Mortgage Advice needed.......

[butterfly 17]

Hi guys,

As some of you know, I am in the process of buying a new home and selling my current one.

I have not yet applied for a mortgage because all the lenders I have spoken to told me a need a signed contract in order to to apply for one. I am just waiting for it to arrive in the mail, which should be today or tomorrow, so I have to decide now what to do.

We are putting 20% down and it will be considered a jumbo mortgage loan b/c of the amount. It will be a full documentation loan so we can get the lowest rate possible. We are thinking to do a 30 year fixed rate and then refinance next year or so. The estimated closing costs from three lenders were around 20K give or take a few hundred over or under.
I also got a few different rates but I am not sure who I should go with.

So, here are my questions.

1- Should I go with a mortgage broker or a bank? My mortgage broker quoted me 6.375%, Chase Bank (where all my accounts are located) quoted me 6.5%. Commerce quoted me 6.25, but could not provide total closing cost fees, and when I persisted, they finally told me 12K, which I think is impossible.

2- Should I do a 30 year mortgage or 20 year mortgage. We can afford either one, but I am not sure which would be better to do. We obviously want to pay it off faster, so we would do the biweekly payments if we did the 30 year mortgage and probably pay a little more principal as well.

3- What exactly is an origination fee and how does it affect my closing costs?

4- As far as closing costs are concerned, the mortgage broker is charging .75% fee for his services added to the closing costs fees, but his total is still only $19K, compared with Chase which is almost 21k, so how is it possible that his estimate is cheaper than Chase's?

I probably have a bunch of other questions, but I can't think of them right now.

 

[Dee*Jay]

Date: 11/28/2006 1:10:46 PM
Author:butterfly 17
Hi guys,


As some of you know, I am in the process of buying a new home and selling my current one.


I have not yet applied for a mortgage because all the lenders I have spoken to told me a need a signed contract in order to to apply for one. ***THAT IS NOT *ENTIRELY* CORERCT. YOU CAN START THE APPLICATION PROCESS AND GET THEM THE CONTRACT SEPARATELY, BUT SINCE YOU'RE TALKING ABOUT SUCH A SHORT TIME ANYWAY (HAVING THE CONTRACT TODAY OR TOMORROW) IT DOESN'T REALLY MATTER.*** I am just waiting for it to arrive in the mail, which should be today or tomorrow, so I have to decide now what to do.


We are putting 20% down and it will be considered a jumbo mortgage loan b/c of the amount. It will be a full documentation loan so we can get the lowest rate possible. We are thinking to do a 30 year fixed rate and then refinance next year or so. ***WHY THE REFINANCE PLAN? DO YOU EXPECT RATES TO LOWER OVER THE NEXT 12 MONTHS? I CAN'T/WON'T PREDICT WHAT THE MORTGAGE MARKET WILL DO, BUT IN GENERAL I WOULD BE SURPRISED IF RATES CHANGES MUCH OVER THE NEXT YEAR--BUT I COULD BE WRONG!*** The estimated closing costs from three lenders were around 20K give or take a few hundred over or under.

I also got a few different rates but I am not sure who I should go with.


So, here are my questions.


1- Should I go with a mortgage broker or a bank? My mortgage broker quoted me 6.375%, Chase Bank (where all my accounts are located) quoted me 6.5%. Commerce quoted me 6.25, but could not provide total closing cost fees, and when I persisted, they finally told me 12K, which I think is impossible. ***THE QUOTES YOU'RE GETTING, INCLUDING THE CLOSING COSTS, WITHOUT HAVING ALL THE DOCUMENTATION IN ARE VIRTUALLY MEANINGLESS AT THIS POINT. AS FOR BROKER VS. BANK: NOTE THAT A BROKER WILL GO OUT AND "SHOP" YOUR LOAN. EVERY INQUIRY THAT IS MADE WILL/MAY IMPACT YOUR CREDIT SCORE. I HAD A RECENT CLIENT WHO'S BROKER SHOPPED HER LOAN OUT 13 DIFFERENT PLACES AND IT LOWERED HER CREDIT SCORE BY 70 POINTSOVER A 30 DAY PERIOD, WHICH ULTIMATELY AFFETED THE RATE SHE GOT. CONSIDER THAT CAREFULLY BEFORE YOU DO IT. IF YOU GO THE BROKER ROUTE, MAKE SURE YOU TELL THEM "NO MORE THAN XXX INQUIRIES" (THREE IS A SAFE NUMBER). HONESTLY, I DON'T FIND BROKER RATES TO BE MUCH BETTER THAN BANK RATES. AS FOR CLOSING FEES--EVERYTHING IS NEGOTIABLE.***


