topic Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay? in Mortgage Loans

5 year ARM with 1 year to go - ReFi now .. yea or nay?

Big-Surf — Fri, 27 Mar 2009 21:12:22 GMT

We need to Refi within the next year. Do you think we should do it now or do you think we should wait until I get my scores higher?

My wife and I bought a house near the beach in California, here's the detail of the purchase:

We paid - $835k

Down Payment - $165k

Load Type - 30 Yr Conv Jumbo ARM

Current Interest - 5.875%

We have 1 year reaming on the ARM

Total current mortgage - $670k

Current home value - $770-$750k

My current salary is $140k per year. My wife makes about $1000 per month (very part time job 9 hours per week) and we get about $36k per year gifted to us by her Grandmother(me, wife and our son)

Credit Info:

Here's what I have:

MyFico:

TU 675

EQ 685

From TrueCredit 3in1:

TU 675

EQ 705

EX 685

1 -account in collection for $206 from 4 years ago - In on-line dispute now

1 -30 day late pay on Cap One CC - In on-line dispute now

3 -30 day late pay on Furniture Store Card - In on-line dispute (EX removed this yesterday!!)

My Credit Summary
Percentage of credit currently available 96.55%
Satisfactory accounts 5
Now delinquent/derogatory accounts 0
Was delinquent/derogatory accounts 1
Public records 0
Number of inquiries 4

Should I try and refinance with a 30 year now at about same Interest rate I have now on the ARM (my payment goes up about $1000 per month) or should I try and get my score up so I can get the Interest rate down...as long as rates don't go up before then!!! Anyone have an idea what rate I could get with a score at 685 in California?

Thanks,

Big-Surf

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Anonymous — Fri, 27 Mar 2009 21:14:32 GMT

Can't give any input on rates, etc. but I would probably try to refi now. You never know how rates are going to be next year...or how much the house will appraise for next year. If you need to do it, I'd go for it now.

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Anonymous — Fri, 27 Mar 2009 21:14:59 GMT

P.S.

If your wife's grandma needs one more grandchild, let me know.

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Lel — Fri, 27 Mar 2009 22:48:54 GMT

I'd definitely look into refinancing, for a few reasons. First, your loan balance might now be below the new conforming loan limits for your area, which means that you can take advantage of some of the lowest interest rates in history. Secondly, your current loan is interest-only, and when it resets in a year you will have to start paying principal over the remaining 25 years of the loan, which could represent a significant jump in payments even if interest rates remain steady.

The only hitch is that your LTV ratio is now below 80%. Most conventional lenders will want to see at least 20% equity, especially if prices in your area are still falling. What part of our Golden State do you live in?

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Big-Surf — Fri, 27 Mar 2009 22:55:28 GMT

We're in Redondo Beach - SoCal

Thanks for your help

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

ShanetheMortgageMan — Sat, 28 Mar 2009 15:21:57 GMT

You have two choices - refinance now or try to work out a loan mod with your current lender. Since you have refinance options now though I don't think your current lender will offer you a mod unless you can demonstrate you've attempted refinancing to no avail. However if you can prove that, depending on who your lender is, and how convincing you can be, they might offer you a mod anyway. The easiest refinance option you'd have is to refinance into an FHA loan, here in Los Angeles County FHA limits went back up to $729,750 a month ago (from $625,500) so FHA is now an option for you. In areas where the FHA/conforming loan limit exceeds $417k, anything over $417k has slightly higher rates than below $417k (otherwise in areas which do not support higher FHA/conforming loan limits over $417k, the difference in rates is astronomical). If you were to go into a conforming loan you could do that once your mid score is at a 730 (PMI requirement in Los Angeles) or if you were pay your balance down to 80% (since no PMI would be required then), but even at a 730 score it'd require to pay down some of your principal balance to where you'd be at no higher than 85% LTV (90% LTV is the max on conforming jumbo loans, but in declining markets it's 85% per the PMI providers). The option with the least amount of maneuvering on your part would be to refinance into a new FHA loan - at your loan amount you can expect a rate about 5% on a 30-year fixed.

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Big-Surf — Sat, 28 Mar 2009 15:41:26 GMT

Thanks MortgageMan!!

Three more quick questions:

1. My wife has Excellent credit - 750 mid score - how will lenders use our scores- or will they just use mine?

2. The $770k - $750k value I listed is from Zillow - is there any tricks to getting a higher home value appraisal? who decides what the apprised value is?

