Easy go to my website; QUICK PRICE MOTIVE-ATION
However, what I find in pricing loans all day is that Brokers don’t see the QM math. Maybe I just see it super fast as some number nerd.. lol Here is an example, and my Broker didn’t see it. His comp is 2.75% and after the LPC the rate sheet had from 4.625% to 3.25% available on the pricing engine. We see the top rate paid back almost 1.5% after comp, and 3.875% was par on this 601 FICO FHA client. BUT, the client needed a lower rate for qualifying, so the broker didn’t know he couldn’t go past 3.625% as a rate costing the client 1 point roughly. (1.083 costs). And when he hears me state that asks, “well why?”
GREAT QUESTION! If QM limits to 3% then we don’t have a lot of room after the 2.75 you charge Mr Broker. In the industry now it’s not really 3% of the loan amount, it’s like APR was and is 3% of the loan minus costs now basically is a great way to gauge it off the top of your head. But think of it this way, YOU CAN BONAFIDE ONE DISCOUNT point on loans as long as it’s not the top rate or the lowest rate. So, 2.75 + .083 = The top your going to be able to give client in costs. Means the teeter totter effect on the rate versus costs bottom’s out. You have to see that in advance before LOCKING LOANS! 3.5% on this loan was a cost of 1.509 and with that and the 2.75 comp it’s not passing QM. I can see it, so should you.
Biggest closing issue this month is loans not passing QM and the LO should know how to figure this out. You can’t have a 2.75% comp plan and then charge 2.75 in points, the most your going to get is 1.125% ish as cost to bonafide one discount point and have the .125 + your comp go into it. THIS ASSUMES, you waive the underwriting fee, not in TX and you don’t have any other affiliated business fee’s going into QM tests.
As a cheat sheet, this is what goes into QM;
Lender Paid Commission/Borrower paid commission + Underwriting fee + TX attorney fee + Points (after 1 bonafide discount point exempted) + any affiliated business profit = QM 3% or less. *note this is a fast way to do it in your head and not be off by 1000’s and is not 100% all the algorithms to use. Use your internal software and run the true test. But with naked eye this hopefully will help some “see it”. – Juiceman