mortgage query: should I lock in today's rate

[gordita]

below is my scenario:

Just made an offer and the seller accepted the offer this saturday on a townhouse with no HOA. Since there is no HOA fee, they consider this a single family house.
I'm doing a 80/15/5 and today's 30-yr fixed is 5.875% with no points.
the 15% HELOC is at 7.5% fixed for 15 yrs.
none of them have prepayment penalty and none of the loans are assumable.
I'm looking at closing around Aug 25 and I must be out of my apartment by end of aug coz the lease ends then.
when I got my pre-approval done on June 30, I had gotten a rate of 6.25%

what are your opinions regarding today's rates.
should I lock them in?

I don't intend to stay for more then 5-6 yrs in the current home.
the purchase price is $125 with 3% seller reimbursement at closing.

the mortgage broker recommended that I should lock in the rates coz there is more potential for the rates to rise quickly than for them to fall quickly.

 

[Vic]

Today is a good day to lock. While the general opinion is that rates are on the rise over the long term, there has been a dip over the last couple of weeks, with today as the low point. While there is a small possibility that rates could go down even further (though only slightly), they are far more likely to rise. What you are being offered is a good deal. If you feel happy with it, then by all means lock and do not look back.

 

[gordita]

yes, I feel happy today....

 

Yes, lock in.

Rates will not skyrocket as people think they will.

 

[Kelemvor]

If you stay less than 5 yrs, you should DEFINITELY get a 5yr ARM. You get a really really low rate for the first 5 yrs and then it goes up after that depending on what the prime rate is. But as long as you sell before the 5yrs are up you don't have to worry about that.

 

[gordita]

Originally posted by: FrankyJunior
If you stay less than 5 yrs, you should DEFINITELY get a 5yr ARM. You get a really really low rate for the first 5 yrs and then it goes up after that depending on what the prime rate is. But as long as you sell before the 5yrs are up you don't have to worry about that.

I got quoted 5.25% for a 5/1 ARM and since I'm not a US citizen, I don't qualify for ARM's unless I put 20% DP (and there's no way I can put 20% down)
yes, my first thought was for a 5/1 or a 7/1 ARM....

 

[monkied]

gordita, you do not need 20% to qualify for an ARM. I'm going for either a 3/1 or a 5/1 Jumbo ARM (interest only) with only 5% down. Look into it. I'm currently with Wells Fargo Home Mortgage, but am sure others offer it.

As for the locking in, I locked in on June 5 and didn't even have my close date yet. A month later I still don't have my close date. It was because of my loan officer pressuring me to lock that made me do it. I regret it because now I could possibly have to pay an extra 1/4 point if I don't close by August 12. Long story short, my loan officer also told me I should lock, even though I didn't want to. But if you know when you're closing, go for it.

 

[welst10]

Originally posted by: gordita

Originally posted by: FrankyJunior
If you stay less than 5 yrs, you should DEFINITELY get a 5yr ARM. You get a really really low rate for the first 5 yrs and then it goes up after that depending on what the prime rate is. But as long as you sell before the 5yrs are up you don't have to worry about that.

I got quoted 5.25% for a 5/1 ARM and since I'm not a US citizen, I don't qualify for ARM's unless I put 20% DP (and there's no way I can put 20% down)
yes, my first thought was for a 5/1 or a 7/1 ARM....

That 20% DP requirement is BS. I locked my 5/1 ARM on 5/10 at 4.25% interest. I only paid 10% down and there was no PMI. I am not US citizen either. It depends on your lender I guess.

 

[Vic]

Originally posted by: monkied
gordita, you do not need 20% to qualify for an ARM. I'm going for either a 3/1 or a 5/1 Jumbo ARM (interest only) with only 5% down. Look into it. I'm currently with Wells Fargo Home Mortgage, but am sure others offer it.

As for the locking in, I locked in on June 5 and didn't even have my close date yet. A month later I still don't have my close date. It was because of my loan officer pressuring me to lock that made me do it. I regret it because now I could possibly have to pay an extra 1/4 point if I don't close by August 12. Long story short, my loan officer also told me I should lock, even though I didn't want to. But if you know when you're closing, go for it.

You should always have a good estimated closing date before you lock. Difference between a good loan officer and bad one IMO. Rates have dropped to the point where you'd probably be better off switching lenders at this point.

And welst10, pardon me but bullsh!t. That rate of 4.25% would have been more than half a point below the yield on the 10 year T-bond for that date. In fact, that exact day of May 10th could arguably be the highest point for rates in the last 18 months. Go pitch your bullsh!t somewhere else.

Otherwise, there are easy ways to avoid MI. If you don't go the piggyback 2nd route, then most lenders offer a no MI program at a slightly higher interest rate (usually about 0.25% rate or 1 point fee above). As interest is tax deductible and MI is not, paying the extra interest usually makes sense.

 

[monkied]

Vic, I am seriously considering switching lenders right now but am afraid of the fees associated with doing that. I believe I would have to pay at the very least, the application fee (~$400) for Wells Fargo. I'm not sure if there are any other processing fees beyond that. But when asked if I could just re-lock at the current rate, which is the same as what I originally locked in at, he told me that it would be considered a rate change and that I would be charged a 1/2 point for doing so.

I'm shopping around right now, but they are still giving me close, if not the lowest rate around. I'm getting 4.875% for the first loan and 5.25% for the piggybacked second loan.

 

[slycat]

what about a regular 1st loan for the 80% but getting the 2nd as equity instead of as a loan?

 

[monkied]

slycat, what are you referring to?

 

[z0mb13]

is there a site where I can learn about mortage lingo??

like 80/15/5, etc

 

[slycat]

Originally posted by: monkied
slycat, what are you referring to?

mortgage.

 

[monkied]

z0mb13,
For starters, check out bankrate.com or interest.com. Both have glossaries and information for mortgages. 80/15/5 refers to the ratio of financing for the home loan. 80% primary loan, 15% secondary loan (piggyback loan), 5% down payment.

The reason people finance 2 loans instead of 1 is because lenders require Private Mortgage Insurance (PMI) if your loan amount exceeds 80% of the purchase value. For people who don't have 20% down, they finance a second loan as either a Home Equity loan or Home Equity Line of Credit (HELOC). PMI is not tax deductible and is often avoided.

slycat,
I mean which post are you referring to? You asked what about a 1st loan at 80% and 2nd as an equity line, but I'm not sure what you are asking. Do you mean what rates I'm getting or if that's a good idea or what? Please clarify.