Refinance Questions

[rain2k4]

Need some help if anyone is knowledgeable about the mortgage business( I figure there have to be some on this board!).

I locked a FHA 30 yr mortgage at 6.375(I got points back) a few months ago. I recently talked to the same mortgage broker who said that he could switch me to a 1 yr streamline FHA Arm at 4.25% with a 4% cap. I know odds are that the rate will probably match the 6.375 in 4 years. Apparently I can do this with no closing costs(according to him). Here are my questions.


1. Should I do it.
2. Are there better streamline FHA loans that may be a better bet?
3. How is this broker making money on me this time?
4. If I switched brokers would I incurr even more costs?
5. Is 4.25% on a 1 yr arm any good? It doesnt seem to be a rate that is posted on the net.

 

[Vic]

1. That is completely up to you. FHA ARMs are generally good, but interest rates will be going up in the future. 6.375% is NOT a bad fixed rate under any historical context. You mentioned that the ARM program you're looking at starts at 4.25% with a 4% cap -- that means it could (and probably will) go up to 8.25% at some time if you keep the loan to term.

2. FHA is FHA.

3. From the SRP, or Service Release Premium, that the FHA investor will pay the broker when he delivers the completed loan. It is rate and loan size dependent.

4. Unlikely. FHA streamlines usually have no upfront costs. No appraisal of the home or credit report is required (although they do have to verify that you haven't missed a mortgage payment in the last 12 months).

5. It is within today's market range.