Interest Rates/Refinance

[dmccarty]

Just a heads up for TBNers....

I noticed right around XMAS that the mortgage rates had dropped under 5% for a 30 year mortgage!

I thought when I got a 7% loan on my old city house that I was getting a deal. I could not buy a house in the mid/late 80s since the interest rates were 10-12%!

We have been following the rates pretty closely since XMAS and they have bounced around from a bit over 5% to 4.75%. Some of the gossip aka news reports are talking about rates towards 4%. I have seen other reports that have said no way were rates going to go to 4.5% and you would be lucky to get 4.75%.

Last week the Farm Bureau and our Credit Union had 4.75% mortgages.

The wifey went to our bank last Friday to just get information about a ReFi, closing costs, rates, etc and long story short we have been approved to refi with a 4.5% rate! Which is just unreal to me.

The savings for us amounts to a tractor payment.

The appraiser will be out to the house on Friday. The appraisal will be the only stumbling block at this point. My area has not been in much of a housing bubble but the loan office said that appraisals are on the low side. Whatever that means. Our house will be tough to appraise since its not a cookie cutter house so it will be interesting. Getting our building loan the appraiser the bank hired was incompetent. He valuation for our land was $6,000 and acre. A lot in the subdivision to our front sold for $20,000 and acre. We had a discussion with the bank and got a new appraiser.

So if the valuation is not an issue then we will have a 4.5% rate on a 30 year mortgage. The closing costs are $2,500ish with a 1% origination fee. That fee is a big ouch!

New Reports/Gossip says that Congress might somehow prevent origination fees. Not sure how they would do it and how they would prevent the bank from moving the fees around. A percentage origination fee is nuts though. Same amount of work for a 10,000 load or 100,000...

There was a local gossip/news report that one of the builders groups wants the Feds to get mortgage rates to 3%. I don't think we will see that rate go that low.

Other gossip reports says the rate should drop towards 4.5% or maybe a tad lower towards the end of the month.

So check the rates in your area, it might be worth a ReFi.

Later,
Dan

 

[WBWI]

That's great news! 4.5% is an awesome rate, but the cost seems high. We're refinancing our "new" home that is at 5.75% and we locked at 4.875%. It was about a $260 savings per month. Closing costs will be in the $1200 range.

I've talked to a few of my coworkers that are chasing that 4.5 - 4.75% rate. They may get lucky or that may lose the bet and find that rates jumped back to the 5% range. I'll take any rate under 5%.

 

[BungeeII]

Just a heads up for TBNers....
So if the valuation is not an issue then we will have a 4.5% rate on a 30 year mortgage. The closing costs are $2,500ish with a 1% origination fee. That fee is a big ouch!
Dan

We just tried to get a 4.875 loan @ around 1500 closing.

Here in Michigan, the only homes selling are those at Sheriff's auctions. Needless to say, that's terrible for valuation. Of 4 comps near our home, you're looking at 3 auctions and an estate sale on the cheap. So, no re-fi for us.

 

[JB4310]

My neighbor just refied at around 4.5% also, he went from a 30 year to a 15 year.
He was putting an extra $100. towards the orig mortgage, now with the lower rate and even having the 15 year vs the 30 he's paying the same, counting that extra $100. but he knocked 15 years off.

I've got to look into mine, I got a home equity loan a few years ago at what was a great rate, I think it was 4.9% I wonder if I can do any better.

I think they will go down even more though, seems to be the big push to get homes selling again. I heard a while back that in Japan the rates are near zero? don't know if that can be true.

 

[dooleysm]

I saw a 3/1 ARM at the local credit union a couple weeks ago for 3.875%. We're at the point in our mortgage where most of the interest is paid off. I ran the numbers and even that 3.875 would only save us about $1600 vs. our current 5.75. Most, if not all, of that would get eaten up with closing costs.

If I didn't have 2 young kids with another on the way and my wife quitting her job in May I'd be out buying rental properties. I've been trying to talk myself into it, but I just can't bring myself to pull the trigger.