3. We might be MUCH better off in the next 5-7years should I even consider another ARM? are they giving ARMs anymore?

Thanks again for all your help!

Message Edited by Big-Surf on 03-28-2009 08:41 AM

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

ShanetheMortgageMan — Sat, 28 Mar 2009 15:43:53 GMT

Welcome.

1. The lowest representative score is the qualifying score. The representative score for each application is the middle of 3, or the lower of 2. So if your wife has a 740, 750, and 755 score, her representative score would be 750, and if yours are 670, 682, and 688, yours would be 682. Then the lowest representative score would be yours of 682.

2. There are a lot of things one can do to their home to increase the value (add a pool, add a room, add square footage, etc.), but I suspect you are asking me what small items you can do to increase value - basically you want to just make sure your home is clean/not a lot of clutter so the appraiser can see everything they would need to see. Also if you are aware that certain upgrades have been done to your home that haven't been done to others in the area, items like that you'd want to point out too. You should never ever say you believe your home is a certain value though, you'll immediately get on the bad side of the appraiser and that's never good. The appraiser decides what the appraised value is, then it's often subject to an appraisal review by the lender.

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Anonymous — Wed, 18 Nov 2009 22:00:28 GMT

Shane, I'm new to myfico.com and am not sure how to post a thread but would love to get some advice from you. My situation is similar to the one listed here but I have three years left in my loan. I've been diligently working on improving my credit score to the point of being totally obsessed by it. I'm dying to re-fi while rates are still low and am tired of paying for a loan that is only paying interest!

My loan amount is $1,200,000 My credit scores are:

734 702 742

These scores are from this months reports, however they take into account a credit card that has a $16,100 limit carrying a balance of $8080 and a second credit card with a limit of $18,000 carrying a balance of $10487. Yesterday I paid down each card to the 20 percent mark thinking that would help improve my score. Guess we'll see how much my scores improve from that scenario next month.

So I'm in the market to re-fi. What lenders do you recommend? What is your best guess of rate I will qualify for based off of my scores?

Thanks,

Ocean Breeze

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Lel — Wed, 18 Nov 2009 23:11:08 GMT

OceanBreeze, welcome to the FICO Forums.

To start a new thread, click on the "New Message" button on the top left above the list of messages.

Normally, we (the moderators) would split off your message to create a new thread, but since you've referenced the original message of this thread, I'll leave it in place.

Some questions that will help others provide meaningful advice:

How much equity do you have in your home?

Do you have any other mortgages (home equity loan or line of credit) on this property?

What is your current interest rate? Keep in mind that jumbo rates are running about one point higher than conforming rates.

How long are you planning to remain in your home?

What is your gross monthly income? I ask this because until recently, many people were able to get mortgages with stated income, not documented income. This option is effectively gone. So if you went stated on your original loan and your current actual income doesn't support payments on a $1.2 million mortgage, then refinancing will more difficult.

Here's a thread that describes the sort of information that will generate the most detailed and helpful responses:

Help the FICO Forums help you (with your mortgage qualification questions)

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Anonymous — Wed, 18 Nov 2009 23:39:33 GMT

@Big-Surf wrote:
We need to Refi within the next year. Do you think we should do it now or do you think we should wait until I get my scores higher?
My wife and I bought a house near the beach in California, here's the detail of the purchase:

We paid - $835k
Down Payment - $165k
Load Type - 30 Yr Conv Jumbo ARM
Current Interest - 5.875%
We have 1 year reaming on the ARM
Total current mortgage - $670k
Current home value - $770-$750k

Should I try and refinance with a 30 year now at about same Interest rate I have now on the ARM (my payment goes up about $1000 per month) or should I try and get my score up so I can get the Interest rate down...as long as rates don't go up before then!!! Anyone have an idea what rate I could get with a score at 685 in California?
Thanks,
Big-Surf

What are the terms of the ARM when it resets?

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Lel — Thu, 19 Nov 2009 00:12:35 GMT

Revike, the original post is several months old. OceanBreeze revived this thread with his/her post today. Presumably, Big-Surf's issues have been settled (I hope!)

Re: 5 year ARM with 1 year to go - ReFi now .. yea or nay?

Anonymous — Thu, 19 Nov 2009 05:42:22 GMT

D'oh!

Thanks - didn't notice the dates ...