Can I payoff my first mortgage with a second mortgage product?

Posted on March 23

Question: I owe about 22.6 years on my 5.625% mortgage. Balance of my mortgage is approx 226k. For home, I would like an appraisal of 440k or may be higher.

My first choice, if possible, is not only to refinance my first mortgage for a lower rate without extending the term, but also, to escrow my own taxes and insurance.

If I can’t find a first mortgage product that allows me to escrow my own taxes and insurance, can I chose my term?

If not, can I payoff my first mortgage with a second mortgage product? If I can payoff my first mortgage with a second mortgage (assuming the second mortgage rates are lower), can I pick a 20 year term if the 15 year term makes my payments higher than I want to pay? How do I find out either of these rates?

If I want to refinance for a first mortgage for 22 years, can I do that? If so, what are the rates? I can’t seem to find any rates other than 15 or 30 year rates for refinancing. Do I use the 30 year rate for a 22 year term?

Escrows (Taxes & Insurance) conforming loans are priced based on you Escrowing – so, if they are not included, there is an extra 1/4 point assessed to your closing cost (or a bump in the rate). You wrote, “escrow my own taxes and insurance”; I gather that, you do not want to escrow, you would request an Escrow Waiver and you would be responsible for paying your own taxes & insurance and would be assessed the extra fee for your decision.

20 year & 30 year amortizations tend to be very close in price, however, 15 yr loans are 3/8% to 1/2% lower rate. A 15 yr payment would be about $239/month more than a 20 yr amortization, but, you would save about $1200 in interest the 1st year. If you can afford the extra payment, the 15 yr option is worth considering.

Why are the closing costs so high?

Posted on March 23

Question: I got a quote and the closing costs total to $7400, which seems a bit high to me. We bought an investment property for 57,000, got a hard money loan and got liens totaling to 8,500 and just put tenants in the home who are paying $895 for rent. So, the total we want to refinance is 65,500. Credit is at a 725, why are the closing costs so high? Is this normal?

I must admit $7,400 in costs for a 65k loan sure seems steep. Do you have a GFE? When did you take title? For conforming no-cash loans, you’ll need to have at least 6 months on title.

Presuming your payoff includes the ‘construction costs’; it should not be considered cash-out; however, you would need to be on title for 12 months.

Presuming you have title vesting sufficient for the type of loan you need, it sure looks like, you should be able to obtain a favorable rate and origination costs of under $2,000, add escrow set-up, title and any taxes/recording.

Was it required to pay mortgage insurance?

Posted on March 23

Question: My wife and I purchased our home in AZ on 5 year adjustable mortgage. We do not pay a monthly mortgage insurance payment. Now, we are $70k upside down in the home, I contacted our mortgage company to participate in making Home Affordable program, but, they told us, our home will not qualify, because, the lender was required to pay mortgage insurance. They could not tell me the mortgage insurance company name and I do not have any records on the contract how is this possible and what are my options. I can not believe, I am the only person in this situation!

You are definitely not alone! It’s important to understand that, it’s not your current service provider.

The program was designed so that, you don’t have MI to refinance at new lower rates. The Guidelines were written so, 2nds could be subordinated to allow significant negative equity, and people that put 20% cash down didn’t have to get MI on a new loan. It is a wonderful program, but, like most programs, there are some people that just don’t fit the mold.

However, the MI companies, at least to my knowledge, were never able to facilitate a program to allow people to reduce their rates. I gather, the Govt didn’t want to bail out the MI companies – which is what would have happened in your case, since, the MI company is at risk with so much negative equity. It is boggling to me, a program could not be provided for people that pay their bills on time, but, have MI.

Although a better understanding of what’s behind the curtain might help you, the information won’t help you get a new loan with today’s great fixed rates.

Should we consider an ARM to bring down payments?

Posted on March 28

Question: My 78 year old mother wants to purchase a beach condo to live in for 2-4 years. After that, she will move in with me. With limited monthly funds, should she consider an ARM to bring down her payments?

I understand that some people either prefer to own, or prefer to live in a home that is not generally available for rent. In fact, there are some Condo Associations that do not even allow rentals.

If you decide that, owning is the option for you (and mom), you can indeed dramatically decrease the monthly payment by using an ARM. However, with the likely pressure on rates in the future, you will want to make sure the initial period of the ARM is more than adequate for the time your plan to either own the home, or, are prepared to pay off the Mortgage Loan.

But, please consider the advice you’ve received about renting, if indeed monthly funds are limited, a rate adjustment could be devastating.

Can you get a home loan with the average of both credits?

Posted on March 31

Question: My wife has good credit, I do not (just below 600). My cousin and his wife just bought a house in Birmingham, Alabama and the lenders averaged out their credit scores to approve them for a home loan. We live in Miami, Florida and they are using the lowest score to see if they will provide us with a loan or not. She makes the higher wage between the two of us, but, we can not afford the house we want with just her income. Does anybody know of a lender that will provide us with a home loan based on our challenge?

You mentioned that, you’ve paid off all creditors. How long has it been since you’re had a delinquency? We have programs that go down to 580; but, they require an electronic underwriting approval – which doesn’t always happen with recent deratory items. Let me know if I can help.

How do you finance a vacant lot?

Posted on April 01

Question: I own a home, and would like to buy a vacant lot to build on in the future. I am unsure what the finance options would be for this.

