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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!
@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.
Thank you all! I will definitely be going fha I believe
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.
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."