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Old 09-11-2008, 12:39 PM
 
11 posts, read 52,874 times
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Hi,

I am buying a house in mid-October and I locked in our interest rate a few days before the whole Fannie May announcement. We put 5% down and were doing a 95% loan. The rate we got was 6.375% however, this included lender paid PMI.

We can float down our rate until September 30th. My question is should I wait or re-lock now? I've seen rates have gone back up slightly after the initial big drop. Our broker quoted us at 6.125% if we re-locked today, if we had done it on Monday it would have been 5.875%.

The way he explained it to us is that there are only 4 banks that do LPMI and so we don't want to re-lock too soon because once you break from the initial lock with a bank you have to re-lock with a different bank and can't go back to the original one. Hope this makes sense. Thanks for the advice!
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Old 09-11-2008, 03:32 PM
 
Location: Plano, Texas
1,676 posts, read 6,333,376 times
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Why not do a 80/15/5 loan? that is a 80% first lien, a 15% 2nd lien and a 5% down payment. By structuring your loan that way you will avoid mi but to qualify for a 2nd you need a 680 credit score. Your payment will be less if you set it up this way vs doing 1 loan with mi or even 1 loan with lpmi. Also, if you split the loan up, it is now your option to set up escrows for taxes and insurance where if you do it as 1 loan you wont get that option. I for one, do not have an escrow account as i want to hold onto my own money and earn interest with it rather then give it to my lender to hold. Didn't your loan officer go over this option with you?
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Old 09-11-2008, 04:13 PM
 
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They did go over this, but we weren't happy with the 2nd mortgage options. The options presented to us were all for loans with balloon payment at the end of the term or at variable rates which we did not want to do. Thanks.
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Old 09-11-2008, 04:26 PM
 
Location: Charlotte, North Carolina
5,137 posts, read 15,094,482 times
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only 4 banks????
lol maybe he only works with 4 banks that do.


Quote:
Originally Posted by freaknjoe View Post
Hi,

I am buying a house in mid-October and I locked in our interest rate a few days before the whole Fannie May announcement. We put 5% down and were doing a 95% loan. The rate we got was 6.375% however, this included lender paid PMI.

We can float down our rate until September 30th. My question is should I wait or re-lock now? I've seen rates have gone back up slightly after the initial big drop. Our broker quoted us at 6.125% if we re-locked today, if we had done it on Monday it would have been 5.875%.

The way he explained it to us is that there are only 4 banks that do LPMI and so we don't want to re-lock too soon because once you break from the initial lock with a bank you have to re-lock with a different bank and can't go back to the original one. Hope this makes sense. Thanks for the advice!
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Old 09-11-2008, 04:51 PM
 
Location: Plano, Texas
1,676 posts, read 6,333,376 times
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Quote:
Originally Posted by freaknjoe View Post
They did go over this, but we weren't happy with the 2nd mortgage options. The options presented to us were all for loans with balloon payment at the end of the term or at variable rates which we did not want to do. Thanks.
There are many 2nd lien lenders, and i do not know of any that do not offer a 15 year fixed rate lien. So, i believe they are not giving accurate information. Now, i am only familiar with Texas loans and it could be different in your state. Also, even if it has a balloon, like a 30 due in 15 meaning the payment is a payment based on 30 years but in 15 you get a balloon payment for the remaining balance, you can always send in extra and pay it off faster. Also, how long do you think you will keep this house? The average in our country is 5 to 7 years. The average life of a mortgage though is only 4 years, so even if you are planning on keeping the house for more then 5 years, you will probably refinance in 4 years so you will never get to the point of the balloon payment. A good laugh i get with many of my clients is that i ask them "other than your parents, can you name me anyone you know that has kept a home for more then 5 or so years?". I wish you the best on any choice you make.
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Old 09-11-2008, 06:26 PM
 
11 posts, read 52,874 times
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I appreciate the advice.
So does anyone have any thoughts on where rates will be headed over the next 3 weeks? I know no one can know for sure, would just like some feedback. Thanks!
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Old 09-11-2008, 06:28 PM
 
11 posts, read 52,874 times
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Also, we don't know how long we'll be in the house, because obviously circumstances change so its difficult to answer that last question, but ideally for a long time.
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Old 09-11-2008, 06:41 PM
 
Location: Plano, Texas
1,676 posts, read 6,333,376 times
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Quote:
Originally Posted by freaknjoe View Post
I appreciate the advice.
So does anyone have any thoughts on where rates will be headed over the next 3 weeks? I know no one can know for sure, would just like some feedback. Thanks!
This is just my opinion, but i believe rates will move in a range from the upper 5's to low 5's between now and the election. I base that on the knowledge that mortgage rates tend to follow inflation. If inflation is rising, rates will rise. This is what happened this year. January rates on a 30 year fixed hit the low 5's. At that time the Fed fund rate was 3.25%. The fed's kept lowering the fed fund rate until they got to 2% where it is now, but rates on mortgages increased. Why is that? Well, with the low fed fund rate, we got a weak dollar which caused oil and other commodities to increase in price. Just look at the price you paid for gas. This is called inflation. That is why even though the fed's where lowering rates, mortgage rates increased. Now, the dollar is strengthening, oil and all other commodities are dropping in price and inflation is falling. So, as long as inflation stays in control and the fed's dont lower rates any more we should see rates move in a range from the upper to lower 5's but we could spike temporarily above or below that range. Also, if our economy is in trouble, that tends to lead to lower rates as well, cause if people are losing jobs they are not spending money, bad for the economy, which causes prices to fall, thus less inflation. So a general rule, bad news for the economy, good news for rates and vice versa. The main thing you need to consider is rates today were around 5.375% on a 30 year fixed mortgage(assuming credit over 720, loan to value under 80%), rates can only get a little better but they could get a lot worse. You got to know when to pull your chips off the table and walk away with the profits or in this case a low rate.

Do keep in mind, i could be wrong.
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Old 09-11-2008, 07:46 PM
 
11 posts, read 52,874 times
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Thanks for the explanation and feedback. Much appreciated!
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Old 09-11-2008, 08:45 PM
 
Location: Plano, Texas
1,676 posts, read 6,333,376 times
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Quote:
Originally Posted by freaknjoe View Post
Thanks for the explanation and feedback. Much appreciated!


Your welcome.
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