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Old 04-02-2013, 05:59 PM
 
275 posts, read 645,731 times
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Hi everyone! I was hoping I can get some assistance from people here in CD. I recently contacted my bank to refinance. I keep hearing rates are great right now but they will not stay this way long. So I was hoping I can lower my rate of 5.50% to something better. I was told I can lower my rate to 3.675, no closing costs (bank will credit me for them) and no appraisal. Good so far, then I am told about the new pmi rules. I paid low rate pmi for 3 yrs. Now the clock will reset and I will end up paying almost 300 for next 5 years - that is extra 15K. Given this, is it still good idea for me to refinance. I am planning on staying in this home at least 10 yrs. I don't think I'll qualify for a conventional refinancing. What do you guys think?
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Old 04-02-2013, 06:16 PM
 
Location: Austin
7,077 posts, read 16,885,085 times
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Don't just guest about qualifying for a conventional, but go out and see if you do. The new FHA MIP calculations are high, and in June, they go to lifetime, not just 5 years. If you think paying an extra $300 a month is a savings, yikes!
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Old 04-02-2013, 06:43 PM
 
275 posts, read 645,731 times
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Well, my monthly pmt still goes down about $100 even with the extra $300 pmi but you are right. Paying this extra pmi is really bothering me. I was unemployed for a long time so I have a big debt to income ratio. That's why I don't think I 'll qualify for the conventional loan.
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Old 04-02-2013, 07:01 PM
 
3,313 posts, read 4,090,891 times
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Quote:
Originally Posted by ladyvictoria View Post
I don't think I'll qualify for a conventional refinancing. What do you guys think?
Do you really think anyone here might have any value thoughts?
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Old 04-03-2013, 10:54 AM
 
2,682 posts, read 4,213,117 times
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Quote:
Originally Posted by ladyvictoria View Post
Well, my monthly pmt still goes down about $100 even with the extra $300 pmi but you are right. Paying this extra pmi is really bothering me. I was unemployed for a long time so I have a big debt to income ratio. That's why I don't think I 'll qualify for the conventional loan.
In a perfect world, you are in fact the best risk that can be found. Somebody who lost her job and still made the payment and didn't default. I applaud you for that . Most people are a job loss away, even for a few month, from defaulting.

Having said that here are things that you need to consider

1) Don't just compare the $100 dollar you save in the monthly payment. You are resetting the loan to 30 year (if that's the loan length). To really see if you come out ahead and is to just see when do you get the loan paid in full by putting that $100 back into the new loan. If you pay this puppy off before the time you are scheduled now, then you can say you are saving even though you have $300 in monthly insurance for five years. That's how to do an apple to apple comparison. (you have the $300 to consider but to do a first cut comparison do that and see what happens)

2) What I just said above assumes that you will hold the loan for its life. If you want to sell the house, say, in the next 4 to 5 year then you need to look some other factors, like the MIP, that may increase your loan balance or you have to pay upfront. See if you even break even in that span.

3) See how much is in terms of interest rate hike the $300/month for your loan. In other words, if your baseline is 3.675% that you are offered now, what interest would bring the payment to include the $300?

4) How much equity you have now? If you are say, 10% or more, you may be better off paying a mortgage insurance on a conventional loan.

5) How long will it take you to put your debt to income ration in order?

If I were you, I would look at all this to get a better picture of my situation. If for example, I would need six month to make may debt to income better, even assuming that rates move 1% in six month (this is just to give you an idea of how you analyze your situation), if I have a reasonable equity, I may wait it out. See, where I am going. You need to answer all these to get a good picture of your situation.

Good luck!
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Old 04-03-2013, 12:12 PM
 
3,317 posts, read 7,251,326 times
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Regarding possible Conventional refi:


You have to check. Conventional debt ratio thresholds are, for the most part, identical to FHA for owner occupied properties.

The key is, loan to value. You might even be more open to a conventional refi with a Private Mortgage Insurance component, which would yield a much more attractive overall scenario.

If equity is tight, you can still sneak in an FHA streamline and make it worth your while. Have they fully explained Streamline MIP guidelines to you, as they stand today?
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Old 04-04-2013, 03:06 PM
 
34 posts, read 59,270 times
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You have to check your loan origination date. If you loan originated prior to June 2009, you would be grandfathered in at your current MIP. I was able to go from 6.75% to 3.626% with barely any upfront MIP (like $8) and keep my same monthly MIP rate of .55%.
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Old 04-05-2013, 10:46 AM
 
275 posts, read 645,731 times
Reputation: 277
Thanks everyone, I think I am going to hold off for couple of years and try the conventional loan. Not only I will be paying $350 every month for 5 years but there is also upfront pmi amount of 5500K. They did call me back with a new deal - bank will credit me the closing and the upfront pmi but my rate goes up to 4%. I don't want to try conventional now b/c I have no money for the appraisal, closing costs etc...; I should be in better financial situation in few years; and I don't think I have at least 10% equity. My gut tells me this is not a good deal.

djaks - I bought my home in 2010 so I will definetly be paying the pmi for 5 years.
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Old 04-05-2013, 11:25 AM
 
3,317 posts, read 7,251,326 times
Reputation: 4095
That is silly. First of all, you get a rebate on the up-front mortgage insurance from FHA. And a 3.5% rate would yield about a $1400 Lender Credit. 4% is way over the top at $6000 - - WAY more than is needed.

You have not received an adequate explanation of the FHA Streamline refinance.

Regarding Conventional, a 90% Conventional with an average fico is around 4% on a 30-fixed, with likely a much lesser mortgage insurance component. Heavily ballparking here, but it could be around $100 or so if you were at 90%.

Even at 95% conventional, the rate is about the same, but the MI goes up to $150-ish. *again, ballparking this number...

Also, the conventional MI will reduce as your equity increases. You just have to work with the company.

You are correct that the deal you've been offered is not a good deal. But you have not been offered anything by a lender of merit, or so it would seem.
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