2- Should I do a 30 year mortgage or 20 year mortgage. We can afford either one, but I am not sure which would be better to do. We obviously want to pay it off faster, so we would do the biweekly payments if we did the 30 year mortgage and probably pay a little more principal as well. ***THAT'S ONE ONLY YOU CAN ANSWER. THE 20 YEAR WILL HAVE A LOWER RATE OF COURSE, BUT THE 30 YEAR WILL GIVE YOU A LOWER PAYMENT. HERE'S AN INTERESTING FACT: IF YOU PAY THE EQUIVALENT OF ONE EXTRA TOTAL MORTGAGE PAYMENT EACH YEAR YOU WILL ESSENTIALLY CUT A MORTGAGE TERM IN HALF (I.E., IF YOUR MORTAGE IS $2,000 MONTH [PRINCIPAL AND INTEREST] AND YOU PAY AN EXTRA $2,000 TOWARD YOUR PRINCIPAL YOU WILL TURN A 30 YEAR MORTGAGE INTO A 15.) THERE ARE ALSO SOME PLACES THAT WILL SET YOU UP TO MAKE PAYMENTS EVERY TWO WEEKS (WHICH IS THE EQUIVALENT OF MAKING 13 RATHER THAN 12 PAYMENTS A YEAR), BUT THEY USUALLY CHARGE YOU TO SET THE SERVICE UP. FORGET IT. DO IT YOURSELF FOR FREE!***


3- What exactly is an origination fee and how does it affect my closing costs? ***I THINK YOU'RE REFERRING TO A "POINT." IF YOU PAY 1% UP FRONT YOU GET A LOWER MORTGAGE RATE. THIS IS ALMOST NEVER A GOOD DEAL. EXPLORE THE SPECIFICS OF THAT OPTION WITH YOUR MORTGAGE VENDORS, BUT YOU MAY BE SURPRISED BY HOW MUCH YOU'RE PAYING UP FRONT AND HOW LITTLE THE RATE CHANGES TO YOUR BENEFIT. ANOTHER THING THAT WOULD IMPACT THIS DECISION IS IF YOU REALLY EXPECT TO STAY IN THIS HOUSE FOR MANY YEARS***


4- As far as closing costs are concerned, the mortgage broker is charging .75% fee for his services added to the closing costs fees, but his total is still only $19K, compared with Chase which is almost 21k, so how is it possible that his estimate is cheaper than Chase's? ***AGAIN, THESE QUOTES ARE PRETTY MEANINGLESS AT THIS POINT. GET IT ALL IN WRITING ONCE ALL THE PAPERWORK IS IN AND SEE IF IT'S STILL THE CASE."


I probably have a bunch of other questions, but I can't think of them right now.

BUTTERFLY - SORRY FOR ANSWERING IN THIS WAY BUT IN DON'T KNOW HOW TO "INSERT" MY RESPONSES AFTER YOUR QUESTIONS. SEE MY REPLIES IN CAPS ABOVE.

 

[Mara]

a recommendation...we used eLoan for our mortgage when we bought our townhouse 4 years ago. there were basically no closing costs...and we priced them out vs 2 other brokers and eLoan was the best...best rate, best terms, best closing costs/out of pocket expenses etc. we are thinking of refinancing inn 2007 and will probaly use them again. other brokers were basically promising us the same rate but their closing costs were like $10k. eLoan i think we paid like $1k only. their people don''t work on commissions. and we found them very easy to use, effective, all the paperwork was online so we could view it at any time...disclosures etc.

in terms of the loans, i''d get the 30 year and that way you can pay it off faster if you want (and essentially make it a 20 year or less depending on your payment structure)....right now i have been reading that the 30 years are at the lowest they have been in a while and also the last time i was looking it seemed like the 30 year was the best rate overall, better than 5/7/10 years or anything else. so definitely check out all your options.

