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So what's the gamble with a 5yr ARM (versus getting a 30/15 year fixed for not too much higher of a rate), that you're not going to be in the house long enough for the potential interest rate hikes to hurt you. With a 2% cap the worst you're looking at is similar to what you're paying now after the adjustment in 5 years...So you're really talking about 10 years from now being when you can really get hurt right?

Quote :
"and if it looks like 4.5% (assuming max increase) is stupid high, i'll just find another option"


If PenFed hikes the 2% max, won't the other options/interest rates be higher too (aka nowhere to go)? That's where the current fixed options would work out well. It's all a gamble.

Do we know that PenFed doesn't sell their loans, like NCSECU?

Quote :
"Did you ever refi synapse?"


Naw. Got pretty close with Randolph, but I'm pretty sure the appraisal wasn't going to be pretty based on similar sales so I'm waiting at the moment.

Quote :
"Borrower will receive PenFed credit card reward points equivalent to 10% of the 5/5 ARM mortgage loan amount"


Huh? What's that?

3/5/2013 11:37:11 AM

David0603
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Who said it was a gamble? My quote was from quag's link

https://www.penfed.org/55-ARM-Promotion/?intcid=ad-55ARM-home-mainAd-02212013

3/5/2013 11:57:56 AM

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Quote :
"Who said it was a gamble?"


I view it as a gamble, unless you know you'll be paying off the ARM at a certain point in the future.

In 10 years, if rates go up a bunch you could be at paying ~6.875% with the 5/5, versus ~2.75%/3.375% if you got a 15/30 fixed.

What am I missing?


And I don't get the credit card points. If you re-fi for $200k with a 5/5, they're going to give you $20k in credit card points, which you can simply turn into Visa/Lowes gift cards?

3/5/2013 12:06:24 PM

David0603
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I just can't imagine being in a house that long. I mean, it's so far away. Statistically....

CC: That's what it sounds like, although I don't have their CC so don't know if 1 pt = 1 cent like other places.

[Edited on March 5, 2013 at 12:12 PM. Reason : ]

3/5/2013 12:08:30 PM

quagmire02
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i mean, i think any ARM is a gamble...you get a low rate in the beginning and hope that it doesn't go up later on...but it can and it might and you may not be able to refinance

doing the math and assuming the worst-case scenario (that after 5 years, it goes up the maximum 2%), i STILL come out ahead (overall) until year 10 versus a 30-year fixed at 3.25% or so...and considering my current rate is 4.75%, it's kind of a no-brainer (in my case, assuming the appraisal works out for me)

if you're planning on living in your current home for the life of the loan, then an ARM might not be the right choice, especially given that rates are about as low as they're going to go (in my uneducated opinion)

we are not...we will almost definitely be here for the minimum 3 years and will very likely be here for the first round of 2.5% goodness...sometime between year 5 and 10, there is a greater chance that we'll move

as for whether or not penfed sells their loans, i'm 99% sure they do not

as for the credit card, yes, 1 point = $0.01, so you would receive a $200 point bonus on the credit card for a $200k loan...i will almost certainly get their credit card if (so many ifs! ) everything goes well and the house appraises high enough to meet the 90% LTV mark

3/5/2013 12:45:41 PM

Str8BacardiL
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Quote :
"CC: That's what it sounds like, although I don't have their CC so don't know if 1 pt = 1 cent like other places."


I figured it up, 17,000 points equals like $170 in Gift Cards.

PenFed refinanced both of my car loans at 1.74% vs the 4.75% I had at SECU. The interest savings over the life of the loans will be ~$1600.

I have a couple of hoops to jump through on the home refinance, trying to source all of my deposits for the last 90 days (since I was not planning on refinancing any time soon), appraisal, reserves, etc. Hoping to get all that together and talk to them again in a week or so.

3/7/2013 10:25:57 PM

rflong
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So I am at 3.97% on my 30 yr fixed that I opened Dec 2011. Since moving, I have already been offered two promotions/moves that I have turned down. I have been thinking about refinancing since I am thinking I can probably shave 0.5% off the interest rate, but I am not sure we'll stay at our current location more than a few more years. What do you guys think? Worth the gamble? Maybe do a 5 yr ARM?



