VA mortgage questions?

obieone

I bought my house 4 years ago, using a mortgage broker, and am paying 6.2 %(total). I keep getting offers from co.'s regarding refinancing.
How do I know which ones are legit? They all have the 'endorsements' on their paperwork, I just want to make sure I'm NOT signing over my house in a scam.
I know I'd have to hire an attorney to review the paperwork, just looking for some objective advice.

Thanks

shack

6.2% is not a terribly high rate. What do you hope to accomplish? To refinance you will have to pay more fees, points, new apprasial, new title work, etc. There is almost no area of the country where home values are the same (as high) as they were 4 years ago. Interest rates are now tiered based on credit scores, debt ratio and LTV which is something that was not done 4 years ago. Before refinancing and incurring costs, make sure it will actually be of value and that you qualify and know what your rate will be going in. You might be able to get a lower rate, but by the time you add back in the new closing costs, add more years to the loan (assuming you started with a 30 yr mtg and will go back to a 30 yr mtg) you may end up owing more, for a longer period of time with not that much savings on the monthly payment. If that is the case you would be better off holding on to what you have IMO.

tcrossma

I would recommend using a local bank, if possible one that retains the loan instead of selling them off. About 6 months ago I refinanced from 5.99% to 4.99%. Closing costs were about $2k, give or take. As long as the closing costs are not astronomical, refinancing to save 3/4 of a point or more can be very desirable.

obieone

I was hoping to get to <5%, but I haven't checked my credit since the closing(lol).
It was 680 @ that time, so I guess with all the new reg.'s I'd probably end up paying more?

I'm just trying to save some $$$ every month by reducing the payment amt. If I have to pay up front, I can do that.

OR

Should I just send a big fat check to my mortgage co., toward the principal?

Thanks again

shack

obieone wrote:

I was hoping to get to <5%, but I haven't checked my credit since the closing(lol).
It was 680 @ that time, so I guess with all the new reg.'s I'd probably end up paying more?

If your credit score is still in the 680 range you will not qualify for the best rates.

obieone wrote:

I'm just trying to save some $$$ every month by reducing the payment amt. If I have to pay up front, I can do that.

Too many people focus just on the monthly payment. If you are spending money that you can't make up in less that 18-24 months with the lower payment...or...adding a significant amount to the balance as well as adding to the length of the mortgage I wouldn't recommend it. It may seem like a good deal in the short run but it is very costly in the long run.

obieone

So how's about sending a fat payment and designate it towards the principal?
I was thinking $5k, but that doesn't seem like enough to make a significant dent in the monthly?

shack

obieone wrote: »

So how's about sending a fat payment and designate it towards the principal?
I was thinking $5k, but that doesn't seem like enough to make a significant dent in the monthly?

Not a bad idea, but it won't change the monthly payment amount. That can only be done via a loan modification. Without modifying the note, it just means more of each monthly payment will be going to principal rather than interest. It will have a cumlative effect and you will pay off the mortgage faster.

Without finding out exactly what your rate and terms will be and crunching numbers, it is very difficult to know it a refinance is a good move or not.

As to the local bank...very few banks will keep a 30 year fixed rate mortgage on their balance sheet. Too much rate risk. Some will do a 15 year fixed and more still will do a 10 year fixed. Bank's cost of funds structure doesn't work well for long term fixed rate loans.

tcrossma

shack wrote: »

As to the local bank...very few banks will keep a 30 year fixed rate mortgage on their balance sheet. Too much rate risk. Some will do a 15 year fixed and more still will do a 10 year fixed. Bank's cost of funds structure doesn't work well for long term fixed rate loans.

That may be, but I just got one such loan: fixed for 30 @ 4.99%, retained at my local bank. Most of the local banks around me do it, usually at 1/4-1/2 point higher than their service released rates.

They do exist, and I was just saying that I would recommend trying to find one if there's one available. If none if his local banks do it, so be it. And if the credit rating is 680, probably a moot point anyway.

Hawkeye

If you have 5K sitting around, do you have CC debt? If so, I'd pay it down. Car payment? I'd put the 5k there. If none of the above, how about a 3 month emergency account? Kids college fund? Roth IRA?

Gordon

tcrossma

A lot of it depends on how far you are into your existing mortgage, (edit) size of the mortgage (/edit), and the percentage rate drop, as well as closing costs and how long you plan to keep the house / loan. Since I was only a few years into the mortgage on this house the 1% drop will save me about $90k over the life of the loan. If I keep this house (and loan) for a year, the closing costs will have paid for themselves.

Everyone's finances are different and there are dozens of things to consider when making any type of decision of this magnitude, but refinancing can be a great tool to help get yourself into a better position.

shack

tcrossma wrote:

That may be, but I just got one such loan: fixed for 30 @ 4.99%, retained at my local bank. Most of the local banks around me do it, usually at 1/4-1/2 point higher than their service released rates.

They do exist, and I was just saying that I would recommend trying to find one if there's one available. If none if his local banks do it, so be it. And if the credit rating is 680, probably a moot point anyway.

They may be keeping on balance sheet for now...but I bet they have the right to sell it into the secondary market. Any bank that puts 30 year paper on the books at today's interest rates with no outs is playing with fire. They evidently didn't learn from the S&L problems from the early 80s. There is nothing out there to match fund those loans. When deposit rates go up...and they will...it's really hard to make money when you are paying 5%-9% for funds to loan out at 4.99%. I know they are probably betting that it will turn (sell or refi) sooner. Mortgage loans used to payout in 7-8 years on average. That got shorter in the last 8-10 years as rates dropped and folks traded, moved, sold and refinanced more often. Most experts expect that to slow down and people will keep homes longer as mortgage rates go up and values remain at todays lower levels.

More and more banks are setting floors of 5% on loans that used to float at prime (currently 3.25%). I would not give anyone a fixed rate of 5% for longer that 12 months. We are charging 6% to 7% for a 5 year fixed rate. We think rates will start going back up sometime in late 2010. As the economy starts making a comeback inflation should start rearing its ugly head. The Fed thinks they can control inflation without slowing down economic growth.The ONLY way to do that without stifling the economy is to systematically drive up loan rates. Not may people remember the late 70s and early 80s when prime rate got as high as 21% to control runaway inflation. THAT was ugly. This economy has the potential to generate worse inflation than that period of time. In the next 3 years I want to be a depositor....not a borrower.

Again, IMO there is not enough info by obieone to make a good recommendation as to which way he should go. He needs to look at all of the things mentioned and then see what makes sense.