Mortgage rates, To lock or not?

[snapda9]

Hello, I'm in the process of buying a new house. I can lock in at around 5.25% right now. (Borrowing $240,000 @ 15years). I have untill March 20th to lock in. What do you think interest rates will do until then. I could have locked in last week at 5% butt my banker didn't return my call:shrug: .
Should I gamble and wait or just bite the bullet?
Thanks, Scott

 

[WhatsHisNuts]

Get a comparable estimate from a competitor and run through all the costs associated with the loan, ask one of them to beat the other and so on....then lock in. Rates are really good right now, but more importantly, you want the lowest monthly payment. Are you putting 20% down? If not, you're going to be paying PMI. If you are ask for an estimate with a higher interest rate (to get you out of PMI) you might end up with a lower payment. There is more to buying a home than the interest rate.

Also, just curious: Why are you getting a 15 year loan? A mortgage is the cheapest money you'll ever get. The time value of money usually makes it better to get the longest term.

 

[onetrickpony]

Hello, I'm in the process of buying a new house. I can lock in at around 5.25% right now. (Borrowing $240,000 @ 15years). I have untill March 20th to lock in. What do you think interest rates will do until then. I could have locked in last week at 5% butt my banker didn't return my call:shrug: .
Should I gamble and wait or just bite the bullet?
Thanks, Scott

If you can still get 5.25% (I doubt it), lock it in. Rates have jumped on average 1% in the last week (100 bps alone on Tuesday) and look to keep going up. I quoted a 4.875% on a 15 year last week and the borrower balked. His rate is around 6% today.

 

[SixFive]

if u can get that rate, u r getting a good deal.

 

[snapda9]

If you can still get 5.25% (I doubt it), lock it in. Rates have jumped on average 1% in the last week (100 bps alone on Tuesday) and look to keep going up. I quoted a 4.875% on a 15 year last week and the borrower balked. His rate is around 6% today.

Ouch..... Looks like I'm stuck waiting it out for a while:shrug: . Hopefully it'll go down in the next few weeks.

 

[snapda9]

Get a comparable estimate from a competitor and run through all the costs associated with the loan, ask one of them to beat the other and so on....then lock in. Rates are really good right now, but more importantly, you want the lowest monthly payment. Are you putting 20% down? If not, you're going to be paying PMI. If you are ask for an estimate with a higher interest rate (to get you out of PMI) you might end up with a lower payment. There is more to buying a home than the interest rate.

Also, just curious: Why are you getting a 15 year loan? A mortgage is the cheapest money you'll ever get. The time value of money usually makes it better to get the longest term.

Thanks, Scott

What do you do then? It's hard not to take the gauranteed interest savings by paying an extra $500 a month on a5.5% 15y (approx. $165,000) as opposed to a 6% 30y. Thats assuming they'll come back down:shrug: .

 

[Franky Wright]

I could have locked in last week at 5% butt my banker didn't return my call:shrug: .
Thanks, Scott

Scott,

Fire this guy, and get someone else, thats inexcusable:scared ...
Rates will come back down, but make sure you have ALL your Documentation in so you can lock when the time is right. One of my clients who I have locked right now at 5% called me yesterday and said he is still trying to sell it to his wife :SIB
:0corn

GL,

Franky

 

[snapda9]

Scott,

Fire this guy, and get someone else, thats inexcusable:scared ...
Rates will come back down, but make sure you have ALL your Documentation in so you can lock when the time is right. One of my clients who I have locked right now at 5% called me yesterday and said he is still trying to sell it to his wife :SIB
:0corn

GL,

Franky

Why don't you sell me his spot?....:00hour

 

[Franky Wright]

Why don't you sell me his spot?....:00hour

LOL, yea, if I had a dollar for everytime that happens, well, I would be in Panama with the Judge year round :00hour

Lesson to be learned here is;

Have all your documents to your lender, and make sure the person you are doing business with is competent

Franky

 

[Jabberwocky]

if he is having to sell the wife on a 5% rate, he might be better just selling the wife :shrug:

 

[snapda9]

if he is having to sell the wife on a 5% rate, he might be better just selling the wife :shrug:

If you have a buyer I'd gladly pay 99.99%:scared

 

[Franky Wright]

One of my clients who I have locked right now at 5% called me yesterday and said he is still trying to sell it to his wife :SIB

if he is having to sell the wife on a 5% rate, he might be better just selling the wife :shrug:

Thats why I put this SIB ) after the comment :shrug:

But, it will hopefully close Monday now, as the underwriters came back and told us the appraisal
was too high :mj07: :scared

This market is just crazy right now :mj08:

Franky

 

[MadJack]

as the underwriters came back and told us the appraisal
was too high

why would that be a problem?