[Edited on March 8, 2013 at 7:32 AM. Reason : sd]

3/8/2013 7:31:48 AM

quagmire02
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^ the only bit of information that you don't know for sure is what your house will appraise for...and that's only necessary if you pick a loan that specifically requires it (though most will, these days)

the rest you can figure out on your own and decide whether it's worth it, financially

3.97% isn't a bad rate on a fixed, not at all...but the value in a fixed rate is in the long-term...if you think you might move or sell the house within 5 years, you could (potentially) save some money by refinancing

still, though, you have to take into account things like origination, PMI, closing, prepayment/leaving penalties, etc...like i said in regards to my situation, i HAVE to keep my loan with penfed (if i get it, that is) for 3 years or the big bonuses (no origination, no closing costs, they cover the first payment) are waived and i have to pay those back...i opted for points, which also won't give me a break even point until about 3.5 years into the loan (but again, if i'm staying there for 3 years, it's beneficial)

i think an ARM (especially a 5-year) is a great idea if you KNOW you won't stay there longer than 10 years, because you'll likely save money even in the worst-case scenario of maximum interest rate increase

past that...it's a crapshoot...my current ARM (a 2/1) hasn't gone up either of the two times it's come around, which makes me super glad i didn't get scared and go with the higher-rate fixed...but again, it's a gamble

3/8/2013 8:33:54 AM

Str8BacardiL
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Is the school of thought still around that one should never pay off their mortgage early?

Pre-recession everyone was saying "oh if you have extra money don't pay your house off, you will lose the tax credit, invest in stocks!!", but then everyone's homes AND stock investments took a tumble in value. A lot of people got stuck in houses they wanted to sell but could not because they did not even have enough equity to pay the commission, closing costs, and loan balance.

The mortgage interest deduction keeps coming up as a big "loop hole" the federal government could eliminate or water down to raise tax revenue. It seems like a long shot that they would ever change it based on the amount of pressure from lobbying groups, but when you are talking in decades things can always change.

What if you went for the lowest rate ARM you could get, figured out how much money you are saving, and took the savings and a little more and paid in extra principal every month? It would seem to me that by the time the payment could reset you would have a much larger dent in your loan balance.

Also this is my favorite Mortgage Calculator. It is on android and apple devices too.
http://www.drcalculator.com/mortgage/

3/8/2013 9:00:40 AM

quagmire02
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^ unless you win the lottery or something, how does one have a long-term mortgage and pay it off LONG before it's due to end? the only case i can really think of is if you refi with only a couple of years to go and yet set up a 30-year plan or something...but i'm not sure why you would do that

if i could empty my savings and pay off the house, i wouldn't do THAT...but because it would eliminate my financial cushion and leave me with very little liquid

we already pay about $300/month more on the house than the mortgage calls for...if we refi successfully and it drops our monthly payment by $200+ (which is my guess, but i could be wrong), we'll continue to pay what we do now...which means that a solid $500/month goes to the principle in addition to what's covered by the mortgage itself

if everything goes to crap and i lose my job or medical bills pile up or any number of things that CAN go south DO go south...well, we can drop back to the actual monthly and be no worse off

3/8/2013 9:06:08 AM

Str8BacardiL
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I am looking at saving $375/mo with this PenFed re-fi. If I took all the savings and threw them at principal I would have a 16 year, 8 month mortgage, and save 34k over the life of the loan.

3/8/2013 9:09:13 AM

quagmire02
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^ if the calculators are to be believed, it's much closer to $350 (before PMI) that i'll save per month...but i assume PMI will be another $60/month and then there will be things i missed (i try to assume the worst-case)

in any case, saving AT LEAST $200/month with only the 0.75% in points out of pocket is kind of a no-brainer

[Edited on March 8, 2013 at 9:12 AM. Reason : ie. i'm gonna be crazy sad if this appraisal don't leave me at 90% LTV]

3/8/2013 9:11:18 AM

Str8BacardiL
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You can ask to have the PMI removed once you get under 80% LTV, which may be another argument for getting the lowest rate possible and then throwing all you have at the balance.

