May have goofed

tishtoshnm Zone 6/NMFebruary 27, 2009

We are pursuing a refinance of our house. We were going with the bank that holds our current mortgage because we initially thought that we could do a streamlined refi with no closing costs but it turns out because our first and second give us only 10% equity, we would have to refinance the 2 into 1 and thus start paying PMI. The rates had dropped that day so we went ahead and locked. I have not turned in the completed loan application yet, I planned to get that in by tomorrow.

We ran the numbers today and it became apparent that a VA loan would probably be a better option. The funding fee on it would be a little less than $4,000 where as PMI would be $174. Assuming no great appreciation in value, we would not hit the 80% mark for another 7 years (84 months x $174 =14616). VA saves us over $10,000.

Should I just call the lender and say forget it for now? How can I handle this graciously?

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fandlil

First read whatever you signed very carefully to find out exactly what you have committed to. If you have not obligated yourself legally, go ahead and reverse yourself. Explain your reasons. If he doesn't understand, that's his problem.

    Bookmark   February 27, 2009 at 8:43AM
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dave_donhoff

If they actually locked your funding (and didn't just talk-lock it) without your full package, and without a deposit... they are the fools.

Probably better of ditching them anyway... they're not showing very sharp financial practice.

Luck,
Dave Donhoff
Leverage Planner

    Bookmark   February 27, 2009 at 12:43PM
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tishtoshnm Zone 6/NM

Thank you both. I had called on a day when rates had dropped and we locked that rate in because Iknew that it would be going up (and it has) but I have not signed anything. I was preparing to fill out the full loan application.

Dave, in this market, do you think it is better to go with a VA loan and pay the funding fee or to pay PMI. I know that PMI is tax deductible but I honestly pay very little income taxe at thsi point (more than made up for gasoline tax, sales tax, property tax, etc, etc).

    Bookmark   February 27, 2009 at 2:29PM
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dave_donhoff

Hi tishtoshnm,

Dave, in this market, do you think it is better to go with a VA loan and pay the funding fee or to pay PMI. I know that PMI is tax deductible but I honestly pay very little income taxe at thsi point (more than made up for gasoline tax, sales tax, property tax, etc, etc).

Impossible to give you a financial answer w/o all your details. Tax effects, personal money management and returns on alternative uses of funds will play the determining factor.

Cheers,
Dave Donhoff
Leverage Planner

    Bookmark   February 27, 2009 at 3:33PM
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