Can she refinance? (PMI, loan, interest rate, escrow)

[jco]

I was talking to a friend who purchased a home this year with nothing down. She has a 7.5% rate, interest only for TEN YEARS (never heard of this before) and then her payment goes way up. She doesn't have any money to put down on closing costs, but she has good credit. Do you think she can refinance a lower rate without anything down? I don't know what to advise her to do, but her payment right now is too high.

What are these lenders thinking??? Isn't this why we have so many foreclosures?

[LaceyEx]

If she purchased this year with no money down she probably doesn't have any equity built up-especially in this down market. She's paying 7.5 cause of $0 down-all she can do is bite the bullet and hope by the time her inital 10 yrs. are up she has built up sufficient equity to re-fi.

[martinez4]

Originally Posted by jco

I was talking to a friend who purchased a home this year with nothing down. She has a 7.5% rate, interest only for TEN YEARS (never heard of this before) and then her payment goes way up. She doesn't have any money to put down on closing costs, but she has good credit. Do you think she can refinance a lower rate without anything down? I don't know what to advise her to do, but her payment right now is too high.

What are these lenders thinking??? Isn't this why we have so many foreclosures?

Why do you ask "what are these lenders thinking"??? Your friend is the one who purchased the home and accepted the loan with those terms. I would question more what she was thinking and why was it so important for her to buy a home with those loan conditions.

The foreclosure rate is so high because most buyers were trying to get more home than they could afford and were willing to accept any kind of loan package to get it. The lenders did get extremely creative in their loan programs but let's face it......they would not have sold so many loans if there were not buyers willing to accept the terms.

[TimtheGuy]

Originally Posted by jco

I was talking to a friend who purchased a home this year with nothing down. She has a 7.5% rate, interest only for TEN YEARS (never heard of this before) and then her payment goes way up. She doesn't have any money to put down on closing costs, but she has good credit. Do you think she can refinance a lower rate without anything down? I don't know what to advise her to do, but her payment right now is too high.

What are these lenders thinking??? Isn't this why we have so many foreclosures?

The interest rate is always going to be a little higher when you go with $0 down and a little higher yet if you want interest only.

If her payment is too high now with the interest only payment, then she bought a home that was out of her price range. A refinance is not going to help her.

The interest only for the 1st 10 years is actually a common loan. It wasn't necessarily the lenders who weren't thinking, but more so your friend who was not thinking. If her debt to income ratios were very high then a good lender would explain the risks to her, but...

[renriq02]

she can do a rate/term refinance with MyCommunity but if she cant roll the costs in then she will need to pay for it herself.

if she received a 10/1 ARM then her payments shouldnt be fluctuating!

[jco]

Her payments aren't fluctuating. She has a set amount for ten years and then a set amount after that (I think that's what she said). Banker, would a rate/term refinance make enough difference in her monthly payment to be worth the closing costs?

[renriq02]

depends.....she's going from a interest only to a principal interest.

most likely her payment will be higher unless she receives a really low rate right now.


i dont think it's worth it....i would just put extra money to the principal each month.

Originally Posted by jco

Her payments aren't fluctuating. She has a set amount for ten years and then a set amount after that (I think that's what she said). Banker, would a rate/term refinance make enough difference in her monthly payment to be worth the closing costs?

[Adieoz]

Are you your friend?

[coolricks]

I have a similar question about refi:

I bought a home and closed on Nov/13/07, with $0 down, but builder paid closing cost and they put down 3% for down payment, interest at 6.375 fixed 30 years (FHA).

I keep hearing about interest going down so my question is : would it be wise to do a refi now? if not how long to wait? it is a new house and cost 299,960, monthly payment of 2280 with P&I and PMI and taxes included.

Thanks!

[martinez4]

Originally Posted by coolricks

I have a similar question about refi:

I bought a home and closed on Nov/13/07, with $0 down, but builder paid closing cost and they put down 3% for down payment, interest at 6.375 fixed 30 years (FHA).

I keep hearing about interest going down so my question is : would it be wise to do a refi now? if not how long to wait? it is a new house and cost 299,960, monthly payment of 2280 with P&I and PMI and taxes included.

Thanks!

Just to clarify....you just closed escrow a few weeks ago???? Why would you want to refi a loan that was just established???