mortgage rates

Email me your scenario and I can get you rates. sunny_hong@countrywide.com
30 year fixed is at about 5.75% today. Credit matters and so much your loan to value. For jumbos, most are getting into ARMs.

shong i will email you know as i have a few questions

I locked into a 5/1 Jumbo yesterday for $1mm at 5.75% IO. Reasonable 700 credit but I'm not a citizen which doesn't help.

Citizenship is irrelevant. As long as you have a valid visa whether you are a permanent or non-permanent resident alien you will get the same rates as a US Citizen. Foreign Nationals are different.
5.75% I/O is pretty good. Today, I can get you 5.625% on 5/1 I/O. Or 5.25 paying 1 point. sunny_hong@countrywide.com

"For jumbos, most are getting into ARMs."

That's really dumb. Buying an apartment that you can't afford unless you take it out at a lower short-term interest rate, praying to god that the rate doesn't go up in 3 or 5 or 7 years, so you can't afford it any more. Transferring all the interest-rate risk onto you.

Wait! I've heard that's already happening!

Too bad you can't buy a hedge against future interest rates increases, like any smart money manager would do.

An ARM would be even more attractive if you bought an apartment with a 421A property tax abatement, too. That way, in 10 years, not only would your interest rate reset to an unknown value, but you'd be stuck paying property tax that you have no idea how much it will be.

Then, let's see: you're not a permanent resident so you buy here thinking - what? - you're going to flip it in a few years once you go back home? And if prices go down lock in the loss? Or if you can't sell it, do what? Rent it out for less than it costs you to keep it?

These seem like wise financial moves for me. My advice is not to drink the Kool-Aid.

:) stevejhx - I have no probelm agreeing with you on this one. you gave me a good laugh today,

Thanks, lobo. I enjoyed writing it on an otherwise boring work day.

steve, ARM's are not dumb. You are dumb for saying that (and you are not dumb). Answer me this steve, what is the risk differential in a 30yr fixed rate vs. a 7 year ARM if planning on staying in a place less than 7 years?

Steve, this is mortgage 101 stuff man, I can't believe you are seriously arguing this. Do you have a 30 yr fixed on your place on Long Island? Did you on your places in Miami?

Unfortunately, lots of people can't come to grips with the fact that 30 year fixed jumbo rates are high. Although it is still historically low. So, they refuse to give in and rather take ARMs at lower rates. Some have short term plans and it may or may nto make sense for them. But I was just stating the facts and many are still getting into ARMs on Jumbos.

JuiceMan, you hit the head right on the nail: if you plan to stay someplace for 7 years, a 7-year ARM is perfect. As long as you finance it for the period of time you plan to live there, it's fine.

I actually have a 5-1 ARM on my place on Long Island, but I wasn't planning to stay in it for more than 5 years (that may change) and I can pay off the full principal amount with a check. No risk.

In Miami I had 30-year fixed. My studio I had planned to rent out long-term but changed my mind; the other property I had a 30-year fixed but wound up flipping it (thankfully) though that wasn't why I bought it. I just hated Miami.

JuiceMan, as long as your note is for the same period of time you plan to hold it, it's fine. But that's not what people were talking about, or what shong was trying to sell.

Okay, so ARM's aren't dumb are they?

Second question, what is the risk differential for 30yr fixed vs. a 7 yr ARM if you plan to stay longer than 7 years? Wouldn't the probability of rates being higher be close to the probability of rates being lower (generally speaking of course, it would somewhat depend on the rate)?

So why are ARM’s so risky steve.

Also, please stop saying this - "and I can pay off the full principal amount with a check". ARM's have nothing to do with being able to pay off the principal amount at the end of the ARM period. If you want to say people need to be able to pay the maximum rate reset, which (subprime aside) is not much, that is fine.

Why are you so over dramatic steve? I don’t get it. This is simple stuff.

any suggestion on 1.4m 7yr arm. Will be putting down 45%.

HCJ

JuiceMan, I'm a drama queen, what can I say? ;0

For the 7-year ARM's risk differential, it depends on the base interest rate & the maximum reset & maximum annual reset. I don't think there is a single answer to that, except for caveat emptor: know the details of your note. In my case, were my mortgage to reset today, being pegged to the Fed fund rate, it would go down. Not all mortgages are like that.

ARM's are risky for instance: say you have a 5-year rate of 5%, maximum reset 6% above base, maximum yearly reset 2%. So it can reset to 7.0% in year 6, 9% in year 7, 11% in year 8. Well, for a $1 million mortgage, 5% interest rate = $5,368.22 monthly payment; 11% interest rate = $9,523.23 monthly payment.