 

[Franky Wright]

why would that be a problem?

Exactly. Common sense tells us that this should be a good situation. Lower LTV= less risk, right?.

Because the Real Estate Market is in such a state of disarray, lenders(underwriters) are almost looking for reasons not to do loans it seems. In this case, I had done a refinance for this customer who did a major remodel last year. Paid off his construction loan, and we had an appraisal of $440K. About one year later, we are doing a rate/term refy now, appraisal comes in at $490,000. Squak goes the underwriter:scared >"No way the house can appreciate $50K in one year in a down market". I told him that the home increased in size by 50%, is on the waterfront, and now is in a new comparable range of 3000-3500 sq.ft. Comps used, showed sales in the 475-675 range. If anything the appraiser was being very conservative, and we hired him for this reason, cause we were doing a streamlined refinance. We hit the market right, and got him the 5% interest rate. So now I have the appraiser going back to the property, taking more pictures, and doing more analysis, to substantiate the value. All at more cost to the client :SIB . Nice, huh! On top of that, we had to fight like hell to get the rate lock extended :box2:

I hope this explains some of the pitfalls of this market we are in right now. It is more complicated than that, but the Readers digest version for here should do it I hope. :0corn

Franky

 

[WhatsHisNuts]

What do you do then? It's hard not to take the gauranteed interest savings by paying an extra $500 a month on a5.5% 15y (approx. $165,000) as opposed to a 6% 30y. Thats assuming they'll come back down:shrug: .

If you look at it from a finance perspective, this would probably fall into the category of "opportunity cost". If you took the longer term loan, what could you do with that $500 a month you'd be paying on the shorter term?

Time value of money principle: What do you think your monthly payment will be "worth" in 20 + years. One finance lesson I've never forgotten involved the value of a $300 mortgage payment in 1950 vs 1972. In 1950 dollars, 300 was substantial, but in 1972, it wasn't much. The payment stayed the same over the 30 year term, but the burden of the payment lessened as the dollar's value dropped (3% inflation per year on average, I believe).

Just something to think about.

 

[AR182]

i thought that i would throw this out in this thread & franky or somebody else can correct me if i am wrong......

if you take out a 30 year mortgage & make one extra monthly payment per year...you can have the mortgage paid off in 18 years.

 

[shawnrobert]

Rates will come down this week - look for for economic reports to be negative throughout the week and for some stabilty to come back to the muni bond market. I have about 2 million in loans that will be closing before the end of the month that I locked on Feb 12th and 13th and since then have floated all new applications but will be locking most if not all of them later this week more than likely.

 

[Franky Wright]

i thought that i would throw this out in this thread & franky or somebody else can correct me if i am wrong......

if you take out a 30 year mortgage & make one extra monthly payment per year...you can have the mortgage paid off in 18 years.

That would be correct sir, give or take a year or so...
Can I set up a satelitte office with you down there:142smilie

 

[AR182]

That would be correct sir, give or take a year or so...
Can I set up a satelitte office with you down there:142smilie

believe me franky, i wish you were down here also....

 

[shawnrobert]

Pricing has been improving on interest rates over the past two days as suspected so I figured I would bump this thread, if you have been quoted a rate and payment with closing costs in the last 10days you should be able to get a much better deal today next week. I locked half my remaining pipeline today and will hedge with floating the other half as I think things will improve even further in the short term. If you have locked between 2/18/08 and 2/27/08 call your loan officer or broker back and tell them you need a better rate - tell them to pull the loan if they are a broker and submit it somewhere else and if you went to a bank and they will not work with you go to a broker who can be more flexible. Good Luck.