Mortgage/Refi Question?

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We have to refinance our house in April ’08, so I’ve been trying to prepare for that. Got the truck paid off, and plan on having the credit cards and a student loan paid down prior to then so they’ll reflect a minimal balance.

This is our first house, and we had to go with a “subprime” 100% loan with the ARM after 3 years. We have no problems making the payments, and I figure with the interest rates going up, the payment for a fixed rate loan will probably be about the same. So….what I’m asking I guess, what else do I need to do to prepare? I’ve heard different things, like refinancing is much easier, but times are changing. Is there a certain amount of money we need to have in the bank? Like so many months worth of payments? Anything else?

Not sure if this was the right category, didn’t see anything for mortgages/loans, and thanks for your help!
6 month interest prepayment penalty….
Yes to all those questions, so hopefully that’ll help.
We went through a broker, no offense to any of you brokers out there, but he was a sh*t bag lol. We were kind of in a time crunch and had to take what we could get quickly. He tried screwing us by adding extra fees at closing. We told him to basically stick it where the sun don’t shine 🙂 We got a reimbursement check from him…

  1. Reply
    May 1, 2011 at 3:29 am

    A really big factor in refinancing is loan-to-value…how much is the house worth now compared to the amount of mortgage you’re requesting. If the house value on appraisal is still close to 100% of the mortgage amount, probably the best you could do would be an 80% first mortgage and a 20% second mortgage. You do have the three years of making your payments on time in your favor. 🙂

  2. Reply
    May 1, 2011 at 3:55 am

    You may still be in a bad position even in April. You probably have not seen enough appreciation before the falling values to be in an equitable position. You in fact, may not be able to refi at all.

    I’d start with getting an idea what your house is worth, then compare that to what you owe. if you are upside down you need to start preparing to make those payments if you intend on keeping the house. If you are lucky and have any equity at all, I’d say the most important thing to do is keep working on your credit rating. Get both of your scores over 720, don’t change jobs, pay down debt, don’t close anything and pray! As far as assets, put away any loose change now. Seasoned bank accounts do matter so put your money in an account and leave it there.

    Rates are really low now (not just a saying, they really are) and getting lower in the next week! if you can refi now, DO IT!

    Edit: There is NOTHING wrong with brokers … just BAD brokers. And any broker that tells you to go get a FHA loan yourself instead of facilitating it for you is a … … … well I can’t say!

    LOL, What a JOKE!

  3. Reply
    May 1, 2011 at 4:27 am

    You are making some good moves already. Now let me ask you a couple of questions.

    1. Can you show enough income to support the loan?

    2. Do you have a stable job history for the past two-years?

    3. Have you made all of your mortgage payments on-time for the past 12-months?

    Answer yes to these three questions and you’ve got it made. Find a reputable lender, (not a broker or banker) and ask them if the are a HUD Approved FHA Lender. When I say “Lender” I mean ask them if they actually fund the loan themselves.

    I don’t have anything against brokers, quite the contrary, I’m one myself. You just don’t want to use us for an FHA loan. Sure I can do it, but it will take me 6-weeks as opposed to the direct lender who can do it in 2.

    While it is not necessary to have money in the bank I strongly advise you to have at least two-months of mortgage payments available. The more money you have saves the stronger your chance of getting a FAST approval.

    On a final note, Why are you waiting until April? If you don’t have a prepay make a move NOW! You should be able to get a 30-year, Fixed Rate FHA Loan at 6.5% paying no more than 2 points.

    Good luck – So far you are doing everything right!

    PS. As far as Loan-to-Value is concerned, if you are not taking out any cash and have made no late payments FHA will go to 97.75% – I think you will be ok

  4. Reply
    May 1, 2011 at 4:51 am

    I believe you are on the right track the less your debt to income ratio is the better it is for you. What I have seen as ideal debt to income ratio is anything below 45%. Anything above that rate is considered high risk which means higher interest rates for the borrower.

    When you’re refinancing they will ask for verfication of income and employment. You provide this though paycheck stubs, also to verify assets they will usually ask for 2 months of bank statements or they will need to provide a verfication of deposit. Verfication of employment for at least two years is the standard. The lender or broker does the VOE.
    If you’re self-employed you need to provide documentation of being in the same business for at least 2 years. You would get a CPA letter or copy of business license.
    Make sure when you refinance you do a fix rate the subprime ARMS are hitting borrowers the worst and they usually end up in foreclosure be very careful. I’ve heard horrible stories about Countrywide, and Argent Mortgage which was just recently bought by Citigroup.

    Oh another thing you will need to get the property appraised again you should shop around for that appraisers tend to overcharge their customers.

    Good Luck!

  5. Reply
    May 1, 2011 at 5:22 am

    I don’t think you need to have any money in the bank to do that. I did this last year…my credit was not so good and I had a lot of credit cards up to the limit. All I needed was my bank statements showing income and that’s about it. It was really easy…too easy. It took about a month and I got a rate of 7.9 because my credit wasn’t so good.

    I wish I could help you more…this is my first mortgage. Don’t stress. Find someone you trust to help you. I used a mortgage broker recommended by someone at work.

    Good luck! Cami

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