About to lock in on rate for FHA loan - questions.

[Anonymous]

Hello all.

So the bank accepted our offer on a foreclosure and I am looking to lock in a rate soon. I am not sure exactly what to do.

I have 3 options at this point. 

5.5 with no points 

5.125 with .625% or 1364 dollars

or 5.0 with 7/8 of a point which is 1942 dollars.

The lady thinks that the 5.125 is the best option and doesnt believe spending the extra 600 dollars for 17 a month is worth it compared to the 5.0 , will take a good 4 years to just make up the difference. However she thinks the difference between the 5.5 and 5.125 is worth it. 

My closing costs are up to 5 grand and have come up to about 4500 so far. This should leave about 500 dollars left so the 5.125 rate would be the 1364 - about 500 remaining dollars which is  864 dollars.

That seems great and all but one question i do have is we bought the house for 225k. It is going to appraise at around 255/260k most likely. If it does infact appraise at that , whats stopping me from refinancing a few months later so the equity will equal part of a downpayment on a convential loan? I am obviously all new to this so maybe im completely out there on this.  

If I can do this , it doesnt make much sense to pay for points right now if I am going to refinance later down the road (if i can and providing rates are good still).

Any suggestions ? 

Thanks in advance. 

[Anonymous]

I wouldn't count on being able to cash out and refinance later....besides the likelihood of getting 5.125% on a conventional loan with your scores are probably not very good....

[Anonymous]

oh my mistake those arent updated.

they are all in the 720s now and the wifes are 740s.

i mean either way I dont think 5.125 with 800 out of pocket for points is that bad?

[Anonymous]

Based on your topic you are talking FHA here.  I might just go with the 5.5 and no points now and do a streamline refi in a few months since rates are now expected to drop further with the goverment buying $500 billion dollars of mortgage backed securities.  I don't see any reason for you to thing about going conventional in a few months unless you would have the 20% equity to get out of PMI.  Even then the FHA MI cancels once you reach 78% LTV but I think there is a minimum number of years you must pay it.  The nice thing about the FHA streamline refi is that you don't have to go through the appraisal or re-qualification again.  Basically your loan is just redone with a lower rate and therefore a lower monthly payment.

I just refinanced into an FHA from a conventional and I'm planning on streamline refinancing in a few month with lower rates.

[Anonymous]

If you do a streamline refi w/ fha do they count the equity unlike the initial loan , or does it even matter since you have to have pmi for at least a few years?

[Anonymous]

nevermind , i did some digging and found the answer. Looks like you can cash out like a refi , but not sure about the PMI,

Regardless of all this, it really comes down to if I think the rates will go lower than 5.125. I mean heck this is really low and better than I would have ever though id get. Perhaps its worth the 800 dollars. In 14 months id break even and anything after that is gain.

[ShanetheMortgageMan]

Of those offers I'd go with the 5.125%.

[Anonymous]

Shane ,

Obviously no one really knows , but do you think theres a chance that these could dip into the 4s come the new year?

Do you think I should just wait it out and see how it goes. I dont close till feb 11th so I have time. I just find that 5.125 is quite low already , and im not sure if its worth the risk to wait it out. 

not quite sure who this guy is but if its true I might as well just wait and see what happens.

Lawrence Yun, chief economist for the National Association of Realtors, predicts the Fed action will help 30-year mortgages hold steady at around 5% or less over the next few months.

Message Edited by aimetti on 12-31-2008 10:14 AM

[ShanetheMortgageMan]

There is always a chance, and I think that it'll happen, but obviously no guarantees.  If you are closing within the next few weeks I'd say to lock in now, but closing in late January or later I'd see what next week has in store for us.

I'll refrain from making comments about anyone at NAR.

[Anonymous]

hahahha

Well I think I will hold out for now anyways. 

If it goes up it goes up. For the longest time I was looking at 6.5 so its still alot better now.