That is one brave buyer you have, if they are planning to purchase now and sell within 3 years – or they must be getting an incredible price on the property. I have a tough time seeing the finances work out well for that considering closing costs, taxes, and home prices quite possibly being flat over that time period (unless it is a fixer, and they plan to fix it).

Gene

Folks, if you are in the middle of a refi, floating, call your LO, and monitor the situation!!

Should you lock now?

As always, consult your mortgage professional…

Thanks for the midweek post of rates.

It has been a gut wrenching week to say the least

These days, unless we have explicit authority to lock on a moments notice without prior consultation, it’s hard to nail these down, as rate sheet changes begin filling our inboxes (IF we get notice).

FHA rates seemed to be a bit less volatile (are you seeing that, too), and ARM pushers touted their “unchanged” rates.

Regarding ARMs, I’m not so sure I could recommend them…many people have/had plans to sell properties that may not be as liquid as once thought, both now, and in the future. Still, like Rhonda says, we should be presenting all available options to clients, and letting them make informed decisions.

While there are plenty of opinions, I’m pretty confident that interest rates in 5 yrs are going to be considerably higher, both for fixed rates and for underlying indexes on ARMS. I don’t know if they will be at 12%, depends on whether the gov is still trying to hold them lower. Eventually, the market floods in, and trumps govt policy/spending.

Regarding Eleua 50% not closing (#2)? I think that is about the average projection for normal fallout, in a refi heavy market. Purchases usually fare much better, but these days, with close to 50% of purchases being short sales and foreclosures, I’m sure the fallout ratio is higher on those as well (we have to wait for bank approval, if it ever arrives).

A lot of LOs and lenders operate on a “throw it on the wall and see if it sticks” methodology (for refis). I don’t operate that way, and I’m sure Rhonda doesn’t either. No LO that truly cares about their clients interests would, but it can make sense economically for an LO/lender to operate that way.

I predict we’ll see an increase in fallout ratios in the next few months, as HVCC begins to show it’s effects, in both lower prop values, and difficulty in moving appraisals around as needed.

BTW, Fallout ratio=Closed loans/completed applications.

Rhonda, you may want to insert link to one of your HVCC threads, so folks have a clue about HVCC.

Good stuff. The one thing that I like to add when discussing an ARM with a borrower is to ask them this question:

If interest rates were at 12.0% when you are planning on refinancing, selling, cashing in investments and paying off this mortgage, would you still sell, refinance, etc?

Buyers need to realize that they might find themselves in a situation where they are “stuck” with that mortgage and then analyze whether the rate differential is worth it.

Just my 2 cents worth.

Tom

Jillayne, now that rates for ARMs are so attractive, I’ve started posting them on my Friday Rates…if a borrower is only planning on retaining the mortgage for a short period of time, as Cathy says, it could make sense. Mortgage professionals show and inform clients the possible options based on their circumstances and allow the consumer to (hopefully) make an educated choice.

Cathy, would an ARM be a risky bet if rates are headed upwards?