How low can we go? 30 yr fixed at 3.75% with no fees...

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Assuming someone got a 5 or 7 year ARM earlier this year or last year (assume in the low 2s like under 2.5%), at what point do you say it's just better to go fixed at the low 3s (hopefully, even lower, and refinance) to eliminate the uncertainty after the fixed period ends?  Assume the plan is to stay in the home for a long time.
 
Probably any 30 fixed under 3.25% is worth flipping from an ARM to a fixed. Yes, there are some pretty low ARM rates in the mid to low 2's (costs vary), but when you can fix it and forget it at 3.25%, well worth it.

I have to confess not believing things would settle below 3.5% for zero fees, but we're at that point of see 3.5% as the new baseline even through some of the majors, not just the Intarweb funding companies. If you pay for some of your closing fees, you can get rates in the upper 2's and not just on a 10 year fixed loan!

A CPA Question: At what point does the MID really not mean anything? Assuming $400,000 at 2.75% that's $11,000 per year + property tax of somewhere around $5,000 there isn't much benefit from a tax relief perspective on home ownership. Thoughts?
 
So I've moved in to my new home for about 2.5 months now.  My loan agent gouged me on the rate (long story), so I'm looking to refi.  My cash reserve right now is pretty low since I've pretty much emptied out my savings to buy the house.  I could sell some stocks to bring the cash reserve up, but would the lender see this as unseasoned funds?  I'm pretty much set to refi now, but my cash reserve is the only thing holding me back.
 
gaogi said:
So I've moved in to my new home for about 2.5 months now.  My loan agent gouged me on the rate (long story), so I'm looking to refi.  My cash reserve right now is pretty low since I've pretty much emptied out my savings to buy the house.  I could sell some stocks to bring the cash reserve up, but would the lender see this as unseasoned funds?  I'm pretty much set to refi now, but my cash reserve is the only thing holding me back.
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You can usually use your 401k account to show cash reserves.  The lender will give you 70-80% (can't remember exact %) credit per dollar in the account.
 
Reserves:

Conventional - 2 months, all of which can be in 401k account
FHA - 0 reserves needed.
Over $625,500 Jumbo - under $1,000,000 6 months PITIHOA. Half of that amount can be in a retirement plan.
Over $625,500 Jumbo - over $1,000,000 12 months PITIHOA. Half of that amount can be in a retirement plan.

Retirement plans are valued at 60% of the asset ($100k IRA = $60k available reserves)

Got a rental property? Need 6 months reserves per property, but that's also case by case.

One caveat: The guidelines are 2 months for Conventional, but sometimes the Automated Underwriting Systems (DU / Loan Prospector) prefer multi-month reserves when the application data is run through for approval.

Hope this helps.
 
Taking your assumption of about a $400K loan, and a zero cost 30 year at 3.5%. 

Would you be able to give me a couple ballpark figures of how much it would cost to bring it down to the upper 2s, etc.?

Thank you very much.

Soylent Green Is People said:
Probably any 30 fixed under 3.25% is worth flipping from an ARM to a fixed. Yes, there are some pretty low ARM rates in the mid to low 2's (costs vary), but when you can fix it and forget it at 3.25%, well worth it.

I have to confess not believing things would settle below 3.5% for zero fees, but we're at that point of see 3.5% as the new baseline even through some of the majors, not just the Intarweb funding companies. If you pay for some of your closing fees, you can get rates in the upper 2's and not just on a 10 year fixed loan!

A CPA Question: At what point does the MID really not mean anything? Assuming $400,000 at 2.75% that's $11,000 per year + property tax of somewhere around $5,000 there isn't much benefit from a tax relief perspective on home ownership. Thoughts?
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Every bank will have slightly better or worse pricing. As well you run into the law of diminishing returns as you go deep on rate.

I'm showing 2.875% costing 4.0 points, plus closing costs for a 45 day lock (80% LTV, Impounds, 781 FICO, Detached Home) through one Bog Box vendor. That's a payment of $1,660 but will cost $18,000 in total fees to get that rate. Talk to USCTrojan about deductible points.

Greenpoint Funding, a long vanished mortgage company, once ran a program to finance that $16,000 into your new loan balance to get a 4ish rate back in the mid 2000's. I'm sure at the time it was a fantastic idea, but not so grand after values collapsed and rates fell to where we are today.

3.00% is 2.75 points (-$5,000 in cost, +$26 per month in payments)

Amerisave is showing $9,500 in total closing costs to get to 2.875%, but that's for a short term lock which is not going to happen.
Greenlight doesn't show that rate, neither does Provident Funding. AIM loans, with a comparable 60 day lock is showing a 3.00% rate for about $10,000 in closing fees. That's pretty much what the Big Box is saying so my guess is that's the market today - 3.0% for $10 - $12k in total fees.


SGIP
 
Just as an education to myself and your listeners... does your company give you access to any loans or are you limited to specific vendors?
 
There are three kinds of lenders:

Banks - Lending funds they draw from the Federal Reserve, or sometimes depositor funds to structure mortgage loans.
Mortgage Bankers - (my company) who draw funds from various Banks, close loans in our name, then re-sell a few loans to various investors
Mortgage Brokers  - they package loans and have them underwritten, approved, and funded through the best service provider at the highest rate of return to the broker.