 

[dooleysm]

My BIL got a home equity loan at 4% about a month ago to build a detached garage/workshop.

 

[Chuck52]

A friend has a sister in the mortgage business who keeps him informed of the best deals she sees. He's getting a 30 year fixed at 4.25% from some bank in Nebraska.

Chuck

 

[dmccarty]

I think our closing costs are high but they are inline with the banks in the area. We checked. The guestimate we received from the Farm Bureau bank for closing costs was higher than what we are paying and the were at least .25% higher on the rate.

My two cents is that the rate is going to go a bit lower. But how much lower is the big dollar question. 4.25? 4.00?

My trigger was if we saw 4.5 then we would take it. People loose money trying to time the market when to sell. I don't want to loose money trying to time the mortgage market to get the absolute best rate.

A bird in hand is better than two in the bush.

Later,
Dan

 

[BigE_]

I've been checking into this as well. I'm at 5.75%, can get 5.25% with no points or 4.75% paying points. I told the mortgage broker to hold off until it is 4.75% no points.

I'd love to get into a 4.25% rate, but I'm betting that's paying quite a bit in points...

 

[2manyrocks]

Credit scores factor into this. Some of the people who have "good" credit scores, didn't get the best rates because credit standards have tightened up so much. I saw something recently about credit scores and the speaker said some things I didn't know before. He said that the longest held credit card count more towards the score than a newer one. Also said taking out new cards and cancelling old ones could hurt the score. Missing payments is a score killer. I'd have to look for my notes on this for the rest of what he said, but generally he said if you are planning to take out a mortgage in the next few months, to really pay attention to what you are doing with your credit cards and other debt.

If anyone is interested, I'll try to find my notes on this.

I've dealt with appraisers for the last several years, and you'd be shocked at how few of them come close to a realistic appraisal. If you have comparable sales you want them to consider, better point them out. Otherwise, they may pick a property two miles from you that isn't comparable, and use it as a comparision just because they have it and it's convenient to them to use it and not dig for true comparisions.

 

[dmccarty]

...
If anyone is interested, I'll try to find my notes on this.
..

I would be interested in the content of the notes.

I have read that having a bunch of credit cards but no balance helps your credit score. I have also heard it hurts your credit score.

The banks now have to provide the credit scores used in your loan. The loan officer said that having a bunch of credit cards does HURT your score so we got dinged a bit but not enough to hurt us. I want to close a couple of cards since I don't use them nor need them any longer but I left them open since I did not know if they would help or hurt. Now I know. At least for one bank.

Later,
Dan

 

[JB4310]

The reason to many cards with large limits are a problem is obvious, they don't want you going out and getting over your head in debt right after they give you a mortgage, which is their most vulnerable time in the life of the loan as that's when there is the least amount of equity in the collateral (house).

I've read where they do credit checks like the day before the closing now and some people are refused the loan at the final hour because they went out and made a large purchase like a car or furniture the week before.

 

[2manyrocks]

Notes on Credit Cards:

What difference does the score make? Higher score means funds can be borrowed at a lower rate saving huge amount of money over the long run.

How can a score be improved? 1) pay bills on time. Payments over 30 days past due can pull score down by 50-75 points. 2) Establish long term pattern of responsible use of credit. 3) Keep balances low on credit cards. Stay below 33% of the card limit and do not max out. 4) avoid opening too many cards because the companies will average the length of time your credit has been open and this will lower your score. 5) opening a new card before buying a home is a red flag that you may max out your credit.

Watch out for the fine print in credit cards. Late payments can result in huge fees and significant increase in the interest rate. The credit card companies reserve the right to increase their interest rate if payments are late. Read the fine print.

Do not put the kids on your credit card. Ruins your credit and doesn稚 establish credit for the kids.

Merchant cards are not recommended.

Check your statements and immediately contest any fraud. Be careful not to pay fraudulent items or you may have waived your rights.

Watch out for errors such as similar family names being mixed up on your credit report. ( JR, Sr, III) Watch for outdated information and transcription errors.

