Are we Getting a good interest rate?

Question

My husband & I are 1st time home buyers. The rate we've been quoted is 7.25%-
We have nothing to put down( 100% financing), our credit is good (705), 40 year loan. Is this a good rate?

We are not opposed to getting a 'not so great loan' and then refinancing when the rates are better. Is this advisable?

Answer 1

I would advise ex-nay on the 40 year loan because it probably only saves you $20 a month and in the long run cost's you much more. Other than that - sounds descent.

Answer 2

NO. SHOP AROUND.

I could easily get you 6.5% on a 40-year term. You'd have mortgage insurance of about .60%, so effectively, 7.1%.

Your rate is acceptable ONLY IF you are getting lender-paid mortgage insurance.

Otherwise, that's not a good offer.

Also, with your scores, you'd easily qualify for an 80/20 or 75/25 that could be as low as 6.125% for the first mortgage, 7.5% for the 2nd mortgage, and no private mortgage insurance.

You should also look up the housing finance agency for your state. First-time buyer programs are out there, if you qualify, which could get you rates under 6.00%.

Your credit means you should not have to take a "not so great" loan. And being that you've never refinanced before, you probably don't realize it costs $3000-6000 or more to refinance. So just get a good loan now and skip that part.

Answer 3

HI,

With you credit score at 705 I can get you a much better interest rate and if you want a shorter term than the 40 year, I can get you that as well. The rate they are quoting you is way to high, I can work with you and get you an 80/20 if you don't have money to put down and avoid paying mortgage insurance which is useless to you. That is an insurance you pay so that the bank is covered in case you default on the loan so it doesn't benefit you in anyway. I can have you in your new property within 2 weeks with a smooth transaction.I can help you. Email me at [e-mail].
Thanks,
Maribelle

Answer 4

The rate is high. The length of mortgage is way too long. Find out what would be your monthly mortgage payments and figure that all of the payments will be interest for several years.
I think you should consider talking to a financial advisor or credit counselor. If you don't have money for a down payment and cannot get a conventional mortgage, you should not buy anything. When you can afford to buy, don't take a mortgage longer than 15 years. The interest you save over a 30 year mortgage is huge.

Answer 5

It just depends on how long your locked in to the interest rate quoted. If you are locked in for the next 40 yrs at 7.25% (which is not all that bad) and all of a sudden interest rates go down to let's say 4%, you will not be able to take advantage of this rate since your locked in to the other interest rate for the duration of the mtge (40 yrs.). The only way to take advantage of the lower interest rate is to buy out the remaining contract but you'll be paying the entire interest quoted for forty years (minus the years paid into) making it unwise to break the contract (you'll end up paying a lot more and will be farther behind and not ahead).
The same goes with deciding on selling and buying another house (either for space or job relocation or job loss or even divorce), let's say 20 yrs from now. If your locked in for the next forty years and opt to find another home within 20 yrs, you are still going to have to pay the entire interest for the other half of the Mtge (20 yrs worth of interest upon buy out). It becomes quite pricey so be sure you are going to stay at this place for the next 40 yrs or consider locking in for a smaller time frame 5-10yrs. max., your interest may be a lot higher but it's peace of mind knowing that you won't have to buy out too many years.
The future is unknown and the possibility of moving is highly likely. Never sign into a 40 yr mortgage regardless of the great rate. We have had to buy out twice due to relocating and it cost us a bundle, be smart and know exactly what your getting yourself into. Be sure your in it for the long haul or it will cost you a bundle later on when you need the money the most.

Answer 6

Most States have special financing programs for 1st time buyers that have below market interst rates, and no out of pocket closing costs. Your rate seems very high. Call a couple local banks and ask about first time home buyer programs. In Washington State where I am at, our first time home buyer programs are at 5.5% on a 30 year fixed with no out of pocket closing costs, and zero down. Even if you have some minor credit issues, an FHA loan is at 6.25% and you can still go zero down using a Neighborhoog Gold, HART, or "Buyers Fund" program.

Answer 7

My parents got a 6.375 on a non owner occupied home for a 30 year mortgage. just like the guy above me said. If you can't really afford the payments, then don't buy. a thirty year will give you a lower rate and the payment really is a difference of 20-30 dollars. so make sure you dont run your credit but keep shopping. if you are in california call me at 714-705-1600 my name is frank. thank you

Answer 8

I'd question this deal. A 40 year mortgage is a long, long time, and I don't think it saves you that much on the payment. One hundred percent financing suggests to me that you're on the edge of not being able to afford the house, or you'd put something down. In my book, this is definitely a not so great loan. If you can keep up the payments, great. If you're concerned about that, maybe you're trying to buy too much house.

Answer 9

Interest rate is more dependent on the type of mortgage and your credit score than your income. Also under consideration will be the amount of money you put down. It's harder to get a great interest rate if you put less down, unless it's an FHA loan.

Answer 10

Credit is not bad. The 40-year product may be causing you to have a higher interest rate though. You'd lower the APR by going 30-year.

Good luck!