[Mr. Liu]

Hey guys,

My banker at Morgan Stanley is able to RE-FI my condo for 2.45% on a 5/1 ARM with 0 points and all inclusive $2,500 closing costs... and that is the LOWEST I have seen shopping around. Has anyone bit the bullet on their rate and then regretted it later? The next lowest I see is from Penfed but even their rates don't come close....

First time home buyer here so very nervous!

[bbbbmw]

Originally Posted by Mr. Liu

Hey guys,

My banker at Morgan Stanley is able to RE-FI my condo for 2.45% on a 5/1 ARM with 0 points and all inclusive $2,500 closing costs... and that is the LOWEST I have seen shopping around. Has anyone bit the bullet on their rate and then regretted it later? The next lowest I see is from Penfed but even their rates don't come close....

First time home buyer here so very nervous!

With mortgage rates being super low, perhaps consider going for a 30-year fixed loan. Many folks feel that rates may escalate very quickly, which would increase the overall value of a long-term mortgage at a low rate. Unless you don't plan to keep it for more than 5 years.

PenFed is a hassle, IMHO. They are difficult to deal with, and are not local - which presents many challenges - can be very difficult to get a mortgage loan closed with them.

[KingOfJericho]

Lock in a 30yr. Thank us in five years.

[jwzimm]

Seriously, ARM's are for fools or those who plan to sell when their rates adjust.

[Maestro]

^ agree, only do an ARM if you plan to sell and get out before the ARM comes due. ARM are what got people in trouble, besides the fact they pull out all the equity out of their house and then were stuck with a high interest loan and could not refi when the ARM came due.

As someone once told me unless you have finance background you better off staying with fix rates.

[Mr Tonka]

What they said. ^^

[PSUSMU]

First time home buyer.. re-fi.. am I missing something or does that not add up?

[Mr. Liu]

oops, shouldn't have used the term refi. This is a first mortgage.

[Benedict1957]

ARMs are useful in isolated situations but I hope you know what you're doing. If you think "Oh wow look at that ARM rate it's way lower than any 30 year fixed rate I've come across I'll just cross my fingers and hope it'll stay like that" then you're perhaps being naive.

A lot of ARMs advertise abnormally low "teaser" rates that last only a couple of months or so to draw people in. I don't think I've ever personally heard of a situation where an ARM beat out a fixed rate mortgage in the long term. I'm sure it exists but I haven't heard of one.

[hudamang]

Many of the first time homebuyers I know move out within 7 years. I don't think I've stayed in a house for more than 5 years in my life. For me, the 7/1 ARM works.

Find out if the rate has any adjustment/life caps as well. If you absolutely know you are keeping the house for more than 7 years, then it might change things.

Disclosure: This is the Internet and everyone pretends to be Suzie Orman but in reality, she would probably VETO everyone on this board that wants to purchase a BMW

[Maestro]

Originally Posted by Benedict1957

ARMs are useful in isolated situations but I hope you know what you're doing. If you think "Oh wow look at that ARM rate it's way lower than any 30 year fixed rate I've come across I'll just cross my fingers and hope it'll stay like that" then you're perhaps being naive.

A lot of ARMs advertise abnormally low "teaser" rates that last only a couple of months or so to draw people in. I don't think I've ever personally heard of a situation where an ARM beat out a fixed rate mortgage in the long term. I'm sure it exists but I haven't heard of one.

Yeah I had one it was based on the LIBOR index prior to the banks in England playing games with it. My rate change with the index ever 6 months and during the 3 yrs I had it, the index kept dropping, the loan was set up so you could make a minimum payment, interest only, or interest and principle. Those three payment choices could change as the index changed, well I paid Interest & Principle and paid the same amount each month even though the index kept dropping so my principle amount i was paying was accelerating over time. I even not a notice saying I did not have to make any payments for a period of months since I had over paid. The only catch to this loan was the fact that I have to keep it for 7 yrs or pay an early repayment penalty. With in those 3 yrs the loan when from a 30 yr to 25, do to all the extra principle payments I was making.

This load was kind of opposite of a ARM since it was variable for the first 7 yrs then fix after that. Talk about a crazy loan, but I talked to a few people in the know and say go for since they believe rates would be dropping at the time which was true. Lucky I sold my house and got out of load before it ratchet back up, that was the only way out of the 7 yr deal.