3/8/2013 9:12:54 AM

quagmire02
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^ very true...and if i really AM paying $500/month extra on the principle, it shouldn't take too long to hit that 80%

3/8/2013 9:13:55 AM

Str8BacardiL
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Hopefully during that time values will continue to improve speeding up that process. I am not sure if your house is in the Raleigh area but inventory is getting tight right now. Home buyers are complaining that they cant find what they are looking for again, and houses are getting sold out from under people taking too long to decide, etc. If that trend continues it should not be too long before we see some upward pressure on home values.

3/8/2013 9:21:10 AM

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When's the appraisal Quag?

3/8/2013 11:00:08 AM

quagmire02
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they haven't contacted me, yet...i had heard that they're a little backed up because rates are so low, but that's why they have the 90-day rate lock guarantee, as well as a guarantee that they'll get you squared away by your preferred closing date or they give you $1000

speaking of the appraisal...a friend of mine suggested that i walk through the house with the appraiser and point out improvements and upgrades...anyone been that interactive with an appraiser before? my first loan's appraisal consisted of the guy coming by to insure that the house existed and a 30-second walk-through...i feel like they're a bit more particular these days

3/8/2013 11:04:18 AM

dinamod
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quagmire02, that is exactly what I did with my appraisal back in June. i told him about all the improvements which he clearly stated on the report. By mere chance, i got the exact same value as I did in August of 2007.

3/8/2013 11:57:45 AM

quagmire02
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^ that would be my hope (that improvements have offset the inevitable drop in value)...a kitchen and bathroom remodel will (hopefully) make the difference and put me at the same value...i don't dare think that it will increase the value of the house

3/8/2013 12:18:07 PM

David0603
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Quote :
"everyone's homes AND stock investments took a tumble in value."


Meh, I'm way up in the market but not so much on real estate.

3/8/2013 1:22:34 PM

wlb420
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Quote :
"Is the school of thought still around that one should never pay off their mortgage early?"


If you can get money at less than 3.5% there's really no good reason to pay it early.

3/8/2013 3:52:46 PM

rflong
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I appreciate the input quagmire. Based on what homes are listing for in my neighborhood, I am pretty sure my appraisal will come back solid. My neighborhood is new though and there are a lot of homes that have just been built that are on the market so that would probably hurt the appraisal. We've done some upgrades too (like plantation shutters throughout and high end appliances).

Anyway I guess I'll just be a chicken and sit this out. I am just not confident I'll be in my current location for more than a couple more years.



[Edited on March 8, 2013 at 4:02 PM. Reason : df]

3/8/2013 4:02:05 PM

Str8BacardiL
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Quote :
"speaking of the appraisal...a friend of mine suggested that i walk through the house with the appraiser and point out improvements and upgrades.."


That is the beauty of a refi appraisal, they dont have the lockbox so they have to meet with you.

If you have done renovations I would not only mention those but maybe even give the appraiser a typed bullet list. They are not going to care about upkeep things (like you repainted or something) that stuff is considered normal upkeep, it may factor in the overall condition of the home but wont really add value.

Things to include on a list for your appraiser.

* bathroom remodel with new fixtures cabinetry, ceramic tile,
* kitchen remodels
* energy star replacement windows
* flooring upgrades
* granite countertop upgrade
* all new fixtures
* recently replaced heat/ac
* recently replaced roof
* replaced cabinets
* anything else extra that other comparable sold homes might not have will give you a boost


(the heat/ac/roof have long lifespans and can factor in to the home value)

Appraisers will look at the MLS listings and photos for recently sold homes in your neighborhood to come up with comparables to base their value.

3/8/2013 7:37:50 PM

NeuseRvrRat
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i'm doing an FHA loan. my appraisal was done just a few days ago and the amount i'm borrowing came to about 82% of the appraised value. the bank says i have to carry PMI for 3 years. what keeps me from just refinancing in a few months when i'm below 80% to get out of PMI?

