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Old 09-10-2015, 11:33 AM   #21
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+1

Also, since you are putting down 20% make sure they do NOT charge you PMI...

If you are good at money management, pay the fee so you do not have an escrow account... when I had one they screwed it up almost every year.... I had lots of excess money sitting in escrow doing nothing for me year after year... not as important with this low rate, but back then it was real lost money....
You have to be careful with the escrow account. When we were living in Texas, we had a mortgage and didn't want an escrow account (for obvious reasons). A large percentage of lenders will CHARGE you a fee (as a percentage) at closing to NOT have an escrow account. However, this CAN and SHOULD be negotiated. There are lots of lenders out there, and if you are highly qualified and are putting down AT LEAST 20%, many of those fees can be waived and/or reduced.

Also, if you qualify, take a look at Navy Federal or Pen Fed...they are both very good to work with and the fees are hard to beat.

+1 on fixed rate. They are so low right now, there aren't many good reasons to get an ARM.

And lastly..+1 on doing conventional. In a seller's market (as most areas are now) it's all about competition between buyers. For the *most* part, a savvy seller will pick a buyer who is conventional over a FHA/VA loan. Dealing with the government is a pain and that includes the folks at the FHA and VA.
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Old 09-10-2015, 11:50 AM   #22
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+1 on fixed rate. They are so low right now, there aren't many good reasons to get an ARM.
Our ARM saved us ~$9000 in interest expense in the last two years, that's a pretty good reason to me.
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Old 09-10-2015, 12:18 PM   #23
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You have to be careful with the escrow account. When we were living in Texas, we had a mortgage and didn't want an escrow account (for obvious reasons). A large percentage of lenders will CHARGE you a fee (as a percentage) at closing to NOT have an escrow account. However, this CAN and SHOULD be negotiated. There are lots of lenders out there, and if you are highly qualified and are putting down AT LEAST 20%, many of those fees can be waived and/or reduced.

Also, if you qualify, take a look at Navy Federal or Pen Fed...they are both very good to work with and the fees are hard to beat.

+1 on fixed rate. They are so low right now, there aren't many good reasons to get an ARM.

And lastly..+1 on doing conventional. In a seller's market (as most areas are now) it's all about competition between buyers. For the *most* part, a savvy seller will pick a buyer who is conventional over a FHA/VA loan. Dealing with the government is a pain and that includes the folks at the FHA and VA.

The fee for me was either $100 or $150, cannot remember... if it were a % I would have brought it up as an issue....


I see that the ARM and fixed is being batted around.... that is a personal decision.... but, I just looked at rates from Box home loans for a $240K loan and the rate with the closest to zero fees was 3.9 for 30 year, 3.1 for 15 years and 3.4 for 5/1 ARM.... kinda makes it easy to pick the 15 year fixed since it is the lowest rate.... but, the 30 year is only $60 more per month than the ARM.... sure, it adds up over the years, but you are fixed and do not have to worry if and when rates go up....


Now, if you need the cash flow and cannot do the 15 years and plan to see in 5 to 10 years... the ARM could work.. but in my example you save less than $4K in 5 years.... Soupcxan must have a pretty big mortgage to save that much money.... BTW, when I did my refi the 15 year was also lower than the ARM... so I am saving money by being fixed with zero worry on a rate increase.....
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Old 09-10-2015, 02:10 PM   #24
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The fee for me was either $100 or $150, cannot remember... if it were a % I would have brought it up as an issue....
I agree, avoid escrow if possible. I don't know if it's something decided state by state or what, but I've never had to pay a fee to not do escrow. These homes were in VA and MD. I'd negotiate the fee. Why pay them money NOT to have to do the work.

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I see that the ARM and fixed is being batted around.... that is a personal decision.... but, I just looked at rates from Box home loans for a $240K loan and the rate with the closest to zero fees was 3.9 for 30 year, 3.1 for 15 years and 3.4 for 5/1 ARM.... kinda makes it easy to pick the 15 year fixed since it is the lowest rate.... but, the 30 year is only $60 more per month than the ARM.... sure, it adds up over the years, but you are fixed and do not have to worry if and when rates go up....

