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I am working with a lender on an FHA loan in Orlando, FL. The rate is 5.59 and the Good Faith Estimate states that the lender is asking for !.000 for a loan origination fee and 1.000 for a loan discount. Does this mean my 5.59 percent is now 7.59 percent? Is this allowed on an FHA loan? What is the likelyhood of getting a smaller fee elsewhere? I have a list of approved lenders to use- should I contact more and get other estimates. Help!!! This is my first home purchase and I’m not sure what to do. I have 20% to put down from grants and gift funds. The good faith estimate still lists mortgage insurance…shouldn’t this be unnecessary with 20% down?

4 Thoughts on Are 2 points for loan origination fee & loan discount normal on an FHA loan?
  1. Guitar_Junkie_
    December 2, 2011 at 10:16 pm

    I think points are 1% of your loan amount for each point paid up front for those fees you described, not 1% point added to your rate. Yes, PMI should not be required with 20%

  2. Porter
    December 2, 2011 at 10:18 pm

    LOOK AROUND THATS A GOOD RATE BUT TWO POINTS IS HIGH.. POINTS ARE AN UP FRONT FEE …NOT POINTS ADDED TO YOUR INTEREST RATE..1 POINT = 1% OF YOUR LOAN..MEANING IF YOU BORROW 100,000 1 POINT WOULD = $ 1,000 AS A FEE AT CLOSING..

  3. thejazzgirl
    December 2, 2011 at 11:16 pm

    That sounds a little high, I’d look around. There may be other factors that your not mentioning and you are “buying down” the interest rate. Check out a credit union if you can. Just do a little research and ask around before you start letting too many people give you quotes because everytime you run a credit check it can lower your score a bit.

  4. Kaz
    December 2, 2011 at 11:59 pm

    Everything looks good to me. Basically what is happening here is this: The origination is the brokers fee for working for you, the discount point is so he can buy the rate down for you and looking at the rate you have, it is right in line with what it should be. This guy is not making hardly any money on this loan.

    As far as your mortgage insurance, you are right when you talk about putting 20% down and not having MI. Although FHA requires MI no matter what you put down and since you are using some grant and gift money to put down, then you have not other choice than to use FHA. Conventional mortgages do not allow down payment assistance programs.

    If you want less up front money, tell the loan officer to take away the discount point and raise your rate. The you won’t have as much up front money. Although if the money is from grants and down payment assistance and not your own money, then what is the difference? It is not coming out of your pocket so why not let the guy make some money? Mortgage originators have that right also….

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