 

[appletini]

I don''t have anything to contribute, but just wanted to thank everyone for their comments. DH and I have been house hunting for almost year (we''re very picky) and so we really appreciate learning as much as possible when it comes to mortgages. We did however get pre-approved for a mortgage so that sellers would know we are serious.

 

[Beacon]

Broker vs Bank: Depends on the broker. If the broker is excellent then that is often very cost effective. If your loan is tricky in any way, then extreme competance is needed from a loan broker. Chase is a pretty good bank (they also wholesale to brokers) and if you run into any trouble spots during your loan, you may get more control by going direct. Loan broker is like a surgeon, some are Godlike, some are choppers.

20/30 yr. mortgage: RIght now the yield curve is very flat, meaning you will not get that much of a rate improvement by taking a 20 yr. loan. I would do this: take the 30 and pay it like a 20, if that is what you want. Easy to calculate the payment you need to pay off in 20 years. DO NOT just start paying bi monthly! Only do so if it is an express part of the loan agreement you started with. You will massively confuse the lender if you pay at odd times and possibly mess up your credit.

If you should have any disruption in your income, or any other unusal expenses you need to cover, you will appreciate the fact that the 30 year loan payment is lower and you are not obligated to come up with the 20 year payemnt..

DO NOT take a 30 year mortgage and refi it on one year. Very expensive, inconvenient and makes no sense. Only reasonable if, for example., you have actually borrowed the money for the downpayment and need to repay the person after one year. If you have a compelling reason to refi in one year, then take a one year ARM and enjoy a cheaper rate for one year. Otherwise, just take the 30 and keep it, until we see some significant drop in rates.

Good luck!

 

[lovelylulu]

I''m in a similar situation as appletini, though we are just starting out. so thanks for the advice! the ins and outs of mortgages is rather complicated and we''re going to have to do a whole lot more research. is there any good information source anyone could recommend other than the collective PS knowledge?

also, deejay: aren''t points on a loan unavoidable??

 

[Dee*Jay]

Date: 11/28/2006 4:24:36 PM
Author: lovelylulu
also, deejay: aren''t points on a loan unavoidable??

You absolutely DO NOT have to pay points. It is a mechanism to get your mortgage interest rate down, but you need to weigh the amount that you would pay against the amount that you would save based on the lower interest rate. Generally points only make sense if you''re going to stay in a place for a long time (i.e., long enough that the amount that you pay is offset by the amount that you save). So, for instance, paying 1 point to get 1/8 off your interest rate for a home that you only intend to stay in for a few years doesn''t make sense.

 

[butterfly 17]

Thanks for all the help!!!

Mara, I think I will give e-loans a call to see what they have to offer.

Dee*Jay,
I did call Chase and explain to them that my mortgage broker is offering me the 6.375 and asked them what they could do to meet that. They said if I paid 1/8 of a point ($707), they would give me the 6.375.

Do you think that sounds good? We do plan to stay in this house for a while, at least 5 to 7 years, if not longer.

I calculate that by dropping the rate from 6.5% to 6.375%, I will be saving $50 a month. So, if I do pay that 1/8 point (707), within 15 months, I would have saved that amount in my mortgage payments.

Beacon,
thanks for the info. When we first found the home, we were going to purchase without selling our home first, so because it was a little bit more tricky that way(we were thinking no doc or no debt ratio type loan so they couldn't verify income since there was no way we could do both mortgages based on our salaries), we decided to get in contact with mortgage brokers. But now that we have a buyer who actually wants to close around the same time that we want to close on the new house, our mortgage will be quite simple.
I think I will do the 30 year fixed and then just pay off an extra payment each year. That seems to make a lot more sense since if our situation changes, we won't feel so obligated.
Thanks!

