickly!

Sep 14, 2010 09:43 AM #15
Julia Odom
Select Realty Professionals - Chattanooga, TN
Chattanooga Homes for Sale

Yikes! I'll have to check with the underwriter? I don't claim to be an expert when it comes to lending but I have a clue. Sounds like that 'lender' didn't.

Sep 14, 2010 09:51 AM #16
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Nevin, this new FHA wrinkle with mortgage insurance premium NEEDS to be explained. You did a great job here with it.

Sep 14, 2010 09:52 AM #17
Dianne Bartlett
Brightside Realty, LLC - Austin, TX

Don't know what I would do without my great loan officer to help me with the numbers.  Thank God for you and your expertise!

Sep 14, 2010 10:31 AM #18
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Nevin,,, good post and you beat me to this...not exactly what I was going to write about... mine was going to be about the basics and more geared towards conventional loans.... but you did an excellent job with using the example for FHA loans... and this was an easy explanation and easy to read.. and I love the ending, when the loan officer had no clue and said, "I have to ask the underwriter"... lol  I have had some conversations with other loan officers like that.. yes, scary.  Sure, everyone has to start some where... but that was mortgage 101.

jeff belonger

Sep 14, 2010 12:12 PM #19
Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

Nevin: Thanks! It's always amazing to those of us who feel we're competent to hear nonsense like this! Take care.

Sep 14, 2010 12:41 PM #20
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

Nevin, part of our job is to be able tto explain this stuff! We need to not be lenders, but be able to explain it to the consumers.

Sep 14, 2010 02:27 PM #21
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Nevin, I love your sense of humor in presenting this dry topic! No wonder you and Craig get along so well :) There is no substitute for a good loan officer - wish you did business in Florida!

Sep 14, 2010 03:44 PM #22
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Nevin -- Your post here aptly illustrates why it is imperative that all real estate professionals (agent, lo, title/escrow, inspectors, etc.) are top-notch as the chain is always as strong as the weakest link.  Consumers need to really, really understand the importance of partnering with the right professionals.

Sep 14, 2010 04:12 PM #23
Nevin Williams
Fairway Independent Mortgage Corporation - Cary, NC
Senior Mortgage Advisor

David - Thanks!

Julia - There are many like them!

Gary - Actually it has always been there!  It's just that most folks don't know it : )

Dianne - LOL  So many nuances in both of our businesses!  When the heated negotiations between buyer and seller begin I say Thank god for the agent and their expertise!

Jeff - And the federal reserve bailed these guys out and demonized the independent brokers.  If I could tell the fed what i thought it would be: Smooth move EX LAX!

Paul - It makes me wonder!

Erica - As much as I applaud a Realtor learning one of the things that go hand in hand with home sales/purchases I have to respectfully disagree.  I think unless an agent is 100% well versed in lending and carries a mortgage loan originator license, explaining finance to a client could be detrimental. This is especially true with all of the lending rules changing so frequently.  Similar to a loan officer telling a buyer what to do in a contract after issues have been found with a home after a home inspection.  Not our expertise.  Thanks!

Frank and Sharon - Thanks! LOL  Craig is my buddy but I will never be as fun and zany as he is!  He is the king of wit!

Chris - I couldn't agree more!

Sep 14, 2010 05:09 PM #24
Fred Griffin
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

Aw, come on Nevin, this is the 25th Anniversary of the HP 12-C calculator.  I bought the first model way back in 1980 something, I am on my 2nd or 3rd one,  and I can type on it blindfolded.   You don't really think I need a Mortgage Professional, do you?  :)

Sep 14, 2010 05:43 PM #25
Nevin Williams
Fairway Independent Mortgage Corporation - Cary, NC
Senior Mortgage Advisor

Fred - Nah!  I'm sure you have the 1,200 page Fannie Mae underwriting guideline manual in your desk drawer.  It's all good!

Sep 14, 2010 05:57 PM #26
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Here in Washington state we are ramping up for the new regulations that will most likely include in-house  educational updating, in addition to the mandated Continuing Education we have to pay for.  We have had a few folks who transfered in, and then couldn't keep up with the changes, and decided to go do something else. (And no, fortunately, it wasn't at one of those banks -- which I hear will have to get their loan people registered by the end of the year).

Sep 21, 2010 01:08 PM #27
Loan Survivor Real Estate Financing Expert
Purchases, First Time Buyers, Pre-Approvals, Refinance - Birmingham, MI

Nevin it is scary what borrowers put up with to save pennies while costing them dollars!  We need a mortgage reality show that shows all this stuff!

Sep 22, 2010 12:34 AM #28
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