Question by nite a: mortgage refinancing through 5:1 ARM program?
Guys, I have a VA mortgage for 5% and now thinking about refinancing through my bank(Wells fargo) under the 5:1 Arms program for 3.25% for 5 years and thereafter 1% increase every year.We are selling this home within next 5 years and thats why we are doing this.So far sounds like a good deal to me. Currently my payment is $ 1864/month which will come down to $ 1550/month.(save around $ 300/month). The closing cost is only $ 2471 after some credits from the bank. I will break even the closing cost in 8 months and savings for $ 300.month after that.Good deal, right???
But I want to know whats the catch??? how do the bank benefits from giving me this offer?
Currently I owe $ 271,000 on my loan and after refinancing , it goes up to $ 275, 550.
these are the figures. could someone explain it to me as my consultant is not available on weekend.
1. Refinance —$ 271,085
2. Est. prepadi items – $ $ 1677
3. Est closing cost – $ 2471
4. VA Funding fee – $ 1370
5. Total – $ 276, 603
6. Other credits(bank credits funding fee) – $ 1370
7.Loan amount (excluding PMI,MIP, Funding fee financed) -$ 274000
8.PMI,MIP,Fundinf fee – $ 1350
Total loan amount – $ 275,350
I didnt get the item # 7.
where does 274,000 comes from?
What is included in estimated prepaid items?
Answer by Lisa L
First off I am available to my clients weekends & nights. Any good LO is.
They are putting your closing costs back into your loan. That is why you loan amount is higher. Not sure how much they are paying because what you have mentioned seems about right. How they figured this is your base loan amount is 274000 & your VA FF on top of it comes to 275350 since it is financed.
Prepaid items set up your escrow account. You will get back what is in your current account. That is taxes & insurance. You will also skip making a payment for one month so why don’t you go to closing with $ 1864 & lower your loan amount…or pay the FF in cash & don’t put it in your loan.
Don’t you worry about the bank benefiting. They wouldn’t be doing it if they weren’t.
Know better? Leave your own answer in the comments!
Sounds good…except the closing cost seems high. Check elsewhere as some banks will do it for zero closing costs.