AVOID: check cashing places, payday loans, 401K loans, home equity loans (you spend your home equity and now this debt is secured by your home if you can稚 pay it); reverse mortgages mortgages loaded with fees and traps; credit card transfers with 3% immediate balance transfer fees.

By the way, I forget the statistic, but merchants like credit cards because people using them will typically spend more than people who only spend cash.

 

[yak651]

Locked in 4.625 for 15 years last wednesday. No points, about $1200 closing cost with aprraisal, title, etc. Was offered 5 for 30 year, probably should've took that in case something happens, but really want to get paid off sooner than latter...

 

[dmccarty]

The reason to many cards with large limits are a problem is obvious...

No, its not so obvious.

One reason I have read for NOT closing credit cards prior to getting a loan is that it shows that the person knows how to handle their credit responsibly. Also the unused credit lowers the percentage of debt vs open credit. Obviously once can't have the credit cards maxed out.

But I have heard the other side of the coin regarding open credit cards. And the bank just told me so.

Obvious no. Mutually exclusive yes.

Later,
Dan

 

[dmccarty]

2ManyRocks,

Thanks for the info. Very interesting.

I wonder why merchant cards are bad?

Later,
Dan

 

[JB4310]

Dan,
I was not trying to be critical, I guess "obvious" was not the right word. I was trying to say I'm pretty sure I knew the reason why.

For what ever reason I have a very high score, that's what I've been told when applying for loans, not sure why, it's definitely not the income, I do pay alot of bills and on time, being a small contractor, but also I do have alot of open credit out there, must be some stupid perfect storm, My wife who just started working after being a stay at home mom for 15 years has a slightly better score than me, we laugh about it but can't figure that out???

Good luck, JB.

 

[BigE_]

My score is around 805, the wife's is around 815. She hasn't held a job in 9 years. But, she does spend a lot more money than I do, which in some insane world (ours) is probably what raises her credit score.

I've heard it said that the people who are really good with their money have a credit score of zero, meaning that they never borrow anything. Of course, those people are few and far between. Someday I hope to be one of them....

Myself, I go without rather than going into debt, with the exception of my house. I drove a $600 truck and a $1000 car for years before I saved up enough to buy nicer vehicles, and I spent 5 years saving up to buy a good tractor, doing everything by hand before that, or using my cheap tractor.

I know some of you actually need a nice tractor or truck to do your jobs, and I'm very thankful I could do without nice things until I could afford them.

 

[dooleysm]

Think about what a credit score is for and it'll make more sense. It is a guage of how much money you have borrowed in the past combined with how quickly you paid it off. The highest scores are going to people that have borrowed and paid off large sums of money. Lenders are less interested in how you come about the money you use to pay off your debt, just that you come up with it on time.

My BIL reports that his 4% HELOC has just been lowered to 3.25%.

I just got a Burpee's credit card for the sole reason of avoiding shipping and handling charges. Without asking they gave me an $11k line of credit with 0% interest on balance transfers and cash advances until Feb. 2010.

There's plenty of cheap money out there for people with good credit histories.

 

[2manyrocks]

Merchant cards are limited to the merchant issuing the card so they are not as flexible a source of borrowing as a card that you can use about anywhere. Plus the merchants may not have as high a credit standard for issuing them as say, an American Express card.

Having several cards with large limits could be a source of possible concern because the person does have the ability to borrow against them all. It is a potential credit risk. It is not necessarily good either in the sense that if a person has the capacity to pay back $100,000 of credit and $30,000 is already available in the form of credit cards, to me this means this leaves $70,000 of credit that could be used for a house or other long term purposes.

People who have loans that are contractually tied to specific indexes may see their rates dropping because of the general decline in rates. You'd have to read your credit card terms, but they apparently reserve the right to increase your rate if you miss a payment. So even if rates are generally dropping, you could get into a posture with a credit card company jumping your rate just because they can --and you not being able to get out from under it unless you can pay it off.

Excessive credit card debt usually is the straw that pushes people into bankruptcy. They get in a posture where the outstanding balance keeps growing and they have no way of paying enough on it to get out from under it.