Gee, that sounds risky to me if you can only afford the $5,368.22 payment. Hence new regulations, hence "I can pay off the full principal amount with a check": I don't have a risk of ever having to pay $9,523.23 because I can pay off the mortgage (and, as a result, could afford that payment anyway).

Here's a good article about it:

http://www.marketwatch.com/news/story/mortgage-reset-tsunami-could-end/story.aspx?guid=%7BECEE333A-22A2-4ECD-8C69-5ED431190A9E%7D

Here's an example of a 5-year ARM from eloan:

interest rate 8.250%
points 0.887%
APR 6.046%

Here are the details of the loan:

This is a combination fixed/adjustable rate product. The start rate of 8.250% is fixed for the first 60 month(s) of the loan's 30-year term.

At the end of the 60 month(s), the rate will adjust to the lower of:
1. The index plus the margin of 2.750%,
2. The previous rate plus 5.000%, or
3. The life cap of 13.250%.

Thereafter the product will adjust every 12 month(s) to the lower of:
1. The index plus the margin of 2.750%,
2. The previous rate plus a maximum periodic adjustment of 2.000%, or
3. The life cap of 13.250%.

Without fighting with ccdevi & others about whether better rates are available - they are in some places for some people - look at the details of the loan. You can afford the 8.25% initial interest rate. Can you afford the life cap of 13.25%?

This is a PRIME rate indexed to the 1-year treasury rate, not LIBOR.

Here's a 1-point loan from Chase:

Loan amount $1 million
LTV 80%
Primary residence
Condominium
New York County
LIBOR

Rate = 5.750%

Maximum reset = +5%. So you take out a 5.75% mortgage, and in 5 years you're potentially saddled with a 10.75% mortgage. Is that not a risk?

"This is simple stuff."

Really? Read the fine print.

hirajain - astoria federal. I was quoted today 5.25% on 7/1 ARM and 5.375 for 7/1 ARM IO for a mortgage lager than that, similar down. They will demand full docs but have the best rates out there for jumbo.

hirajain- if astoria federal can do that, its pretty good. If you can't show full income documentation I can get it done at 6.25 on 7/1 and 5.625 on 5/1. sunny_hong@countrywide.com

So you are saying ARM's are risky if you are buying a place you can afford only because of the ARM rate. I am 100% in agreement with that point.

"in 5 years you're potentially saddled with a 10.75% mortgage. Is that not a risk?"

Yes, it is a risk, but you haven't adjusted the risk for the probability of it happening. Nor have you offset it with the probability of your rate going down or the fact that you can refinance at some point during the loan. Bottom line is, for someone with good credit that can afford the property, there is next to no risk at all of an ARM. You know this, otherwise you wouldn’t have one yourself.

So please steve. If you want to say ARM’s are dumb for the reason at the beginning of this post, cool by me. Otherwise, ARM’s make a ton of sense.

This is really simple stuff.

shong-i know different banks/lenders have different definition of full documents--credit of 800, two year tax returns, bank and investment statements---do these documents suffice.

superquant--do have the name of a contact at astoria?

hirajain- are you self employed? If not, you would be required to provide W-2s and paystubs. As long as your income and assets are enough (not exceeding 50% debt to income ratio) then it would be considered full doc. What is your closing time frame? is it new construction? Generally, astoria is pretty slow so it depends on what your needs are. email me for any specific questions.

Steve, what the hell is wrong with you.
You can always refinance before your ARM resets. The rate may go down or go up, 50/50.
Why should you pay a premium when some of us will not keep the property for more than 5-7 years?

JuiceMan: "you haven't adjusted the risk for the probability of it happening."

I have no idea what the probability of that happening is. Look at the 1980's, with 25% interest rates. It can happen. The risk is not reliably quantifiable.

"So you are saying ARM's are risky if you are buying a place you can afford only because of the ARM rate. I am 100% in agreement with that point."

That's what I'm saying, that's why I said I have an ARM but there is no risk. Indeed, if I were to finance the place on my margin interest rate from Fidelity, it would cost me less. But I don't need to: I can pay it outright.

ba294, "You can always refinance before your ARM resets."

Really? More bullsh*t. You can only refinance if you have 20% to 30% equity. If you took out a 10% down mortgage, your property has fallen 15%, YOU CANNOT REFINANCE without putting down 25% to 35% of the value of the property.

