Lender Credit for Closing Costs

On most loans you can't get money back that you didn't pay out, so if the lender credit is more than your costs (including both closing costs and prepaids and escrows) you can't get money back at closing. While it's possible that the lender over estimated your costs so they would not have to give you the credit more likely the costs came back lower than they projected so that you would not need to bring any money to closing. If you are getting a rate of 3.5% with 0 origination or points, and all your other costs are being covered through the remaining lender credit it sounds like a pretty competitive deal. You might find slightly better by shopping around but if you are ready to close, my recommendation is to take the loan and move on - you seem to have caught it at very close to the best available.

No, it's not true. If I offered to pay $900.00 of your fees, and it was in writing, I'd be obligated to provide you with a $900.00 Lender Credit.

A lender credit that was not input on the GFE technically is not binding. If it was on the 1003 (Loan Application) it is not a bound credit. A competent loan officer would have explained to you that the GFE now is more like a contract. The origination charges can't increase (with the exception of bona fide discount points) once it has been issued.

First, understand all loans have full closing costs. No lender officially is able to close a loan for $500. What lenders do is lower your closing costs by increasing your interest rate to a rate that pays them enough to absorb all your closing costs. The amount of your overall credit, combined with the interest rate can change daily. For example, assume your rate is 4.00%, and I am giving a credit of $5000. Maybe rates move slightly tomorrow, I still give you a 4.00% rate, but now your credit is only $4500. BUT, once LOCKED, that will not change. My guess, is simply that the person was off on your overall closing costs which wiped out the $900 difference. Then, to explain it, he made a bad "story". Sounds to me like you are working with an unlicensed bank application clerk.

Unless you are getting more cash back then you had in the transaction this is a bait and switch. IE on a purchase if you are not meeting your mininmum cash interest in the transaction then you will lose that lender credit.

Neal, Not enough information is available to give you a clear answer. IT almost should like this is a refiance so if you do not like the terms being offerred at the closing table, you have the option not to proceed with the refinance. As others have said, today lenders are bound by the GFE (Good Faith Estimate) that they give to you. If any changes occur a new GFE needs to be issued before closing. With that said, there are rules that need to be followed, but not sure if your lender saying FANNIE MAE RULES is correct. I am a lender in OHIO and if you wish to give me a call, I will gladly share my opinion and thoughts. You can find my contact information on my profile page.

Ok, if the final deal that was renegotiated was for a $900 lender credit at 3.5% they should honor that. But, if you didn't get it in writing it may be difficult to prove. You could try calling and ask to talk to the manager of the mortgage department and give them the details, tell them you are considering calling regulators and see what they'll do. No mortgage lender likes to have negative publicity and none like to attract attention from regulators. While it is possible they are legally okay, it still isn't right - any reputable lender would have made sure you go the deal that was committed to. It was/is a good deal especially with the cash out but that still doesn't make it right. Joe's right, doesn't sound like you are dealing with a truly experienced mortgage officer. Good luck