 

[butterfly 17]

Date: 11/28/2006 4:24:36 PM
Author: lovelylulu
I''m in a similar situation as appletini, though we are just starting out. so thanks for the advice! the ins and outs of mortgages is rather complicated and we''re going to have to do a whole lot more research. is there any good information source anyone could recommend other than the collective PS knowledge?

also, deejay: aren''t points on a loan unavoidable??

Hi lovelylulu,

I found the website- ourfamilyplace.com to be a very good site for first time homebuyers such as yourself. It explains everything in a step by step fashion that is really easy to read and uncomplicated.

Also, bankrate.com, realestateabc.com and mortgage.com.

But I really think that if you are just looking to buy a home, then ourfamilyplace is great. It explains the entire process and even lets you print little checklists, etc.

 

[butterfly 17]

Date: 11/28/2006 1:33:37 PM
Author: Mara
a recommendation...we used eLoan for our mortgage when we bought our townhouse 4 years ago. there were basically no closing costs...and we priced them out vs 2 other brokers and eLoan was the best...best rate, best terms, best closing costs/out of pocket expenses etc. we are thinking of refinancing inn 2007 and will probaly use them again. other brokers were basically promising us the same rate but their closing costs were like $10k. eLoan i think we paid like $1k only. their people don''t work on commissions. and we found them very easy to use, effective, all the paperwork was online so we could view it at any time...disclosures etc.

Mara, I just contacted eLoan and they quoted me the same 6.375%, but their closing cost estimate is only $10K, half of what the other lenders are estimating.
Plus, they have no application fees, no appraisal fees, so, I think I wll go ahead and just apply with them b/c I really have nothing to lose and if I am not happy, I can always just change my mind and use someone else.
Thanks!!!

 

[moremoremore]

Are you in NY? I don't know why I thought you were...In any event, I'm shocked that the closing cost quotes varied so much (assuming that the point issue is the same for each lender you've contacted)...Just be sure that some aren't excluding the mortgage tax and other title charges from their estimate....That is a huge difference...I am also not sure why you'd want to refi in a year...you'll be paying all of those costs again... As for points, IF I'm planning on being in the same house for 20 years, I actually don't mind paying a discount point to lower the rate...it depends, you'd have to figure out the potential savings...
Most lenders should be able to tell you, outright, the fee for the appraisal, flood cert, credit report, application fee, underwriting fee, bank atty fee, origination and discount fee (points) ..you can figure out your escrows for taxes and insurance pretty much (maybe 3 months' worth for each), and if you close late in the month, you'll have less per diem interest to pay until the end of the month....The title charges are also pretty standard...

Oh, btw, even though our largest client is a mortgage banker, I went to a broker when I refinanced my ARM...We got a fabulous rate for a 30 year fixed and paid VERY lost costs with no points at all...what happens is that the broker just got paid by Chase on the back end...didn't impact us...So brokers can be good...

 

[Mara]

the big difference for us was that eLoan doesn't take a big $5-10k commission for themselves when they give you the loan like brokers do..and of course brokers are not giving their time for free, they have to make money too.

but, if i recall correctly, i believe how eLoan works is they are your lender. they give you the loan for your house. then they turn around and make $$ on your loans by selling them off to banks. So they don't need the broker commission, because they make money another way. it actually benefits you both.

i did some research beforehand (actually i researched for MONTHS before we bought and i had everyone comment on how they'd never met a more educated homebuyer...hahaha) and had a few brokers and eloan price things out for us. i also wanted to make sure that eloan did not sell our loans after the fact to some fly by night company who would try to screw us over (read those horror stories!). eloan ended up selling our loan to the 2 largest banks in california a month after we closed, one of which we have all of our accounts with so it worked out perfectly.

