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sunnytimesnj · Joined: 19 Jan 2008 Posts: 5 3.84 Dollars($)

Hi everyone.

We bought a house just last year in August. Paid $1.4 mil and took out a $1 mil mortgage - 30 year fixed with a 10 year interest only option at 6.75%. As rates have dropped since then we are already thinking about doing a re-fi. This time to a 10/1 ARM IO. The broker we used last time is quoting 6 1/8% as did another guy I checked with. However I called a company I found on Bank Rate and they quoted me 5.5%. The company is National Mortgage Alliance, owned by Georgia Banking Company. I have never heard of them and can't find any info. Any one know if they are legit? Does the rate 5.5% sound too good to be true? Thanks!

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.12 Dollars($)

Hi Sunnytimesnj,

Yes, 5.50% is too good to be true and here is why. That is the rate for a mortgage under 417K for a single family home. Jumbo loans have a rate that is about 1/2% higher than that. I would advise that you stay away from anyone that has low balled the interest rate as it seems to be in this case.

helping_user · Posted: Mon Jan 21, 2008 3:15 am Post subject: RE:

Welcome Sunny.

The interest rates on 10/1 ARM refinances have dropped down by 1 basis (1/100th of a percent) points to around 5.58% this week. So, I think its ok for the lender to offer you 5.5% rate of interest. However, check out the fees and the closing costs thoroughly so that you are confirmed that you aren't paying any hidden fees as compensation for such a low rate.

Thanks.

Posted: Mon Jan 21, 2008 5:34 am Post subject:

Thanks. The fees were high - super high. Around 6K without title and all that other good stuff. I would think it would be 10k at least when all is said and done. I just haven't been able to find a rate this good without huge fee.

ckalvesmaki · Posted: Mon Jan 21, 2008 6:15 am Post subject:

What are your credit scores? I'm seeing that rate on 5/1 ARMS..but not on a 10/1 ARM......I have a question for you though.....why not look at a fixed rate IO loan.......the rate is about 6% and you don't need to worry about doing a refi again.....

sunnytimesnj · Joined: 19 Jan 2008 Posts: 5 3.84 Dollars($)

Credit is 800. I'm not so worried about locking in the rate for 30 years, I just need the 10 year I/O option at the lowest prossible rate. It seemed that the 10/1 ARM was the right move - I was just nervous (am still lol) that I will get ripped off.

evolovik26 · Posted: Mon Jan 21, 2008 7:52 am Post subject:

To original poster: you were being quoted conventional 30yr fixed interest rate. Jumbo rates are nothing like this, especially on 30 yr fixed. On a loan you have described you can get 7 yr fixed I/O starting at 5.75-5.875 and that is not bad at all. As far as closing costs are concerned 10k doesnt seem unreasonable depending on what you concider closing costs.
Origination - .5-1% = 5000-10000, Appraisal - 500+, credit report - 25-50, Lender Fees - $750-1250, Title - closing fee $250, Doc Prep - 130, Title insurance - $2200, Mortgage Registration Tax - $2300. And if you escrow you got another 6-10k in taxes and insurance to put in escrow account.
Granted you can likely take a 6.125-6.25% interest rate instead and greatly reduce or eliminate all of your costs. (this is likely the better way since you planning on taking interest only loan anyway)

sunnytimesnj · Joined: 19 Jan 2008 Posts: 5 3.84 Dollars($)

Hi. Thanks for your post, but the quote was not for a conventional 30 year fixed loan. Here is what they wrote to me. We had already talked about loan amount and credit score:

THEM:
At 5.5%, our total lender fees would be 6,640 for the 10/1 ARM I/O. At 5.625%, our lender fees would be $4,800. Again, you will still have the third party fees such as the appraisal and title company fees along with the taxes and insurance for the escrow account.

ME:
ok great thanks....so it's slightly more for the interest only option right.

THEM:
That is correct. Do you want me to check the 30-year I/O?

ME:
sure, that would be very helpful

THEM:
Actually, the 30-year fixed I/O is not competitive compared to the 10/1 ARM I/O at all. We would be looking in the high 6s for that program. I would suggest going with the 10/1 ARM I/O

brad · Posted: Mon Jan 21, 2008 8:14 am Post subject:

Sunny,

You should be able to get a Jumbo 10/1 arm at 5.875% with no fees or points! Interest only costs a little extra but with your credit scores some lenders would waive the extra cost. I have a client that is a doctor he just got a deal at 6.125% but his credit isn't as good as yours.

My point is that your credit is too good for you to have to pay origination fees or "points". There are plenty of people that will be willing to do your loan with out making you pay points! Let us know if you need more info!

shane · Posted: Mon Jan 21, 2008 9:06 am Post subject:

Credit being excellent isn't what determines paying points or not... the interest rate you want determines if you pay points or not.

brad · Posted: Mon Jan 21, 2008 9:34 am Post subject:

You could say that but I prefer to offer a rate with 0 points first and then give the option to buy it down. With great credit you can get a better rate at a lower cost because the Lenders will give you a break of say a quarter of a percent if your score is above 740.

shane · Posted: Mon Jan 21, 2008 9:50 am Post subject:

Totally agree about the better rate/lower cost with better credit Bradley... but just wanted people to know that credit status doesn't (or I should say, shouldn't) determine if points/origination are charged or should be paid, or not.

banker0679 · Posted: Mon Jan 21, 2008 7:48 pm Post subject:

Hey sunnytimes....saw you on citydata.

Just a reminder.....MOST individuals refinance every 3-5yrs....There's no way you're going to be in that ARM for 10yrs.....Most people dont do it.
It's obvious that you purchased your home..and you're ready for a refinance...MOST people are like this.

I would look at a 5/1 ARM I/O...and a 7/1 I/O ARM.
Either way.....I'm sure you wont stick out the 5yrs.

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.12 Dollars($)

There is no way that 5.50% is possible for a jumbo loan. If it were under 417K then yes. I think the person that is quoting this rediculous rate is new or on drugs.

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.12 Dollars($)

I really need to add a picture. The above cartoon pic is not too flattering. lol.

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