[jlstyle]

Originally Posted by Mr. Liu

Hey guys,

My banker at Morgan Stanley is able to RE-FI my condo for 2.45% on a 5/1 ARM with 0 points and all inclusive $2,500 closing costs... and that is the LOWEST I have seen shopping around. Has anyone bit the bullet on their rate and then regretted it later? The next lowest I see is from Penfed but even their rates don't come close....

First time home buyer here so very nervous!

If I were buying a condo, my first choice would be 7/1 ARM as I don't see myself living in a same condo for more than 7 yrs, so 30yrs fixed doesn't make sense unless I have cash to buy 2nd home down the road and keeping the 1st.
5/1 ARM has a great rate but I think it's little too short.
But 1~2 or even 3 years out of your 5 year lock period, you will most likely still have better rate then 30yrs fixed even if market rate later on high rockets as there's maximum adjustable rate anyways.

It all depends on your future plan. There are plenty of great rates out there for ARM so your current deal can be matched easily. But no one can see your future plan. Just don't bite on ARM because it's cheap to get it.

[jwzimm]

Something to keep in mind is all those saying they would move out in X years will need to sell the house. Right now the values are coming up but only modestly. Also, most times the seller pays closing costs so you can end up not making any money on the sale.

One other advantage of a 30yr fixed is the ability to turn the property into a rental without worrying about the rate adjusting on you. This is what i plan to do with my townhouse if/when I need to move.

[W Cole]

Originally Posted by Mr. Liu

Hey guys,

My banker at Morgan Stanley is able to RE-FI my condo for 2.45% on a 5/1 ARM with 0 points and all inclusive $2,500 closing costs... and that is the LOWEST I have seen shopping around. Has anyone bit the bullet on their rate and then regretted it later? The next lowest I see is from Penfed but even their rates don't come close....

First time home buyer here so very nervous!

Writing this very quickly at work so its a bit scattered..

I work as a financial consultant in commercial real estate and just shopped around all these sorts of loan products - will be closing on my home 2 weeks from today. I have shopped around every lender out there and done a ton of quantitative analysis on 5, 7 and 10 year ARM products.

Are you refinancing your first home? Or is this a purchase finance?

That is the best 5/1 ARM rate I have seen but that is potentially a lot in closing costs depending on your purchase price and whats included in that - you would probably get the Penfed rate down to 2.5% with less than a point and with the 5/5 structure you would be much better protected against future interest rate risk. with that being said I would never go for a 5 year ARM since I believe I will be in my first home a bit longer. If you get a 5 year arm and stay for 6 or 7 years it costs a lot more than getting a 10 year and only staying for 5 or 6.

The Penfed 5/5 ARM at 2.75% WAS the best option for a 1-15 year hold period for a very long time. Be aware that the Penfed loan covers closing costs (lenders title, appraisal and their BS origination fee so its really not worth much). They charge a 1% origination fee and there is a clawback for the first 36 months. So if you refi or sell in the first 3 years this can get expensive because of their exorbinate origination fee.

Penfed is no longer the best loan in town because ARM products from portfolio lenders, namely Wells Fargo have come down quite a bit and Penfed has stayed the same/gone up (Penfed has been hovering around 2.75-3.00%).

I was quoted 3.375% on a 10/1 ARM from Wells Fargo with them covering the origination fee (only out of pocket for appraisal). For a purchase finance Wells Fargo likes to see 12 months of reserves and excellent credit (760 or 780+). Although, as a portfolio lender (holds their loans on their balance sheet) they have 100% control over their underwriting standards so exceptions can be made.

I think 2nd best after Wells is Union Bank but their 10/1 for example was at 3.5%-3.675% so quite a bit higher than wells. UB is also a portfolio lender and is very very loose in their underwriting standards. They will allow up to a 49% DTI (need 6 mos reserves and over 720 credit), or 2 months reserves and don't care about credit score, just history if under a 45% DTI.

Also, I actually got full loan approval through Penfed but decided to go with a different lender for the reasons above and they were very easy to work with. I got a loan processor at the Omaha branch which I am told is the best. Most of the bad reviews are based on other branches.