while the other brokers might have been able to match or get close to eLoan on the rates and points and all that, the closing costs were just a killer. one gal told me she'd make no money if she did it that way. and since i am comfortable with doing things online, hello i'm in internet marketing...and i also had a friend who worked for eloan who could vouch for the fact they don't like run away with your money or anything, hahaha...so we applied online and then we got assigned an account manager and she was wonderful. i emailed her questions at all hours and she would get back the next biz day. all our loan documents, the appraisal, everything was online in one spot for me to see...you could log in and check your loan status daily if you wanted to. they posted as things became available and steps were checked off. it was just really easy.

when we wanted to refi a year later, i emailed the same gal back and asked her some Q's and got back some educational answers. so we waited for a bit on refinancing...now we have to figure out if we want to stay here and refi into a 30 year loan or move next year. rates are good right now for a 30 year and we could decide to stay here in our town house for another few years and not deal with having to move (we're not really mentally ready to make a big move for no REAL reason even though i love looking at houses!!).....so we'll see.

anyhow...some brokers can lower their commission if they really want you to work with them, there ARE negotiations that can go on..and you don't have to pay points (we didn't)...but cash was a big deal for us that year because we were buying a house and getting married and paying for it ourselves so not having to pay $8-9k to a broker for their commission was REALLY appealing and it worked out great. anyway just our experience...good luck!!!

eta...the other thing is that if you have a good relationship with your main bank, and they do mortgage loans...check them out and price them out too. because our bank owns our 2nd and they were like 'oh we would have loved to do your first too...when you want to refi, let us know' kinda thing. because obviously it costs them way less to originate the loan for us directly than to go and buy it from someone like an eloan. so your bank might be willing to work with you on closing costs and all that if they can get your loan directly. definitely worth a try...when/if we refi we are going to have them price things out for us.

 

[lovelylulu]

Date: 11/28/2006 8:28:28 PM
Author: butterfly 17

Date: 11/28/2006 4:24:36 PM
Author: lovelylulu
I''m in a similar situation as appletini, though we are just starting out. so thanks for the advice! the ins and outs of mortgages is rather complicated and we''re going to have to do a whole lot more research. is there any good information source anyone could recommend other than the collective PS knowledge?

also, deejay: aren''t points on a loan unavoidable??

Hi lovelylulu,

I found the website- ourfamilyplace.com to be a very good site for first time homebuyers such as yourself. It explains everything in a step by step fashion that is really easy to read and uncomplicated.

Also, bankrate.com, realestateabc.com and mortgage.com.

But I really think that if you are just looking to buy a home, then ourfamilyplace is great. It explains the entire process and even lets you print little checklists, etc.

thanks butterfly and good luck sorting everything out!!

i need to learn a lot of things before we seriously consider buying a place. but we have time. in about six months i''ll have a new job paying close to triple what i make now and my DH will have gotten nearly a 20% raise -- then we''ll be in a comfortable financial position to take on the housing market. i wonder what the market will look like in 6-12 months. prices are dropping left and right here in DC -- perhaps it will level out.

i''m curious as to why you''d have two mortgages on one house -- mara, when you referenced your second is that on the same property?

 

[Dee*Jay]

Just wanted to throw out a much cheaper alternative to refinancing. If you loan has not been sold and is still held by the institution that originated it they can do what''s called a "modification of loan." It ends up being the *essentially* the same result as a refi (i.e., you have a loan with a lower rate) but they don''t have to do all the paperwork over again. It should typically cost you a fraction of the $ to do a modification rather than a refi. As an example, the happy hubby and I looked into a refi several years ago and it was going to cost $3,000+. We did the modification of loan for a couple hundred bucks. By the way, they don''t tell you about this option, you have to ask for it. And many people in the industry don''t even know about it because it''s not somthing that they want to pitch because the fees are lower therefore the lender makes less $. So, if you loan is still held by the originator ask about this rather than a refi.

Here is a Q&A on the topic:
link

And here is the previous week''s column that''s referred to: link

 

[njc]

Lovely - I havent seen prices drop all that much around us in the Springfield/Alexandria area, just FYI. They may slowly go down, but from what I can tell its just not as competative! The DC area always has a healthy flow of people coming in and out, esp with all the BRAC stuff coming in the next couple of years! We are actually expected a small boom in our area being close to Ft Belvoir. In 2005 we looked at our house Friday 10am before it was even on the market, put in the contract at 12pm at the same EXACT time it was going on the market and by 8pm that night they accepted our contract. Now things are sitting for a month or so.

