There are risks with an ARM. The 5/1 is fixed for 5 years, and has a 1% limit on how much the rate can increase each time once the rate becomes adjustable and can only adjust one time each year, but you never know what rates are going to do. My advice is to make your decision based upon a) how much you will save over the five year period and b) the worst possible scenario for rate increases after that. Do not count on a new streamline refinance if you decide to go with the ARM and don’t count on rates going down any further. This way, you can live with the worst case and be thrilled if rates go down further and you get the best case.

In your case you would have at least 5 years at the 4.25% followed by an increase to 5.25% the next year and then 6.25% the next. You could potentially save a lot of money with that lower rate. This is a particularly good plan if you plan to sell and move before 6 years.

It is accepted under the guidelines at this time to do another streamline refinance at any time, however take a look at the costs for this one. Your next streamline will cost just as much and possibly be more difficult to complete. When you do not go above your original loan amount, no appraisal is required. Usually, on a 2nd streamline refinance done relatively close to the the first one, the amount needed for closing costs and prepaids won’t fit within the guidelines and a new appraisal is required. If the market is down in your area when the time comes for this appraisal, your next streamline refi may be shot down quickly.

Carl Pruitt
http://FHALoanAdvice.com

Your broker may not have been offering you the par rate and so would have lost all their profit on the loan if you decided to buy down the rate. This might have been behind the effort to dissuade you from buying down the rate. On the other hand, while 5.25% might have been paying the broker 1% in yield spread premium a week ago, it would not be paying that today.

Bottom line, though, is that you should be getting a comparison of the exact costs on your specific loan in order to make this decision.

At first I thought it was a good idea to streamline but it seems to me that even though it would be easy to refinance I would have to start all over plus still pay closing costs which could be equivalent to how much we would pay for the point to lower our interest rate now. Am I missing something? Any advice?

Thank you,

Sandra

You can certainly complain to the state authorities about the misleading information, but I imagine it will cause no more than a reprimand since I know there were documents in the loan closing package that let you know how the refund is issued. These disclosures are included with every FHA loan closing. In addition, since the way it was handled – as a credit against your new UFMIP – is the only way FHA allows it to be done, there are unfortunately no legally recognizable financial damages from the misrepresentation.

However, if you complain to the management of the lender, you may get some help. They usually don’t like for their loan officers to leave a trail of unhappy customers by making such misrepresentations.

First, reported rates are generally only for very vanilla conventional loans under 80% loan to value on regular single family homes. These rates do not reflect the circumstances of a particular loan, such as rate add-ons for manufactured housing for example. They also don’t take into account your particular loan amount, desired level of closing costs, type of loan and various other potential additions to the rate. Government rates in the market tend to be just slightly higher than conventional rates (not always but most often).

Second, these reported rates are always reporting for the past week and not the present. Rates change many times per day based upon the mortgage bond market. For instance, rates were lower last week than they are this week so far. Yet that may or may not be the case by the end of the week. The reported rates will be the rates that the week ended with, even though they may have varied significantly on any day during that week.

The best way to find a good rate is to contact different local lenders in your town. Give the loan officer all the details and let them give you an accurate timely quote rather than relying on the inaccurate and outdated information reported in the news.