Hey, they're in business to make money so I don't begrudge them trying to make a buck. They aren't however trying to get "the lowest rate" for you. Neither for that matter are Mortgage Bankers or Banks. They're all trying to balance market competitive rates with sustaining income for the company.

Being a mortgage banker and broker, you can see net pricing from Wells, Chase, Citi, etc. Go directly to Wells and you might get 3.25% for 1.0 point. Wells might offer a 1.0 rebate to a mortgage banker or broker at that very same 3.25% because they don't have to deal with their overhead costs. This is why you will get a lower rate from most bankers/brokers even though the loan will end up at Wells, Chase, Citi, etc.

Mature mortgage bankers have acces to a good couple dozen established funding lines. Some of these lines are great for Jumbo's while others are FHA only. Brokers have access to 50 or so companies, but really fund only to a small pool of reliable funding conduits.

My .02c
 
You can deduct paying points to buy down your interest rate for a purchase or a refi, but you have to be careful that some of that deduction isn't phased out via AMT and high income phase-outs.  Rule of thumb that I would use for deciding where to pay extra for a rate buydown is see if it has a 5 year payback (on a gross basis).  Since rates are so low, going down an 1/8% gets more and more expenive so most people shouldn't spend money buying down the rate.  Besideds, if rates keep going lower you can always just refinance to the lower rate later.
 
Soylent Green Is People said:
A CPA Question: At what point does the MID really not mean anything? Assuming $400,000 at 2.75% that's $11,000 per year + property tax of somewhere around $5,000 there isn't much benefit from a tax relief perspective on home ownership. Thoughts?
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For 2011, the standard deduction for single filers was 5,800 or 11,600 for married filing joinlty. If you assume that you were only itemizing the interest and property taxes for the 16K you mention, then the only tax relief for a married couple filing jointly being provided by the home is difference between 11,600 and 16K, which is 4,400. Take that 4,400 times a combined (fed/state) marginal rate of say 30%, the actual cash savings is 1,320, so in this scenario (also assumes income is low enough for property taxes to still be deductible), your MID and prop taxes are only saving you 1,320, not much at all.

In irvine im guessing there are more higher income earners than most places so the income taxes paid to CA alone are probably higher than the standard deduction, in this scenario, assuming you had enough income, at the combined marginal rate of say 30%, to absorb the entire 16,000 deduction, the the tax benefit would be 16,000 x 30%, which is a tax savings of 4,800.  This is why for people in low home cost areas such as the midwest, a lot of folks dont get much benefit from MID, if any.

not sure if i answered your question or not, i think this is what you were looking for though.
 
qwerty said:
Soylent Green Is People said:
A CPA Question: At what point does the MID really not mean anything? Assuming $400,000 at 2.75% that's $11,000 per year + property tax of somewhere around $5,000 there isn't much benefit from a tax relief perspective on home ownership. Thoughts?
Click to expand...

For 2011, the standard deduction for single filers was 5,800 or 11,600 for married filing joinlty. If you assume that you were only itemizing the interest and property taxes for the 16K you mention, then the only tax relief for a married couple filing jointly being provided by the home is difference between 11,600 and 16K, which is 4,400. Take that 4,400 times a combined (fed/state) marginal rate of say 30%, the actual cash savings is 1,320, so in this scenario (also assumes income is low enough for property taxes to still be deductible), your MID and prop taxes are only saving you 1,320, not much at all.

In irvine im guessing there are more higher income earners than most places so the income taxes paid to CA alone are probably higher than the standard deduction, in this scenario, assuming you had enough income, at the combined marginal rate of say 30%, to absorb the entire 16,000 deduction, the the tax benefit would be 16,000 x 30%, which is a tax savings of 4,800.  This is why for people in low home cost areas such as the midwest, a lot of folks dont get much benefit from MID, if any.

not sure if i answered your question or not, i think this is what you were looking for though.
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I'd be a FBC in the midwest.  :P
 
Yep. That works. For the $300k Condo buyer at 3.5% it's looking fairly thin on the tax benefits of home ownership - unless I am still missing something.
 
Amerisave update : all set to close this week, rate is 3.25 with 3k+ credit.
Real estate bubble 2.0, here we come.

So, the question now is to prepay or not to prepay considering the rate.. When we had a 3.5 10 YR ARM, I had doubled the payment to pay down the principal. Doesn't make sense now.. Or does it?
 
Cubic Zirconia said:
Amerisave update : all set to close this week, rate is 3.25 with 3k+ credit.
Real estate bubble 2.0, here we come.

So, the question now is to prepay or not to prepay considering the rate.. When we had a 3.5 10 YR ARM, I had doubled the payment to pay down the principal. Doesn't make sense now.. Or does it?
Click to expand...
Only if you don't believe that you can find better opportunities to make a return greater than 3.25%.  Why not let inflation eat away at your loan and use the money to invest in something else?
 
So I have this question about the 10 year bond and today's rate.

10 yr treasury as of 09/24/2012 ~ 1.722
30 yr mortgage rate as of 09/24/2012 ~ 3.500

I thought the 30 yr mortgage is derived from the 10 yr bond.  If so, then how come the 30 yr mortgage is cheaper now then it was 2 months ago when the 10 yr bond was around 1.5 and the the 30 yr was higher at 3.875?

Why are mortgage rates going down when the 10 yr bond is going up?
 
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