And not to answer your questions for Mara, but we have 2 mortgages. Since we were first time home buyers without a 20% down payment (it would have been close to 100K!), we qualified to have one morgage carry 80% and a second carrying the balance and are not required to pay PMI. First trust/morgage is like a traditional one, second trust/morgage is like the down payment. Hope I explained that so it made sense...

 

[Mara]

our situation is like njc's...we were first time homebuyers and wanted to do zero down at the time to save our loose $$$ esp for the wedding, and considering housing prices here...20% was a whole heck of a lot of cash. so we did two loans...basically an 80/20. so our first is an 80% of the value and our 2nd is 20% of the value. when we refi (if we do vs moving!), we will actually consolidate them into one loan and get rid of the second because our house has appreciated in value about 35% since we bought 4 years ago. but because rates are a little higher now than when we bought 4 years ago when rates were super low, our new payment for the 1 loan would basically be about the same if not a wee bit more (200a month probably) than we are paying now...which would be fine. so we'll see...the big decision we want to make in early 2007 is really just do we want to stay here another 2-3 years OR next year do we want to take the plunge and move into a house that might be smaller and less modern and less new but something that we might want to be in 'longer term'. part of the problem is we really like our townhouse. hahaha.

oh the other thing i wanted to say is that many people we know here in the SF bay, esp new homebuyers or younger couples, tend to have 2 mortgages OR one mortgage and PMI for the additional 10-20% of the remainder. houses are so exp here that typically people just don't have $100-200k laying around for a down.

 

[butterfly 17]

Mara,
That''s exactly what we did too, except that we did a 80/10/10, so this way we could avoid paying PMI.

We refinanced a year later and combined the two mortgages into one and since our home appraised for a higher value, although we still had to pay PMI, it is only $20 a month, compared to $127 the year before.

We figured by the time we were able to save that extra 10%, the home values would have appreciated so much more, so it was better to just do it that way and then refinance when the house was worth more.

It''s a good thing too that we bought the house when we did because we calculated it would have taken us about about a year and a half to save that 10% and in that amount of time the value of our house went up by $50- 60K, so it was worth it to just buy when we did.

 

[fire&ice]

That is how all the low closing fee/no closing fee companies make their money. They sell to the big financial institutions like Chase Mortgage or Citibank mortgage. Honestly, I would go with one of those companies. Closing costs should be a thing of the past. These companies sometimes have a tiny bit higher interest rate - BUT - usually the closing costs are more than the higher interest rate over the course of the loan. When we refianced our home in NC, we received money back from the lender as we did a negative point interest rate!

Date: 11/28/2006 10:46:36 PM
Author: Mara

but, if i recall correctly, i believe how eLoan works is they are your lender. they give you the loan for your house. then they turn around and make $$ on your loans by selling them off to banks. So they don''t need the broker commission, because they make money another way. it actually benefits you both.

 

[lovelylulu]

Date: 11/29/2006 11:08:39 AM
Author: njc
Lovely - I havent seen prices drop all that much around us in the Springfield/Alexandria area, just FYI. They may slowly go down, but from what I can tell its just not as competative! The DC area always has a healthy flow of people coming in and out, esp with all the BRAC stuff coming in the next couple of years! We are actually expected a small boom in our area being close to Ft Belvoir. In 2005 we looked at our house Friday 10am before it was even on the market, put in the contract at 12pm at the same EXACT time it was going on the market and by 8pm that night they accepted our contract. Now things are sitting for a month or so.

And not to answer your questions for Mara, but we have 2 mortgages. Since we were first time home buyers without a 20% down payment (it would have been close to 100K!), we qualified to have one morgage carry 80% and a second carrying the balance and are not required to pay PMI. First trust/morgage is like a traditional one, second trust/morgage is like the down payment. Hope I explained that so it made sense...

hey njc (and mara and butterfly): thanks for the explanation. that makes a lot of sense. i live in cleveland park in DC and basically people were putting condos/houses on the market at prices that were too inflated. so, many people have had to trim anywhere from 10K - 50K off their original asking prices in order to sell the properties. also, lots are offering closing costs. but i definately understand that the DC market will always be hot. so many jobs!

