Lender Paid Mortgage Rates VS Borrower Paid Mortgage Ra… — Transcript

Hey, hope you're doing well. My name is Jonathan Thomas, senior loan officer at Edge Home Finance, 2022 AIM Broker of the Year. We are a mortgage broker, so we're able to do some really cool things that most loan officers can't do, even some brokers can't do. So today, I'm going to go over one of the main things that I offer and am able to offer all of my clients. Sometimes it could be a little bit confusing, so I'm going to try to just keep it real simple with an example as well. Then I'll make another video later on actually screen sharing and pricing out some loans to go a little bit more in depth and the difference and kind of take away the mystery of rates and how things work.

loan officers can't do even some Brokers can't do so today I'm going to go over one of the main things that I offer and able to offer all of my clients uh sometimes it could be a little bit

Okay, so the big thing that I'm able to do is lender paid versus borrower paid rates. I'll try not to go too deep into the weeds here, but let's go over lender paid versus borrower paid. The big difference here is that lender paid rates, the lender's fee is in the rate. That's 2.75% of the loan amount, so whatever the loan amount is, 2.75% of that is baked into the rate, which is going to inflate the rate because the lender, by raising the rate, pays that for you, the borrower.

kind of take away the mystery of rates and how things work okay so the big thing that I'm able to do is lender paid versus borrower paid rates and I'll try not to go too deep into the weeds here

Okay, borrower paid, the lender's fee is not going to be included in the rate. All right, so that's removed from the rate. It doesn't inflate it, so it'll drop the rate lower to more of a wholesale true rate, and that percentage is paid at closing by the borrower, which would be you or your client if you're a realtor. That percentage can actually change when you go borrower paid. Me as the broker, I'm able to lower that for my clients.

um 2.75 percent of that is baked into the rate which is going to inflate the rate because the lender and buy raising the rate pays that for you the borrower okay borrower paid the lender's fee is not going to be included in the rate all

Okay, now this works for almost every loan except VA. There's some nuances with VA, but FHA, conventional, almost any other loan besides VA, this is going to work. So let's go through a real world example that happened a little over a month ago. $370,000 purchase, it was a 3.5% down FHA. Total loan amount was $357,500.

realtor and that percentage can actually change when you go borrower paid me as the broker I'm able to lower that for my clients okay now this works for almost every loan except VA there's some nuances with VA but FHA

Okay, 2.75 on lender paid, 2.75% would be $9,818 in lender fee, and that goes into the rate. So the rate would be 7.375%, $2,466 principal and interest payment on a lender paid scenario.

was 357.50 okay um 2.7 on lender paid 2.75 percent would be 98.18 and lender fee okay and that goes into the rate so the rate would be 7.375 uh 2466 principal and interest payment on a lender paid scenario okay

Okay, borrower paid, we're able to drop the percentage paid at closing. All right, so 2.75%, but let's skip, a simple 2.75% is removed now from the rate. Okay, and I was able to drop the rate to 5.375%, totaling $7,141, my lender fee percentage.

totaling 71.41 okay my lender fee percentage all right so 9818 the 7141 already about 27 um 100 uh difference right there that was duet closing in this situation in almost every situation that I go borrower paid we get what's called a

All right, so $9,818, the $7,141, already about $2,700 difference right there. That was due at closing. In this situation, in almost every situation that I go borrower paid, we get what's called a seller concession to offset those costs.

thousand dollars which left a little bit left over on there um to offset the cost so you walked away with about fifteen thousand dollars cash to close which is awesome okay so borrower paid 2.75 is not in the rate

Okay, so in this situation, we had a $10,000 seller concession to offset those costs. This borrower had a $12,000 down payment, and with the seller concession for $10,000, which left a little bit left over on there to offset the cost. So you walked away with about $15,000 cash to close, which is awesome.

okay so 432 a month difference huge huge huge huge um this particular client wasn't going to put an offer on the house at the 7.375 rate until he talked to me was able to drop the payment 432 dollars put

Okay, so borrower paid 2.75% is not in the rate anymore. Instead of a 7.375%, this client got a 5.375% rate. All right, two percent difference. The monthly payment on this principal and interest was $2,034.

paid I give them the options I also give them the option that is kind of in the middle of these I'm not going to go into that now but um to be able to be 432 dollars a month

Okay, $432 a month difference. Huge, huge, huge, huge. This particular client wasn't going to put an offer on the house at the 7.375% rate until he talked to me, was able to drop the payment $432, put an offer on the house that he liked that was over his budget at 7.375%, and got the house. And yeah, I was super happy for him.

this with conventional and FHA on a pricer and screen share it um but this is something really really awesome I'm proud to be able to offer as a broker have a good