[Edited on March 11, 2013 at 12:04 PM. Reason : dfas]

3/11/2013 12:03:51 PM

dinamod
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If you have the cash, you can throw it in now, and not have PMI. As you said, you can also choose to wait. Though you risk rates going up. However, I don't think they will go up any time soon.

3/11/2013 12:49:07 PM

David0603
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Well most refinances cost $ so that's a hassle, also they could have a prepayment penalty.

3/11/2013 1:05:58 PM

TJB627
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^^^IIRC, FHA loans require you to carry PMI for at least 5 years regardless of what % of the loan you owe

http://www.fha.com/fha_requirements_mortgage_insurance

Looks like it depends on how much you put down though. There definitely is a time requirement involved.

Oh I missed the refinance part of the question. IDK the answer to that one.

[Edited on March 11, 2013 at 2:26 PM. Reason : whoops]

3/11/2013 2:25:32 PM

Str8BacardiL
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Quote :
" came to about 82% of the appraised value. the bank says i have to carry PMI for 3 years. what keeps me from just refinancing in a few months when i'm below 80% to get out of PMI?"


Do you know if they are basing that on their PMI policy, or is it based on the amount of time they estimate before you would pay down the 2% that you need to be under 80% LTV?

You may have some recourse under the homeowners protection act, but only once you get to 78%.
http://www.realtor.com/home-finance/mortgages/how-do-i-get-rid-of-my-pmi.aspx

[Edited on March 11, 2013 at 2:36 PM. Reason : never mind that act specifically does not apply to FHA loans.]

3/11/2013 2:30:39 PM

NeuseRvrRat
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i talked to my loan officer and he said FHA bases the LTV on the purchase price, not the appraised value.

he also said that after 6 mos i'm free to refinance if it makes sense. at that point, they'd use the appraised value as the value of the house and i could get out of PMI. didn't i read about some zero closing cost refis?

Quote :
"If you have the cash, you can throw it in now, and not have PMI. As you said, you can also choose to wait. Though you risk rates going up. However, I don't think they will go up any time soon."


well, durr. if i had 20% just chilling i wouldn't have to screw with FHA.

[Edited on March 11, 2013 at 4:38 PM. Reason : fd]

[Edited on March 11, 2013 at 4:48 PM. Reason : and everything i find says you have to pay PMI at least 5 years on a 30 yr mortgage. that's BS]

3/11/2013 4:33:21 PM

NeuseRvrRat
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i just can't see how i wouldn't come out ahead refinancing in 6 months. it'll be approximately $175*60 mos plus the interest that i'll save by throwing $175/mo towards the principal. seems like a no-brainer to me. somebody do the math for me.

3/11/2013 5:21:03 PM

NeuseRvrRat
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Quote :
"i talked to my loan officer and he said FHA bases the LTV on the purchase price, not the appraised value."


actually, i guess they just go with whichever is less

3/11/2013 5:44:25 PM

David0603
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Damn, your pmi is $175?

3/11/2013 5:59:16 PM

NeuseRvrRat
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that's what they estimated it at on my good faith estimate. i've got a buddy who did an FHA loan on a similarly-priced home and it was in line with what he pays.

shit's a fucking racket, but it appears to be my only option. if the home appraises as well in 6 months, then i'll refinance.

3/11/2013 6:02:23 PM

quagmire02
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holy crap...i don't actually know what mine is going to be, but i ASSUMED around $60

3/11/2013 6:09:25 PM

NeuseRvrRat
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they use some bullshit points thing to calculate it. it'd be too easy for them to just tell you how much it's gonna be.

fwiw, my loan is only ~$175k. those jokers pre-qualified me for $275k. no wonder all those suckers ended up with shit they couldn't afford.

[Edited on March 11, 2013 at 6:14 PM. Reason : actually more than that, but we told them to cut it off there]

3/11/2013 6:13:20 PM

David0603
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Damn, that sucks, guess it's probably not worth it for me to refinance if I'm stuck paying an extra $175 a month.

[Edited on March 11, 2013 at 7:10 PM. Reason : ]

3/11/2013 7:09:22 PM

NeuseRvrRat
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it might not be as much on a non-FHA loan. idk.