 

[butterfly 17]

Date: 11/28/2006 9:34:35 PM
Author: moremoremore
Are you in NY? I don''t know why I thought you were...In any event, I''m shocked that the closing cost quotes varied so much (assuming that the point issue is the same for each lender you''ve contacted)...Just be sure that some aren''t excluding the mortgage tax and other title charges from their estimate....That is a huge difference...I am also not sure why you''d want to refi in a year...you''ll be paying all of those costs again... As for points, IF I''m planning on being in the same house for 20 years, I actually don''t mind paying a discount point to lower the rate...it depends, you''d have to figure out the potential savings...
Most lenders should be able to tell you, outright, the fee for the appraisal, flood cert, credit report, application fee, underwriting fee, bank atty fee, origination and discount fee (points) ..you can figure out your escrows for taxes and insurance pretty much (maybe 3 months'' worth for each), and if you close late in the month, you''ll have less per diem interest to pay until the end of the month....The title charges are also pretty standard...

Hi mmm,

Yes, I am in NY. I don''t get the large differences in the closing costs either. I did just get off the phone with eloan and after speaking to my loan consultant, it turns out that the closing will be more like $17k, although he did say that they usually quote on the high end and it should really l be closer to 15K when I do close.

The only reason why I would want to refi in a year or so is so that I can switch to a 15 year mortgage with a lower interest rate. Currently we are not able to do it, but I figure in a year we will be more certain of where we stand financially and then we can do the refi. I would only be interested in it to get a lower interest rate anyway, but we will see when that time comes.

 

[butterfly 17]

Okay, another question.

What would be the benefit, if any, of getting a ARM compared to a fixed rate mortgage and what kind of purchase would benefit from it the most?

 

[Mara]

Date: 11/29/2006 4:29:10 PM
Author: butterfly 17
Okay, another question.

What would be the benefit, if any, of getting a ARM compared to a fixed rate mortgage and what kind of purchase would benefit from it the most?

For us we did an ARM because we didnt plan to be in the house long-term and wanted a lower interest rate. I would only do an ARM if you plan to be in the house for less than 5 years OR if you KNOW for sure you can refinance before the ARM is up at a better interest rate. ARMs are risky because after the fixed period, you are stuck at the mercy of the rate until you refinance again (or move/sell etc)....so you have to refi before the fixed period is up. If rates go up in the next year or two and you get a 3 year ARM then you might be in a tough place waiting for rates to fall.

Our ARM is up in 2008 and so next year by spring we want to know what we want to do so we can either refinance or move before the ARM fixed 5 year term is up. But if we move, we will definitely do a 30 year fixed since the rates are really good right now and then it''s locked in.

ARMs in the past offered much lower interest rates and so it allowed people to get into a house who maybe didn''t want to pay a 30 year fixed like our parents did when they moved into one house for the rest of their life kinda thing.

But quite honestly, ARMs right now do not seem that much (if at all) lower than a 30 year fixed. Every other loan I have run numbers on (and you can use eLoan''s online calculator to figure out payments and all that on the different types of loans, it''s pretty close to accurate, or at least it was for us) has been more for us than a 30 year fixed would be right now.

 

[moremoremore]

Yeah, I definitely wouldn't do an ARM now either..the rates aren't that much better.....And it's very risky if you're going to be there for a while...Eloan is a direct lender I think...but like Fire says, they don't keep them, they sell them and make their $ that way


Butterfly, I'm in NY, are you upstate? Hubby's childhood friend is a mortgage banker and she got us the best rate with l owest costs and no point...it's a Chase loan...I'd call Chase or Wells or WAMO...

Believe it or not, the bulk of your costs (assuming it's a no points loan) will be TITLE charges which are what they are...