Now, if you need the cash flow and cannot do the 15 years and plan to see in 5 to 10 years... the ARM could work.. but in my example you save less than $4K in 5 years.... Soupcxan must have a pretty big mortgage to save that much money.... BTW, when I did my refi the 15 year was also lower than the ARM... so I am saving money by being fixed with zero worry on a rate increase.....
Once again, +1. With rates as low as they are there just isn't that much difference between the options. $9K in 2 years would have to be a honker of a mortgage, and might be worth it, maybe, I guess. Again, I wouldn't want the uncertainty on the rate, especially as the 15 year FRMs are as low or lower.

I once (2007ish) had a zero interest jumbo liar's loan for $750K (those were the days). I kept it for 2 years before refi'ing into a $417K conventional 30 year. I saved close to $2K per month for those 2 years, although I ended up paying a pittance of a penalty when I refi'd. It was stupid that they let me do that, especially without me supplying much in the way of documentation. But no way I'd recommend something like that. For me the 30 (or 15 or 20) year fixed rate is similar to the "sleep better at night" feeling that the no mortgage people are always saying. I prefer having managed my finances in a way that the result is pretty much under my control.
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Old 09-10-2015, 02:37 PM   #25
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Joe C,

How long do you think you'll be in the house? All the arguing about ARM or fixed rate is pointless without the answer to that question. Your plans might change, but what do you think today?
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Old 09-10-2015, 03:35 PM   #26
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Another vote for no escrow - I forgot to mention that the first time. Had horrible problems with our first two mortgages with escrow errors (not paying insurance or taxes on time) so have always gone no-escrow. In DE it didn't cost anything but in Texas it did, at least the last time (I don't recall the first time).
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Old 09-10-2015, 03:36 PM   #27
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yeah +1 for no escrow
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Old 09-10-2015, 04:56 PM   #28
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If you are good at money management, pay the fee so you do not have an escrow account... when I had one they screwed it up almost every year.... I had lots of excess money sitting in escrow doing nothing for me year after year... not as important with this low rate, but back then it was real lost money....
+1 on avoiding the escrow account if you can. I hated dealing with that.

Bankrate.com is a great place to start searching for a mortgage.
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Old 09-10-2015, 07:50 PM   #29
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$9K in 2 years would have to be a honker of a mortgage, and might be worth it, maybe, I guess.


Our $330k mortgage is a "honker"? The average mortgage today is $294k, although this was two years ago, so we're a little above average but not even jumbo.

Average mortgage loan size outpaces home prices | 2015-03-13 | HousingWire
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Old 09-10-2015, 08:35 PM   #30
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I tried to avoid escrow for my last two refi's but they wanted a 0.125% or 0.25% higher interest rate to let me do it myself (don't remember the correct bump). While some of the escrow calculations have been a little flakey, I haven't had any problem with them paying anything late.
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Old 09-10-2015, 09:04 PM   #31
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Our $330k mortgage is a "honker"? The average mortgage today is $294k, although this was two years ago, so we're a little above average but not even jumbo.

Average mortgage loan size outpaces home prices | 2015-03-13 | HousingWire

OK..... then what kind of interest rate do you have on your ARM and what rate did you use to calculate $9K savings....


I did a quick calc and used 3.5% vs 2.5% and the savings was $6.6K.... so it looks like you need a 1.5% spread between the variable and fixed to get your savings.... but I do not see that much spread in ARMs today... as I said, the ARM rate was actually higher than the 15 year fixed when I looked online...
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Old 09-14-2015, 02:49 PM   #32
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Get a real estate license and buy a home with a 3% discount, then give up the license if you do not want it anymore.
I'm curious on the practicality of this advice. If someone is just going to buy ONE home, is it worth it? Don't you have to pay to access the MLS? And associate with someone who carries some office support and liability coverage? Genuinely curious....
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Old 09-14-2015, 03:20 PM   #33
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I'm curious on the practicality of this advice. If someone is just going to buy ONE home, is it worth it? Don't you have to pay to access the MLS? And associate with someone who carries some office support and liability coverage? Genuinely curious....

I think the poster was joking around. You have to take a couple of courses and then pass an exam that is not difficult. Then you have to have a broker basically hire you to have a place to park your license. They actually expect you to work at trying to sell houses and spend time manning the office. An agent represents the broker and can't sell homes on their own until they get a brokers license, which requires experience and more exams and a different license.


