Colli Real Estate

Is a higher rate(6.5 from current 6.375) decent for cash out on a home refi?

Credit score 719(middle score), 2pts(yuk), PMI(double Yuk), Closing costs 6% ..somewhere around $7,200! Yikes…FHA loan, BK7 discharged 2.5 years ago. Income $50,200. House app(7-02-08) at $188,400. Remaining bal on current mortgage $71,200. New loan will payoff car $15,300 and SL $4,100. Remaining cash out = $61,220.

Seems a little high, but FHA is always a little higher b/c FHA doesn’t allow many fees, so they make it up in the rate. And you should probably not be basing your decision simply on your old rate and your new rate. Rates go up and down all the time, so what you got before is most certainly not what you will be offered today, and maybe not what you will be offered next week. There are many reasons to refinance, including lowering the rate, paying off bills, paying for home improvments, etc.

So I know this isn’t what you asked, but I cannot help myself. Why are you doing this cash out? Do you really need that $61,220 for something? And if so, why are you also paying off your car and student loan. If you didn’t already re-finance your student loan with a private lender, then you’re probably best keeping it as is, because there are rules as to how high it can go. I remember when I paid off mine (way back when) it was at 4.125%, and rates were higher then! And by refinancing the car, you are taking a 5 year loan and spreading it out over 30 years. It may be a lower rate, but it will most likely cost you more over the long run in the additional interest payments (25 yrs worth.) Same goes for the SL. Maybe you are paying them off so you can qualify for the loan by reducing your debt to income ratio? But if you don’t pay them off, then you can get your LTV below 80% and eliminate the MI. You’ll also reduce your closing costs by $388 by reducing the amt of money that those 2 points is calculated on. You also slightly reduce the 1.5% upfront MI premium by $291 (if you didn’t have an FHA loan before.) Also, this 1.5% is going up on 7/14/08 if you are less credit-worthy, and down if your LTV is below 90%. So anyway, in not answering your question, I would recommend not rolling your Car and SL into this loan, and keeping your LTV ratio below 80% to eliminate MI. It’s not just the rate, but the total costs that matter.

As far as the rate, I would have to do some research and get back to you, but some lenders do have different tiers of FHA, while others have only one rate, equivalent to the better rate of the tier lenders. It seems like with your credit score, you would qualify for the best rate, however, you do have the recent BK. Also, the one piece of information you left out is your new monthly payment which includes taxes and insurance, as well as your total monthly debt, which I’m assuming would be the same as your monthly mortgage payment after you refinance your car and SL. This would be used to calculate your debt to income ratios to see if you would fit well within the FHA guidelines, although I suspect that your problem is the BK.

3/25/09 Mortgage Rates, FHA Rates, Loan Rates, Rates

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