Okay, I know there are some very smart/experienced people in this forum that could help me on the subject matter, so I’m casting out for some advice.
I am looking to re-finance my home, and I have been dealing with a local broker, who has helped me a lot. However, I am facing a decision of whether or not to go with him on re-financing…I feel I want to give him my business, but when I compare his rates, with some of what I see on the internet…I don’t know.
So, the specifics:
I currently have a first and a second…first is at 7% and second is at 8%. With the appraisal I just had done, I am able to consolidate into a single loan. I live in the Austin, TX area if it matters.
I have an excellent credit score, and have 20% equity in the house.
The amount total to re-finace is $168K. My local guy gave me a 30-yr fixed at 5.875%, with no points, and $3K closing costs.
When I checked this against some of what I was seeing on bankrate.com, some of the comparable rates are a full point lower or better. If I look at a 5/1 or 7/1 ARM, its even better. Not sure if an ARM would suit me, but I would consider a longer term ARM…5/1 or more.
What am I not seeing on some of those rates…are there anything I should be wary about that is hidden with some of those e-loan deals, or other rates listed? Any advice on how to compare or watch out for?
I don’t see why my local guy could be so far off what I am seeing on the net, so I’m wondering if I’m not getting the full picture on either end. I fill I “owe” my local guy my business, but money is money.
What is your credit score (FICO + median)? That determines rate more than anything else.
What is your true equity in your home? Less than 20% equity & rates go up.
Texas is fucked when it comes to re-fi’s, and especially seconds–couldn’t do them until a few years ago.
You can always got eloan.com & see what the competition will give you.
For national lenders, see what Ameriquest and Countrywide are offering–they both do direct & its just a phone call to one of their branchs to find out.
Your broker is likely making $1-2k + at least a point on your refinance. Real $$.
The only thing I can add to mop’s comments are to shop around, skip the mortgage broker and consider the length of stay in your house as whether it is economic to re-fi at all. If you are looking at a new house in the next 3 years or so, why bother? You should be able to do better than 5.875% right now. You might also go direct to the holder of your first and see what they can do.
First things first, find out your actual credit score. Go to the credit bureaus’ sites and request your credit info from all three, then pay the like 10 bucks to find your actual score. Very important. You could think you have excellent credit, but there may be mistakes on it that are hurting you.
Second, when comparing rates, use the APR and not the “rate”. Looking at bankrate.com with your info I saw a couple 4.875% “rates” but add in the $7,000 closing costs and that adds up to an APR of about 5.25%. Get the APR from your local guy and use that to compare.
Third, you said you “just had 20%”. Do you still have it when you add in the closing costs and the refi fees?
Fourth, the local guy is trying to get your business just like anyone else. There is a little comfort in using him as if you have any questions later on you’ll at least have a person that you have met and that you know to bounce questions off of. But other than that the internet deals can be quite good too. Just try and go with a reputable bank.
You can get a great credit report at myfico.com It looks just like the way a lender sees it. Beware of mortgage deals that sound too good to be true because they probably are. I would get two or three gfes and compare them. You can also try your bank because they can have some pretty good deals…
Just curious, are you planning to stay in your house for 3o yrs? If not, did you examine other options available to you? When you do the math on a 30 year loan the interest alone could pay for lot of items.
check out http://www.annualcreditreport.com. New federal law says you get one every year for free. if you look at the ‘about us’ or ‘faq’ you will see that it comes from the major 3.
I would use the internet with a grain of salt. In our world of so many options available, it is also extremely difficult to compare apples to apples andymore. We’ve been running into a lot of issues with the internet financing. If you choose to go that route, stick to the bigger names. I’ve seen several deals fall apart lately (the last on the day of closing) because of an internet lender. I’d speak with 2-3 area lenders and see what the good faith estimates look like.
you should work with a local broker who knows what he or she is doing and is able to explain his or her recommendation(s) to you in easy to understand terms.
if the broker has not reviewed specifics with you then you are working with the wrong one.
don’t mess around with getting your own credit report. have your broker pull a tri-merge and then get a copy and review it with the broker. in many cases, they are unable to use one you pull anyway and still need to get their own. plus if there are issues, they can, or should, work with you to get issues resolved.
internet shops sometimes do okay when everything is perfect. but when a glitch develops, which is more times than you can imagine, you may get left high and dry. a local broker you can meet with is likely to get things handled more efficiently than any internet shop.
advertised rates on the net are generally for the absolute best scenario possible and rarely show the fine print regarding such qualifers as:
-required credit score(s)
-LTV (loan-to-value)
-DTI (debt-to-income)
-loan term (most places advertising rates show their best/shortest ARM rates.*
-type of home
-cash out? (in your case unless the 2nd was used originally as part of the purchase that would count as cash out…and you’ll take a bit of a hit for that. Be ready to show HUD1(s) from your purchase to prove it)
-location of home
and a bunch of others.
*be careful when comparing prices and rates of an ARM to a fixed rate. you had better know what you are doing or work with someone who does. ARM’s can be good deals, but if you do, say a 3/1, you need to add the cost of the REFI in 3 years plus the potentially longer term of the new loan back into the first ARM to truly compare with a fixed. Quite often it makes more sense to lock in long term, depending on your picture, and pre-pay on the balance which then gives you a lower effective rate by shortening the term. that’s where your short and long term goals and plans show up as a big part of the overall picture and determining which loan program is best suited to your situation.
…find me an internet shop that wants to take the time to sort out the picture on your behalf…
Thanks for the advice. I have had my credit report pulled by the local broker, and it is clean. I have real good credit. Besides my existing house mortgage, I have zero debt. Decent salary. None of that is the issue.
I was more looking for advice on shopping the internet guys and what to look out for. I am always very leery of anything on the internet, especially when it comes to something as huge as a mortgage.