[W Cole]

Originally Posted by jlstyle

If I were buying a condo, my first choice would be 7/1 ARM as I don't see myself living in a same condo for more than 7 yrs, so 30yrs fixed doesn't make sense unless I have cash to buy 2nd home down the road and keeping the 1st.
5/1 ARM has a great rate but I think it's little too short.
But 1~2 or even 3 years out of your 5 year lock period, you will most likely still have better rate then 30yrs fixed even if market rate later on high rockets as there's maximum adjustable rate anyways.

It all depends on your future plan. There are plenty of great rates out there for ARM so your current deal can be matched easily. But no one can see your future plan. Just don't bite on ARM because it's cheap to get it.

^ This guys got it right. Personally, I went with a 10 year. The slightly higher rate over a 7 was cheap insurance in case I decide I want to stay there longer.

This is your first home. I am not sure your age but I am in my mid twenties and my earning potential in the future is going to be much higher than I am currently making. I am not going to raise a family in this condo and I wont be here for 30 years. For me a 10/1 ARM makes sense.

If you look at the statistics most people don't stay in any home, much less their first for more than 10 years but people seem irrtantially fixated on a 30 year mortgage. 30 year fixed does make sense if you plan on keeping the condo as a 2nd home and renting it out, especially with Prop 13 in CA you should have a pretty low tax basis in the future compared to the market rent. But, the returns when investing in residential real estate are extremely low in CA (think 3-4% cap) which makes sense because residential home prices are set by owner/users such as yourself who are comparing their occupancy costs to renting and not investors comparing their returns to alternate investments.

[Mr. Liu]

^ Yeah, the closing costs for me was around $2500 all-in. I chose the 5 year due to the fact that I might be flipping it within 5 years if I move out of state for work... plus the cap on it was 5% above lock. I highly doubt interest rates will move that much in the 5 years. You can say I am taking a bit of an interest rate risk but I am saving a lot of money.

[Mr Tonka]

Originally Posted by Mr. Liu

^ Yeah, the closing costs for me was around $2500 all-in. I chose the 5 year due to the fact that I might be flipping it within 5 years if I move out of state for work... plus the cap on it was 5% above lock. I highly doubt interest rates will move that much in the 5 years. You can say I am taking a bit of an interest rate risk but I am saving a lot of money.

With all that information you would have received different responses. I think you're on track with those plans. The only risk i see is what if you don't sell it within 5 years.

[W Cole]

Originally Posted by Mr. Liu

^ Yeah, the closing costs for me was around $2500 all-in. I chose the 5 year due to the fact that I might be flipping it within 5 years if I move out of state for work... plus the cap on it was 5% above lock. I highly doubt interest rates will move that much in the 5 years. You can say I am taking a bit of an interest rate risk but I am saving a lot of money.

I'd go for the Penfed 5/5 Arm over the 5/1 you mentioned. It adjusts once every 5 years vs. every year. Going to be much cheaper if you decide to stay for longer than 5 and you will probably be able to buy down the rate with points (with the savings in closing costs) to the same rate as the 5/1.

[Quicksilv3r]

Call me monday 706-868-2666. I work for Wells Fargo Home Mortgage and i can help point you in the right direction. Hope to hear from you..

Wes Vaiden
NMLSR# 1002215

[954Stealth]

Originally Posted by Mr. Liu

Hey guys,

My banker at Morgan Stanley is able to RE-FI my condo for 2.45% on a 5/1 ARM with 0 points and all inclusive $2,500 closing costs... and that is the LOWEST I have seen shopping around. Has anyone bit the bullet on their rate and then regretted it later? The next lowest I see is from Penfed but even their rates don't come close....

First time home buyer here so very nervous!

That's great and all but where will you be when it adjusts and what will the the rate/payment, etc?
Don't be baited by an enticing rate now and that number...pretty much +1 to the folks above.
I would go ARM. Stick with fixed.

[Hisam135i]

Originally Posted by KingOfJericho

Lock in a 30yr. Thank us in five years.

+1 rates should be rising in June 2015.

[2011CrazE89]

I had a 30 year fixed at 5.5. Refied to a 30 year fixed @ 3.5