Let's say (again, I this is only what I would think off the top of my head .. I'm off and can't know for sure and I'm saying 400k loan? dunno and don't knwo where you are) say bank says $300 appraisal, $300 underwriting, $25 credit report, $350 application, $50 fed ex, and some few others, $850 bank atty, $950 for your own atty, then assume you're closing in the middle of the month you'll pay 15 days of your mortgage per diem interst, then assume 4 months of your home owner's insurance depending on when it's due for escrows...and say 3 months of your taxes for escrows..... As for title, say $850 for "department" searches, $400 endorsements, $200 to record mortgage and $200 deed, $150 to title closer, and a few others...but the big guy is mortgage tax (say $4000-4500 not negotiable..1.05% by me...1% upstate?) and then the fee and lender insurance (say $2500-$3500...not negotiable)......What is that, about $13,000? + escrows and the short term interest above......also, if taxes are due within 60 days, you will have to pay them....

Best of luck!

 

[diamondseeker2006]

Date: 11/29/2006 4:27:39 PM
Author: butterfly 17


Hi mmm,

Yes, I am in NY. I don''t get the large differences in the closing costs either. I did just get off the phone with eloan and after speaking to my loan consultant, it turns out that the closing will be more like $17k, although he did say that they usually quote on the high end and it should really l be closer to 15K when I do close.

The only reason why I would want to refi in a year or so is so that I can switch to a 15 year mortgage with a lower interest rate. Currently we are not able to do it, but I figure in a year we will be more certain of where we stand financially and then we can do the refi. I would only be interested in it to get a lower interest rate anyway, but we will see when that time comes.

No reason to refinance unless rates drop substantially. As everyone said, you can turn the loan into 15 years or less just by paying extra towards the principal. Our last mortgage was 20 years and we paid it off in 15. If you are thinking 5-7 years in that house, no way would I consider refinancing in a year.

 

[butterfly 17]

Date: 11/29/2006 8:04:23 PM
Author: moremoremore
Yeah, I definitely wouldn''t do an ARM now either..the rates aren''t that much better.....And it''s very risky if you''re going to be there for a while...Eloan is a direct lender I think...but like Fire says, they don''t keep them, they sell them and make their $ that way


Butterfly, I''m in NY, are you upstate? Hubby''s childhood friend is a mortgage banker and she got us the best rate with l owest costs and no point...it''s a Chase loan...I''d call Chase or Wells or WAMO...

mmm,

I am in Staten Island, not upstate, your in LI, right? My brother is also buying a house right now in Baldwin, NY and he is supposed to close in December as well.

 

[butterfly 17]

Well, I went ahead and applied with eloan.
They first quoted me a rate of 6.375 with a credit towards closing of $667 or a rate of 6.5 with a credit of $2100.

So, I asked my loan consultant if they could do 6.25 with no credit and he said that he would see what he could do. He put me on hold for a minute or two and came back and said that normal I would have to pay .225 points to get that rate, but he would just waive the point fee, but he had to get approval for that.

So, he quoted me and locked me into 6.25% with no points. I think that is a good rate since it is the lowest I could find anywhere and also my closing costs will be at least $3K cheaper than the other 3 estimates I got.

So far everything is going very smoothly!

 

[moremoremore]

Yes, I work in Great Neck!
That sounds like a good rate so I wouldn't hesitate...Best of luck!

 

[Mara]

yay butterfly, keep us posted.

6.25% is a great rate...i''d be happy if we could get that with a refi and no points and no commissions.

 

[Dee*Jay]

Butterfly - That sounds like a great deal!

 

[butterfly 17]

Date: 11/30/2006 4:39:25 PM
Author: Mara
yay butterfly, keep us posted.

6.25% is a great rate...i''d be happy if we could get that with a refi and no points and no commissions.

I am positive you will be able to, especially if you go with them again. They actually have the rates at 5.75% with a 30 year fixed, but they consider the amount we are borrowing a jumbo loan, so the rate is higher. I believe they said any amount over $417k is considered a jumbo loan and falls into a higher interest rate.

I wish I knew why though!