7.85% Rate 2 mths after discharge

[HHM]

Who cares? 7.85% is not horrible, interest rates are not going to be going much higher in the near/short term, and you can refinance after a year or two. The risk/reward equation is in your favor for the time being.

The problem is, the risk reward is not in their favor? You're correct, 7.85% is not horrible, it is NOT market, but it's not horrible either. The problem is, the closing costs of this deal, plus a refi 2 years down the road (note, almost all 2/28 ARMS come with prepayment penalties for the first 2 years of the loan) will cost you more money than simply waiting. Also, there is more risk than usual in that there still is no clear direction in the real estate market, so if their appraisal is not spot on for this first deal, it could screw them in two years when they try to refi.

We don't know what the LTV is here, but if it 100%, I can almost guarantee, this person will have a hard time refinancing in 2 years becuase odds are the current appraisal is inflated, (to allow the bank to finance closing costs and intital escrow), and in 2 years, you barely pay down any principal, and we simply are not seeing any short term appreciation in home values yet.

[invest1choice]

Example our 2 year arm in 2004 just adjusted from 7.5 to 10.5 and again it will go up to around 13.5 in May 07. We Wish we would have chose another route now we owe est 120,000 plus closing fees about 4000.00 .. Our home should appraise 138,000 est a apprasier updated me on this a couple weeks ago.. I was going by houses selling in my area 120,000 -130,000.. My problem is with the new closing costs our LTV is too high from what I am told to get a decent rate and not go into another 3 yr arm which by the way they can only do to get my rate to 8.25% total payment 1031.00 a month. which I chose not to do and we are currently selling and if it does not sell my May they we have to refinance into another arm by no choice .. We are in a no win situation... I would be careful with arms ... Hope this helps

[chucko]

I also have a 2/28 loan. I have a 1st and 2nd. 1st is for about $140k @7.5%, the 2nd is for ~$35k @10.5%. I was discharged BK almost exactly a year ago. I closed on my house in Aug of 2006, and there is a pre-payment penalty if I refi within 2 years. By Aug 2008, my BK will be discharged 2.5 years, I will have been in the same job for 2 years, and my credit should be significantly better. I have gotten some credit cards and used them lightly and very responsibly to build decent credit. I am still fighting a couple incorrect items on my credit report, which I would guess would put me near or at 700 across the board when they get resolved and my mortgage and credit cards have a little more history.

I also live in Boise, ID, one of the top strongest real estate markets in the country, so my appreciation should be decent. I'm just hoping it's 20% so I can refi into one loan.

Regardless, I am socking money away like CRAZY in case something doesn't go my way in Aug 2008.