3/11/2013 8:00:20 PM

Str8BacardiL
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The PMI rates FHA loans have been rising.

People tell me this CHIP loan from BBT is a much better deal than an FHA loan due to the cost of the PMI on FHA loans.
http://www.bbt.com/bbtdotcom/lending/mortgage/mortgage-loan-options/first-time-homebuyer-and-low-down-payment-mortgages.page#tab3.

3/12/2013 8:00:44 PM

NeuseRvrRat
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Quote :
"Income cannot exceed 80% of your county median income. Consult your BB&T Mortgage Professional for details."


fuck you, successful people

[Edited on March 12, 2013 at 8:05 PM. Reason : i wanted to do USDA loan, but i make too much money for that, too]

3/12/2013 8:04:27 PM

NeuseRvrRat
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all the supposed banking and lending reform was supposed to keep folks from getting into debt they couldn't afford. instead they just rape those of us who can actually afford a home in order to cover the dumbasses who still get loans they can't swing.

3/12/2013 9:08:57 PM

David0603
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ditto, exactly

3/12/2013 11:08:33 PM

Str8BacardiL
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This is what I found for "wake county median income"

Quote :
"Median household income, 2007-2011 $65,289"


So it sounds like the CHIP loan is not for anyone making < $52,231/yr.

3/12/2013 11:56:45 PM

David0603
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Right, hence our complaint.

3/13/2013 12:16:56 AM

Str8BacardiL
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This is an interesting read about PMI on an FHA loan, lots of changes coming this year. They are basically trying to make up for losses incurred over the last decade by jacking the rates and tightening the requirements for PMI removal.

http://themortgagereports.com/12374/new-fha-mortgage-insurance-premiums-downpayment-minimums-for-spring-2013

From another article.
Quote :
"The FHA's insurance fund had a $16.3 billion deficit at the end of fiscal 2012, with much of its problems tied to mortgage loans insured by the agency between 2007 and 2009. In its annual report to Congress in November, the U.S. Department of Housing and Urban Development said claims against the FHA's insurance fund that are tied to those loans are expected to total $70 billion.

Since 2009, the FHA already had increased mortgage insurance premiums four times to help protect itself against potential losses.

Last year, the FHA insured nearly 1.2 million single-family mortgages with a total value of $213 million. About 78 percent of those loans were made to first-time homebuyers."

3/13/2013 12:30:18 AM

TULIPlovr
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Quote :
"This is what I found for "wake county median income"

Quote :
"Median household income, 2007-2011 $65,289"


So it sounds like the CHIP loan is not for anyone making < $52,231/yr."


I'm gonna say it's worth talking to an actual BBT loan officer about this. We were meeting with them a few years ago about a home loan, and didn't think we were eligible, because my income was above the Durham County median. To my surprise, the loan officer suggested it. If I remember correctly, their cutoff at the time was $75k. That's a far cry from 80% of the Durham median.

Don't assume an answer without talking to an actual person.

3/13/2013 4:36:47 AM

NeuseRvrRat
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I have been talking to a BB&T loan officer. They can't do anything for me.

If the house appraises well again in 6 months, I'll just refinance. Gotta pay my share to make sure irresponsible folks can still chase the american dream.

3/13/2013 10:03:14 AM

jbrick83
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Or maybe you should just be more responsible and wait til you have 20% to put down before you buy the house??

3/13/2013 10:17:31 AM

dtownral
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zzziiiing

3/13/2013 10:22:11 AM

quagmire02
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Quote :
"Or maybe you should just be more responsible and wait til you have 20% to put down before you buy the house??"

you, sir, are a dumbass

i did a 100% loan under great terms (by comparison, at the time, anyway) and it's worked out very well...i could have put down something, but i chose not to, so that i'd have money in reserve

it's stupid for you to voice such a blanket statement, indicating that the only "responsible" thing to do is to put down 20% (and that, in contrast, anything LESS than 20% down is "irresponsible")

3/13/2013 10:24:21 AM

NeuseRvrRat
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Then I can piss away $1000/mo on rent instead of $175/mo on PMI

3/13/2013 10:25:09 AM

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