Financing in Fort Worth>Question Details

Kristen Spor…, Home Buyer in Fort Worth, TX

Is an interest rate of 4.75% reasonable in the current market?

Asked by Kristen Sports, Fort Worth, TX Wed Mar 30, 2011

We are first time home buyers and have been pre approved for a VA Loan for $180,000 but are going to spend much less than that, around $130,000. Also, Should we do a fixed rate?

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T.E. Sumner’s answer
The interest rate is a big part of the story, but not all of it. As Tamika and Ben mentioned, the APR gives you an indication of the other fees and discount points. Check out those, too, before celebrating.

Fixed rates for rates below 6% are always a good idea. An adjustable rate mortgage at 3% that can change by 1% in 3 years (a 3/1 ARM) will increase your monthly payment by about 33%. That can be a real shocker. If the ARM can max out at 6% in increase (lifetime cap), then your payment will have tripled over the original. Not a good move. The risk of increasing market interest rates should tell you to stay away from ARMs unless the capped rate is below today's fixed rate.
Web Reference: http://www.SumnerRealty.com
0 votes Thank Flag Link Sun Apr 3, 2011
The rate is fine and you are doing the right thing buying less than the approved amount since this will make payments easier to make. Go for a fixed rate, ARMs are just a nightmare and they can strangle even the most stable of borrowers.
1 vote Thank Flag Link Wed Mar 30, 2011
Good Morning Kristen,

Congrats on taking the first step to owning your first home! 4.75% is an VERY GOOD interest rate! When you're looking over your Good Faith Estimate please make sure to view what the APR is, as well. Please let me know if I can be of any assistance. I would be more than happy to assist you on purchasing your first home if you aren't already represented. Please feel free to contact me at anytime!

Make it a Blessed Day!

Tamika Turner Goree
Keller Williams Realty
Cell: (972) 697-1178
Email: tamika.goree@kw.com
Website: http://tamikagoree.kwrealty.com
0 votes Thank Flag Link Thu Mar 31, 2011
Kristen-

It is impossible to say without knowing your credit score and the fees associated with the rate that was provided. It might be a great deal but then again it might not be.

For those that answered that it was a great deal, what if she were being charged 3 points for the 4.75% rate? Still a great deal??
0 votes Thank Flag Link Wed Mar 30, 2011
Hi, Yes 4.75% is a great rate for any type of loan right now, especially one that allows 100% financing like the VA.

Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
GREEN Designated Agent
William Raveis Legends Realty Group
914.406.9023
0 votes Thank Flag Link Wed Mar 30, 2011
Hi, Kristen. 4.75% is a great rate for a VA loan in this current market. But to better answer your question, one must also take into consideration your credit score and history, and what if any allowed VA closing costs are be covered/paid on your behalf by the rate?

Furthermore, since VA loan are also assumable (and only if you may one day wish to sale), 4.75% will be an even better rate as time and interest rates inevitable go by and climb.
0 votes Thank Flag Link Wed Mar 30, 2011
It depends. Is it with or without any discount points? You say you have been pre-approved for a mortgage - if you were to buy a house today, can you apply for the mortgage and lock in the rate today? If the answer is yes, and if you can get it with no discount points, I'd say "hurry up and find a home!" That's great rate!

As for wheterh or not you should get a fixed rate - it depends on how long you anticipate staying in the home. You say you're first-time homebuyers. If you plan on moving sometime in the next say 5 - 7 years, then no, you should not. You should opt instead for a hybrid Adjustable Rate Mortgage such as a 5/1 ARM or a 7/1 ARM. The rates for the initial fixed period (5 years on a 5/1 ARM, 7 years on a 7/1 ARM) will be lower than that of a 30 year fixed rate mortgage.
Web Reference: http://Lew.BestChoice.net
0 votes Thank Flag Link Wed Mar 30, 2011
Good advice below. If you can get 4.75% fixed rate, do it. However, if you think you'll be moving soon (probably not a good idea, just considering the entire market), then--on a mortgage basis only--you could consider an adjustable rate for even less.

Still, if you've be preapproved for $180,000 but only are going to spend around $130,000, then you presumably can afford the fixed rate payment option. And if interest rates rise--as I expect them to--you may end up in a better situation with a fixed rate mortgage.

Hope that helps.
0 votes Thank Flag Link Wed Mar 30, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Go fixed rate for sure and anything under 5% is a great deal.
0 votes Thank Flag Link Wed Mar 30, 2011
4.75% is extremely reasonable in today's market.

My recommendation is to go with a fixed rate but if you want to roll the dice or are pretty sure you might be moving on in about 5 years or so there are some attractive Adjustable Rate Mortgage's with interest rates in the 3s.
0 votes Thank Flag Link Wed Mar 30, 2011
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