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Old 09-14-2015, 03:33 PM   #34
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+1 on avoiding escrow and PMI, even if you have to put up a bit more. A good mortgage broker can be an advantage but it is hard to find a good one. I found one through my credit union. A CU or PenFed or similar might be a good place to start.

Avoid Quicken Loans... I had a bad experience with those shysters but luckily had a good trail of emails so came out whole at the end of the day.
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Old 09-14-2015, 04:14 PM   #35
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You don't say where you live, but where are you looking to buy a $300K house? It'd be a dump in Toronto, but in Atlanta it'd be a 4,000 square foot house in a beautiful swim tennis neighborhood.

I'm with Suze Orman about housing and living in general: Live below your means. If you can afford a $300k house, buy a $200K house. If you can afford a new BMW, buy a 2 year old BMW or a used Honda Accord and keep it until it dies. Fund 401K's and Roth IRA's to the max. Take the extra and get the house paid off. Then you can seriously save.
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Old 09-16-2015, 09:25 AM   #36
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I think the poster was joking around. You have to take a couple of courses and then pass an exam that is not difficult. Then you have to have a broker basically hire you to have a place to park your license. They actually expect you to work at trying to sell houses and spend time manning the office. An agent represents the broker and can't sell homes on their own until they get a brokers license, which requires experience and more exams and a different license.


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I don't think he was, but I'm sure he'll eventually chime in and "set the record straight."

But, thanks for confirming what my gut feeling was telling me, it probably isn't worth it to get your RE license for a home every couple years.
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Old 09-16-2015, 06:41 PM   #37
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OK..... then what kind of interest rate do you have on your ARM and what rate did you use to calculate $9K savings....
When we got the mortgage the 5/1 ARM was 1.875% and the 30 year was 3.25%. Multiply by 330k by 2 years = 9k. I will take that bet any day of the week.
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Old 09-16-2015, 07:28 PM   #38
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When we got the mortgage the 5/1 ARM was 1.875% and the 30 year was 3.25%. Multiply by 330k by 2 years = 9k. I will take that bet any day of the week.

See.... I did get the spread right... so you have 5 years at the 1.875%.... is there a max increase per year after that

I would agree that big of spread would make someone think twice if they had some limits on increases or be able to pay it down if the rates shot up....


The spreads today and the probable rate increases soon would beg that it is not the best decision....
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Old 09-17-2015, 07:02 PM   #39
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See.... I did get the spread right... so you have 5 years at the 1.875%.... is there a max increase per year after that
After five years, the most it can increase by is 2% per year. The minimum it will ever be is 2.25% and the max is 6.875%. The reset formula is 1 year libor + 2.25% so if it reset today it would be 3.1%. That's still less than the 3.25% for 30 years I could've locked in up front or the 4.0% I'd pay on a 30 year fixed note today.

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I would agree that big of spread would make someone think twice if they had some limits on increases or be able to pay it down if the rates shot up....
Yep, we'd pay it down if it shot up. Or we might have already moved, who knows. But I do know that I'll have saved $22,500 in interest over the first five years.

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The spreads today and the probable rate increases soon would beg that it is not the best decision....
I agree the fixed/floating spreads are not as favorable today, but people have been saying "interest rates will shoot up any second now!" since 2008. I still believe that a 30 year fixed rate has people paying for rate insurance the majority of them don't need, either because they move, or they refinance.
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Old 10-01-2015, 12:54 AM   #40
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Thanks everyone for all the comments, and sorry for the delay in response, I was out of the country for a bit. -- I'm looking through all of them.

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Joe C,

How long do you think you'll be in the house? All the arguing about ARM or fixed rate is pointless without the answer to that question. Your plans might change, but what do you think today?
You are correct, it would all depend upon our job situation, but I see it as long term living (at least 12 years). It's a very family friendly neighborhood with a good university satellite campus nearby.

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You don't say where you live, but where are you looking to buy a $300K house? It'd be a dump in Toronto, but in Atlanta it'd be a 4,000 square foot house in a beautiful swim tennis neighborhood.

I'm with Suze Orman about housing and living in general: Live below your means. If you can afford a $300k house, buy a $200K house. If you can afford a new BMW, buy a 2 year old BMW or a used Honda Accord and keep it until it dies. Fund 401K's and Roth IRA's to the max. Take the extra and get the house paid off. Then you can seriously save.
It's in the metro Seattle area.
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