Call a bank. Ask around. Read a thread or two. You're talking BS.

shong, stop trying to sell bullsh*t loans. Soon you will be regulated by BofA, where I used to work & who own my mortgage. I had a problem with them, sent a letter to the chairman, got a call from the chairman's office and they had escalated the problem all the way to the regional executive vice president. You have NO IDEA what's about to happen to countrywide.

yea okay buddy...

shong, been there, guy. Worked there. Was an auditor there. Saw the worst in the 80's.

You have NO CLUE what's about to happen.

None.

Commercial banks have no appetite for risk. It's a very simple business: take in cheap deposits, lend out in expensive loans. Take a cut. One bad loan can wipe out the profit on 100 good loans. Just a fact, do the math. Nobody nowadays seems to understand what a 5% foreclosure rate means: it means negative profits. No bank can withstanding nonperformings of more than 1% for long. Just a fact.

You're being taken over as a distribution and servicing platform. Nothing else. Countrywide's loans are valued at $0 in the takeover. Do the math. You're a salesman. They don't want salesmen. They want relationships with good customers. An entirely different model.

Watch Countrywide branches be turned into BofA branches, giving them a 50-state footprint. Remember me when you're collecting unemployment.

Now we are going back to the 80's with 25% interest rates! Why do I bother with your nonsense!

Thanks for the entertainment steve. Have a good night.

JuiceMan, don't take me out of context. I said it was possible, I said I don't know.

Do you?

ARM fans. You can't have it both ways. Manhattan is different from the rest of the country and people did not take out the exotic products to support the Manhattan price increase and get an ARM so you can buy now.

If people can use ARMS in Manhattan to any extent it is safe that at least some have done so unwisely. They can't refinance for certain if no one will lend them the money. Whether it is b/c of a change in their job situation, increase in interest rates which reduce affordability, fall in the apartment's market value or bank don't have any money or won't lend the money they have.

What I am saying is an ARM is not without its risks.

Refinancing is not a certainty.

"JuiceMan, don't take me out of context"

Frustrating to be taken out of context huh? Maybe you shouldn't do it to others as often as you do?

In answer to your question, no, but I'm more confident it will be closer to 7% than 25%. You are as well or you wouldn't have one.

Steve, Majority of NYC puts down 20%. Many can refinance with 10% down. get a clue

Steve,
You are generalizing the entire population as being 10% down with degrading property value faster than a piece of rock. You also seem to believe that people who takes adv of tax abatement cannot afford the amount when it gradually increases. Yes there are IO loans with 10% down with 20%+ down in value with 421A abatement, but how common are they in NYC?

Thanks old man.

wow, you typed a whole lot of words in this thread and I'm not sure you made one truthful material point, you contradict yourself from thread to thread, even post to post. There really is no point.

Steve,

I laughed so hard at your plea not be taken out of context given your wild speculation about my circumstance.

For the record, I am putting 25% down but could have put 75% down. I haven't because the incremental funds are locked up in longer term investments yielding more than 5.75% and the 1st million of mortgage is a no-brainer given this country's silly tax deductibility rules.

Looking longer term, I fully intend to be able to afford to pay off the full mortgage in 5 years and to be a citizen. Where exactly is the flaw in opting for 5/1 IO ARM now given that I would prefer to own rather than rent and this is somewhere to live and not just an investment?

It would be unfair for me not to respond without at least one sarcastic comment based on wild assumptions about your financial position given you so kindly made the first effort. Will you still living in your grandmother's rent controlled studio wishing that you had taken the plunge and moved out 15 years ago and made some capital gains? Somehow I think my baseless comments may be closer to the mark than yours about mine.

Enjoy!

ba294, first: back this up with statistics: "Majority of NYC puts down 20%. Many can refinance with 10% down."

What's your source?

Get a clue: haven't you read the news? Banks are now requiring 20% to 30% equity for refinancing. If your property has 0 or negative equity, they're not going to let you refinance, because you'd be refinancing for more than the security. Get a clue, or back up what you're saying with verifiable sources.

ccdevi, I haven't contradicted myself even once. On another thread, I told you why I thought property values would go down, and why. You said it was BS - I'm still waiting for your theory as to why.

Steve,
If you have a zero or neg equity, it is obvious that refiniancing is not an option. Chase, BofA are still offering 10% equity refinancing as of TODAY. They are still writing out No Income verification Loans. It looks like you believe what you see on the FOX news, there are still many sources available to help out some struggling borrowers. What source regarding 20% down? you shouldn't be posting here if you can't even get that info on nyc.gov

ba294, I don't watch Fox News.

No doc loans are soon to be a thing of the past. Thankfully.