Home refi question for the bankers and gurus

Ok, so I'm looking at buying a new house and renting out the one I'm living in now. I bought this house 6 years ago on a 30 year FHA ARM. The mortgage guy is telling me I should do a streamline refinance to a fixed rate on this one before I get into a contract on a new house. Here's why I wonder if I should really do this:
My original mortgage was for around $137,000. I now owe around $125,000 on it. My current rate is 6 1/8th and adjusts once per year by an increase or decrease of a maximum of 1% (in November). After all the closing costs and fees, the refinance would put me back up to around a $134,000 loan for 30 years at 6 or 6 1/4% interest, basically the same monthly payment, and make me feel like I'm starting all over with this house. It would take several years of my interest rate going up the full 1% to make up the $9,000 difference between my current balance and the refinance balance, no? With all the homes going into forclosure, I'd think the government would not want to raise the rates much, if at all right now. Not to mention the 6 years time and equity I've got in it now. It doesn't sound like much, but 6 years is 20% of the 30 years.

Any advice or suggestions?
Thanks in advance,
Andy

 

Andy,
Was in your situation exactly, on a FHA ARM @ 6.125 and was offered the same streamline deal. Your closing costs at $9K look silly high. I did a little checking around and went with a conventional 15 year @ 4.875% with 1.25% in points (discount) total closing costs were about $3K on a $115,000 loan, so it went to just under $119,000, but I dropped 10 years off as I was on year 5 of a 30 and now have a 15 year note. Payments went up $173 a month. Total interest savings over life of a loan were close to $70K. This was last month and I went with Countrywide. The FHA refi will cost you a good deal on the front end as PMI is paid at closing (or a large portion of it) but is easy, no real qualifying.

Countrywide did ours over the phone and with our credit scores required no income verification or tax returns, no appraisal, nada. Very easy.

As far as the government raising your rates, they are not in control of that, your FHA is subject to the whims of the market and the paper is probably owned by a private bank anyway. Tied to T-bills mostly. Ours was Chase. Looking at the future, I see inflation as a real threat so I thought it prudent to lock in a low rate while I could since we would probably stay here for ever.

From a reduced payment to offset closing costs, my move didn't make sense, just a hedge against ARMS doing something nasty in the future.

Call around, if your credit is good, there are plenty of people who will do a conventional loan for much less than that offer you outlined, IMHO.

Best of luck.

 

You might want to check your original loan docs, a lot of FHA loans also require the owner to oocupy, and if this is the case, doing a re-fi would definately work in your favor.

 

here are the fees:
Estimated prepaid items 2,457.81
Estimated closing costs 4,179.91
PMI, MIP, Funding fee 1,980.00

Does that sound right?

You know, the guy did mention something about "owner oc" which I didn't know what that meant, but I now assume means owner occupancy. Makes sense.

Thanks guys :up:

 

+1!

 

I just refinanced my condo (rented) through Quicken Loans. I wasn't particularly worried about what it was going to cost, just really needed some of the equity out. Anyway, I found they were really good to deal with, and came up with a plan that worked for me.
No association with them except as a satisfied customer. If you want, I could give you the name and phone number of the bloke I dealt with.
Cheers
Barry

 

+1 w/ Mongo

I ain't paying no closing cost on a refi.


It might be a search, but they're out there.

 

Refi

I do a lot of loan closings. I agree that your closing costs are out of line. If you could get the loan to value down to 80%, ( Maybe with a new appraisal ) and avoid the PMI, the rest of the costs should be in the range of $3000.00, assuming your credit is OK. Shop around.

I just closed one today, 5.125% for 20 years.

My concern with the adjustable is that after the elections the rate will rise to cover the costs of the war. I have not made a study of it, but it seems that preceeding a presidential election, the rates are low, then go up in Jan. after the election. This is not meant as a political comment.

Good luck.

Ben.

 

For someone who does not understand what costs are real and what are bs this statement may be confusing. A mortgage will not get refinanced with absolutley no cost (out of pocket, rolled into loan or paid by lender), you may get some lenders to eat those cost (unlikely IMHO) but there are several items that will be paid off the HUD statement other than the principle. Some states have tax stamps for mortgage filings (unavoidable), prepaid items such as escrow (prop tax and insurance) will get funded, although you will get back escrow from current mortgage. Find me a lender who will not require title insurance (yes, bs, but.....). If an appraisal is required, you got someone who does them free?? Yes, some lenders will pay that, most do not. Especially when we're talking about a fairly small loan. Those costs can be paid at the closing table, but most folks tend to roll them back into the loan since writing a $2-3K check is painful or the lender pays them and jacks the interest rate. Nothing happens in a vacum.

Show me a refi HUD statement that has the refinancing priciple amount being the only thing on the borrowers side and I'll eat my hat.

Of that $3K mentioned above, prolly 2/3 are escrow funding. Now your down to $1K to pay taxes, title insurance, flood cert, etc.

I do agree paying all the bs fees some lenders try and hang on you is stupid, but when considering various APR's you can't just blanket say I WONT PAY CLOSING FEES, use a calculator and think what's best for you. Nobody works for free.

 

Have this "mortgage guy" print out a Good Faith Estimate for you.
Many (not all) mortgage brokers are weasels.

Then take it to your local bank, where you have your checking for example, see what they say. Have them print out a Good Faith.

Then try a local credit union. You will then know what to do.

 

refi the house that ur currently living in before you move and get it re-appraised. There's no monthly mi, (mortgage insurance), on a 15 year fha loan at 90% ltv. You should be able to get a fixed rate around 5.25 to 6% (depending on your credit). If your not confortable with the 15 year payment, just leave it alone.

 

Thanks everybody. I will look into getting it re-appraised and see if I can get the LTV down and go from there.