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Mortgage Questions-Please help!!!

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kingmidas
New Contributor

Mortgage Questions-Please help!!!

I have two questions for everyone:  1. Does anyone know about a 5/1 ARM mortgage, I was thinking about this mortgage because I was planning on possibly getting a starter home and moving within the 5 years and/or refinancing to FHA in that time frame. My credit union claims that their rates will go up after 5 years but they have policy in place that they won't go past 6% for the life of the loan. It is that realistic or should I be wary because I hear some bad stories about ARM mortgages.

 

Question #2.Another question is: does anyone know if you have go through Ryan homes to build a house but if I go with my own bank do I still have to give them a 5000 initial good faith deposit prior to them start buidling or will my approval from my bank be enough.   Any input on either questions would be fantastic!


Starting Score: myfico.comEQ 570 TU 614 EX (fako/experian.com) 565 5/24/12
Current Score: lender pulled EQ 672 TU 722 EX 692 as of 7/2/13
Goal Score: 700 across the board

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6 REPLIES 6
MovingForward_2012
Valued Contributor

Re: Mortgage Questions-Please help!!!

I would avoid an ARM if at all possible. Have you considered stretching your budget a little to get the home you want in 5 years, now? The reason I ask is because rates are slowly starting to come back up and while, the home you want in 5 years seems doable in 5 years at this moment, the higher interest in 5 years may make it not doable as the payment will be higher than the payment would be now. We stretched our budget to get the home we want to live in long term now because we wanted to lock in on the historically low rates. Myfico has an article about this in the blog section.

In regards to question 2, if you go through your own bank for financing, you still have to put down earnest money and whatever additional they require to start construction. You may also lose out on incentives by not going with the builder's lender. We received $15K in incentives by going through the builder's lender.
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! Smiley Happy Last App: 4/5/13 Gardening until July 2014
Message 2 of 7
JM-AM
Valued Contributor

Re: Mortgage Questions-Please help!!!


@kingmidas wrote:

I have two questions for everyone:  1. Does anyone know about a 5/1 ARM mortgage, I was thinking about this mortgage because I was planning on possibly getting a starter home and moving within the 5 years and/or refinancing to FHA in that time frame. My credit union claims that their rates will go up after 5 years but they have policy in place that they won't go past 6% for the life of the loan. It is that realistic or should I be wary because I hear some bad stories about ARM mortgages.

 

Question #2.Another question is: does anyone know if you have go through Ryan homes to build a house but if I go with my own bank do I still have to give them a 5000 initial good faith deposit prior to them start buidling or will my approval from my bank be enough.   Any input on either questions would be fantastic!


1. Nothing wrong with a 5/1 arm if you know 100% you are moving, selling, and or refinancing. But in todays day and age while home sales have been picking up, can you guarantee yourself the home will sell? If you Refinance can you gurantee the house wont be underwater, and appraise enough for you to refinance? Once you can answer those questions with some certainty then make a decision. If you are going to use FHA then personally I would do it before they tack on paying MIP for the life of the loan, coming this June 2013.

 

2. Cant speak for a builder but can say that the builder usually offers incentives if use their preferred lender, broker, titke company, etc etc. There are reasons this is done.

I would not see a reason for a builder to not work with you for not using their preferred lender, and as far as incentives such as closing cost and such I am sure you could negotitae that still also. I wouldnt expect any upgrades if you are not giving them any ernest money, but once again negotiate. Any thing is possible.

Good Luck
May all your dreams and wishes become a reality!
Message 3 of 7
MovingForward_2012
Valued Contributor

Re: Mortgage Questions-Please help!!!

Only the passage of time can truly answer the questions JM-AM posed. That is why an ARM is so risky.
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! Smiley Happy Last App: 4/5/13 Gardening until July 2014
Message 4 of 7
kingmidas
New Contributor

Re: Mortgage Questions-Please help!!!

Thank you all! I will definitely be going fha I believe


Starting Score: myfico.comEQ 570 TU 614 EX (fako/experian.com) 565 5/24/12
Current Score: lender pulled EQ 672 TU 722 EX 692 as of 7/2/13
Goal Score: 700 across the board

Take the FICO Fitness Challenge
Message 5 of 7
Autumnslight
Frequent Contributor

Re: Mortgage Questions-Please help!!!

An ARM is certainly risky. More so now, because with rates at historic lows, they really only can go up from here. I actually bought a house in 2003 using a 5/1 ARM, with the thought that I'd sell or refinance before the 5 years were up. Well, that didn't happen. Life is unpredictable, you just can't be sure, even if you think you're sure at the time. I've been lucky though, in the sense that rates have dropped, so my rate didn't go up. Yet. I'm trying to sell now, before rates start to climb again.

 

If there's a lender that offers an ARM with a lifetime ceiling of 6% (historically, 6% isn't bad, but really be SURE to verify this 100%), AND you're reasonably certain you'll sell or refinance before 5 years, AND the current rate and fees on the ARM are so much lower than on a fixed mortgage that it makes a significant difference in the monthly payment, then I'd consider doing it. But I'd make sure that the payments at 6% would still be affordable for me, in the worst case scenario.

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07/29/12: EX FICO (Amex) 684 | EQ MyFICO 631 | TU Walmart 695
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Message 6 of 7
foofighter74
Established Contributor

Re: Mortgage Questions-Please help!!!

In terms of Ryan Homes, they will not start building unless you give them the $5,000.  Even if you use their inhouse lender NVR mortgage (not something i'd recommend). If you have time between when you sign your contract and the projected start date of construction, they would probably work out some sort of payment plan, but ultimately, permits will not be secured, lumber will not be ordered, and they won't start digging the hole until they have the $5k. 

 

On the positive side, the $5,000 comes back to you at closing and is credited against your closing costs, which, if you don't use NVR, will probably be significantly less than if you did.  NVR not only charges you for both an origination fee, and a "loan commitment fee", they will charge you $25 every time a document is overnighted to somebody.  They will charge you a "point" to get their best interest rate no matter what your credit is for an FHA loan. 

 

Most people that use NVR do so because they're getting non-cash related incentives such as a morning room upgrade, finished basement, etc, for "free." 

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