No Payment for 2 Months After Purchasing a Home or Refinancing

There are a number of ways that you can structure or plan a closing so that you can maximize your specific needs when financing a home today. Assuming you have a choice on your closing day, here are three typical options.
Option number 1: The typical and assumed closing at the end of the month...
If you have bought a home lately, or refinanced, you might have heard someone in the transaction sphere of influence mention the large volume of closings that come together at the end of ever month. The idea is that if you close at the end of the month, you pay less prepaid interest. What that means is this; If you close on your home on say April the 30Th, the last day of the month, then you only borrowed money for your new loan for one day in April. They do not tack that one day on to the first payment of your loan, so you pay that up front at closing. You can see how if you closed at the first of the month how you would be required to come out pocket up front/at closing by much more money. In this scenario, you close on April 30Th and pay one day of interest up front at closing, you have no payment at all in May, and your first payment is due June 1st but isn't counted negatively in any way until June 15Th. That is a 45 day no payment closing, and it works for refinancing and purchases

Option number 2: Close on your home loan the 1st day of the month...May 1st.
There is 31 days in May, and since you'll have funds loaned to you all 31 days of that month with no mortgage payment, you'll pay 31 days worth of interest at closing. AH, but you don't have a payment in June at all. Your first payment is due July 1st and it is not late until July 15Th. That is two and a half months, or 75 days with no mortgage payment.

Option number 3: Close your home on the 1st day of the month with a "short pay"...May 1st
In a short pay, you do it all opposite of what the above options provide. You pay interest in days backward, and you make your first payment the very first month coming up. If you close on May 1st, you pay 1 day of interest up front, and your first payment is due June 1st and not late until June the 15Th. In this scenario, you don't have a "mortgage payment" in May, so you still ultimately get a month with no mortgage.

Here are the calculations for closing scenarios for options 1-3 Using a new loan amount of $270,000 and a new interest rate of 4.875%. Please take not that two of the closings are on the same day, and the other one is 1 day before the other:
Option #1...Close April 30Th;1 day of interest = $36.56 paid at time of closing
No payment due until June 1st of $1,429 a month (Principle and interest on $270k at 4.875%)
31 days of May you have no payment...
Pay all other closing costs PLUS $36.56 AND then come up with 1st payment of $1,429 in June. From day of closing until June first you spend a total of = $1,465 and then another mortgage payment of $1,429 July 1st
Money spent total from closing to July first = $2,894

Option #2...Close May 1st 31 days of interest = $1,096 paid at time of closing
No payment until July 1st of $1,429 a month (Principle and interest on $270k at 4.875%)
31 days of May you have no payment, 30 days of June you have no payment...
Pay all other closing costs PLUS $1,096 AND then come up with 1st payment of $1,429 in July. From day of closing until June first you spend a total of = $1,465
Money spent total from closing to July first = $2,525


Option #3...Close May 1st using a "short pay"
1 day of interest = $36.56 paid at time of closing
Payment due June 1st of $1,429 a month (Principle and interest on $270k at 4.875%)
30 days of May no payment...
Pay all other closing costs PLUS $36.56 AND then come up with 1st payment of $1,429 in June. From day of closing until June first you spend a total of = $1,465
Money spent total from closing to July first = $2,894

The number 2 option here appears to save you $369 out of pocket in your closing scenarios. I know some of you are thinking, "that's it! I'm going that route, and there is no discussion". Others are taking a little longer look at it and seeing how the options for cash in the pocket for a little longer in the front might help here, but "yada yada yada". Good! How ever you feel the options help you, that is what matters. Remember though, the majority of loans close at the end of the month and lender offices are busy busy busy towards the end of the month with such a work load, so consider closing at a different point in the month to avoid getting stuck in the traffic...you might have a hiccup in the process and when there is traffic, the slower you will be able to "get rid of you hiccup".

Employment Reports Hoping to Drop Mortgage Rates

What are the hopes for the short term in interest rates for your hopes in a more successful refinance?
In a daily report yesterday, Moving.com said, "Current forecasts call for a 0.3% increase in the unemployment rate, pushing it to 7.0%. Analysts are expecting to see a drop in payrolls in the neighborhood of 500,000 with earnings rising 0.2%. If we see weaker than expected results, mortgage rates should improve tomorrow. However, stronger than expected readings will likely push mortgage rates higher." This would mean that if the reports showed a worse than expected figure, we would see rates possibly fall even lower for the hopes of that next best rate in your refinance or purchase.

How did the employment report turn out today?CNBC report that the U.S. private-sector employers shed 693,000 jobs in December, a private employment service said Wednesday in a report that was far worse than expected and pointed to more ugly news from the government's jobs data due later this week. The drop, much bigger than the revised 476,000 private sector jobs lost in November, is consistent with about a 670,000 fall in December non-farm payrolls, said Joel Prakken, chairman of Macroeconomic Advisers, which jointly develops the private sector employment report with ADP Employer Services. After the ADP report, U.S. Treasury bonds regained some lost ground, the dollar extended its losses against the euro and the yen and U.S. stock futures slid.

What were the results for mortgage rates today or what is to hope for?
Rates came out this morning pretty much unchanged, because typically the changes take half a day or better to have their affect. So we'll either see the affect as a mid day pricing change today, or hopefully Monday.

Daily Mortgage Rate Commentary

Wow, got here today fired up to work and tightened up some "business bolts", and submitted some refinance files, all the while checking on my always reliable Mortgage Interest Commentary Site for advice, and I'm thinking now here at 10:47am, he took off early for New Years. Maybe I should be home with the family...except they have stomach viruses and I better enjoy my coming hours because with a 3 year old and a 1 year old, it's gonna pass it's way to me for sure and only in time will I be on bed rest too. YUCK!
So here is today's commentary, straight from the horse's (Brad's) mouth.
At the time that I looked at our stock market ticker, the DOW was up 140.5 and the NASDAQ was also up 31.39. Typically that would mean that Bonds are probably not as strong at first blush. On the other hand, I would have expected the stock market to be very shaky today with the December Consumer Confidence Index report coming back so poorly. Read it here on Forbes...it's well written and you don't have to be a stock broker to understand it here, so do it. You'll be glad you took the extra 1.5 mintues. The expectations were much worse than expected. Yesterday, Moving.com said, "Current forecasts are calling for a minor increase confidence from November's reading of 44.9. Analysts are expecting tomorrow's release to show a reading of 45.2," but instead of a small rise, it sank to 29.4. Friends, as I continue to read these reports and stay close to the market conditions in hopes to better advise my clients, I become more and more afraid of what our country and it's economy is running into.
Rates worsened a little bit today and the 30 year fixed conventional is sitting at 5.125% today, while the FHA 30 year fixed is at an even 5%.
If you are looking to close on a home loan in 1 week to 60 or even 90 days, DON'T BE GREEDY, lock your loan and be done with it...is my advice. If you have further to wait, make today's mark a note on your calendar to refer back to and if you get .375% better between now and the next 90 days, figure a way out to lock it.