Financing in 08873>Question Details

Homeowner, Other/Just Looking in Somerset, NJ

15 years Vs 5/1 arm

Asked by Homeowner, Somerset, NJ Thu Sep 15, 2011

Recently, I was denied loan from GMAC due to 21% of my community members are not paying or late on their condo association fee. According to fannie and freddie mac rules they will only approval mortgage if the the community is only 15 percent delinquent. My broker advices it will be hard to get 15 year loan due to this issue but I could get 5/1 ARM. We are not planing on staying in this property for more them 5 years anyway. do you guys think I should go with 5/1 ARM and save the money for down payment towards new house?

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Yeah, I am with Chad, seems difficult to get mortgage insurance on the condominium project you live in - the 5/1 ARM sounds like it's from a portfolio lender who doesn't abide by Fannie Mae & Freddie Mac guidelines, so perhaps they also self-insure their own loans. Still, at that loan-to-value (90%) it seems pretty difficult to get financing on your situation because of the property. If you have the funds to dispose/pay down your balance anyway, and you will be in the loan long enough to recoup your closing costs in the form of a lower payment, then it's likely worth it. It'll come down to the numbers making sense on paper as well as your comfort level with having an ARM in general (like what if you can't sell in 5 years, would you be able to continue making the payment?). ARM's are a good loan program for those who are financially responsible.
0 votes Thank Flag Link Thu Sep 15, 2011
I would have to pay down 20K on my principle amount to bring down my LTV back to 90% Current Rate is 5.37% 30 years and GMA was locked in at 3.25% for 15 years
0 votes Thank Flag Link Thu Sep 15, 2011
then my best advise is just to stay where you are. If you saved $100 a month getting a lower rate, but it cost you $20,000-$30,000 to pay the loan down it doesnt make sense.

Im am confused though, how you would get a 5/1Arm if there isnt enough equity in the property, and the condo asscoiation fee arent being paid. Every bank at High LTV require the same financaials. Maybe you could help me learn something. lol

Let me know
0 votes Thank Flag Link Thu Sep 15, 2011
nope regular conventional loan.
0 votes Thank Flag Link Thu Sep 15, 2011
Is your Loan an FHA by any chance ?
0 votes Thank Flag Link Thu Sep 15, 2011
well due to homes prices drop. my value came to be 220K and my current balance is 215K. I would have to put down money to bring it down to 90% or less LTV.
0 votes Thank Flag Link Thu Sep 15, 2011
How much equity is in the property ? I have some prgrams that allow you do scensrios like this. I run into these problems all the time

Let me know if I can help
0 votes Thank Flag Link Thu Sep 15, 2011
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