We offer lot loans – 75% LTV under $300k loan; 70% 301k to 399k, and 65% up to 500k. The loans are 3/1 year ARMs with rates in the mid 4′s (credit, income & LTV affect the rate).

Please let me know if you have any other questions about the program.

Are there any programs for investors that are upside down on their mortgages?

Posted on April 11

Question: Property is valued now at $40,000 & my loan is $140,000. I paid $186,000. Property is rented, but, does not pay full mortgage payment. If I short sale, I am told that, my other rental properties could have liens placed on them. Any options out there??

Unfortunately that property doesn’t seems like it was a very good purchase. If your current lender can’t/won’t make any adjustments, it looks like you’ll need to take a long term approach to this property. It’s important to note that, your current lender didn’t sign-on as a partner in your real estate business – all they did was agree to loan you the money you requested – just because the property value got killed, it’s not fair to expect they should participate in the loss.

Refinancing Rental Property in GA

Posted on April 14

Question: Bought a property as a primary home with a 5/1 ARM interest only loan. Got married and then rented it . Want to refinance , and wondering whether I can still refinance home as primary home, since I don’t have my name in any other home.

If the home is a rental, you can’t refinance as a Primary Residence. Since nearly all lenders pull a transcript of your IRS tax returns you’ll want to make sure you are upfront with your lender.

Cash-out refinance for investment property?

Posted on April 20

Question: Is it possible for me to get a cash-out refinance for my two investment properties I own free and clear? I paid all cash for them about a year ago and was unable to obtain this type of refinance last year. I already have 4 houses with mortgages, and bought these two with cash.

Conforming guidelines allow cash-out up to 75% LTV (must own more than 12 months). We can lend on more than 4 properties, but, I suspect you’ll have some difficulty with the cash-out on investment properties.

I would recommend you, consider developing relationship with a business banker, if you’re considering using the cash-out to acquire additional properties, you may find commercial lending very attractive.

Does any mortgage company offer jumbo loans?

Posted on April 24

Question: I am looking for a mortgage for around $650-800K. I do not have enough money for a 20% down payment, but, I can put down around 5-7% in cash and I have a good income/ income potential.

I have some options that might be able to get close enough to your goal to make it work. Please give me a call our email if you’d like to talk. We go to 90% LTV to a 650k loan.

What is included in seller paying closing costs?

Posted on April 27

Question: My realtor says that seller automatically pays closing costs, so, it does not need to be written into the contract, is this true?

I write quite a few loans and what your realtor said is not correct. Of course, the seller has a significant number of their own closing costs, but, you’ll have all of your origination, title and taxes. If you’d like a summary of the typical buyer side costs, please let me know and I’ll gladly help you with a quick summary.

Why use a mortgage broker instead of going direct to a lender?

Posted on May 01

Question: Why use a mortgage broker instead of going direct to a lender?

For every benefit of one, there is normally a correlating benefit to the other. Some people like the security of a complete banking relationship, whereas, others would prefer to save an 1/8 discount point that a broker might be able to provide.

You’re never wrong working with an originator that you know you can trust.

I have a jumbo mortgage. Can I refinance it into two conforming mortgages?

Posted on May 03

Question: I have a jumbo mortgage. Can I refinance it into two conforming mortgages?

It is fairly common for people to take a conforming 1st and a HELOC 2nd, but, since the HELOC can adjust on a monthly basis, that option is quite risky giving the consensus that rates will be increasing.

We offer 30yr fixed Fixed rate Jumbos to 80% LTV to $1,000,000 loan; rates today are 5.125% with 3/4 point discount and about $1,060 of other closing costs (presuming 720+ mid score).

How does pre-qualification work?

Posted on May 06

Question: If I work with a mortgage broker, do they actually ask the lenders to do the pre-qualification or do they actually do it themselves? how does it work?

The ‘normal’ process for a Pre-Qualification would involve the originator completing an application, pulling your credit, and reviewing your income & assets. A next step would include running your application through and electronic Underwriting process.

If you have a typical situation, the process is the same for a single person mortgage broker to the largest bank.

The impact on credit scores is more complicated, but, if you’re going to buy a home, your credit will need to be pulled, which will impact your score. If you decide to shop around, make sure all lenders pull the reports as close as possible to one another

10-15% down Jumbo portfolio loans in California?

Posted on May 08

Question: I am looking for a Jumbo loan on a purchase price of 1.1 million in California. 10-15% down, with 2-3 months reserves. Is anyone aware of banks that carry portfolio loans of this type?

Alternatively, is anyone doing attorney/professional jumbo loans with low down payments?

Our guidelines allow 80% LTV to a $1,000,000 loan. With superb credit and assets, it’s possible we would consider a 80% 1st, and a 5% HELOC to get your to 85% CLTV. Please contact me if you’d like additional information.

How do I figure out what it would cost to refinance my home loan?

Posted on June 05

Question: How do I figure out what it would cost to refinance my home loan, adding in the amount I have now in?

If you enter a quote request, you will receive some loan quote that will provide you the origination costs. You can then add those costs to the title and taxes required to close your transaction to the principal balance of your loan and one month’s interest to get an approximate new loan amount.

I owe 275000.00 at 5.25%. Should I refinance at a 15 year 4.25 % to pay off sooner?

Posted on June 22

Question: I owe 275000.00 at 5.25%. Now, 20 years left. Should I refinance at a 15 year 4.25 % to pay off sooner?

Before considering IF you can afford the new payment (presumably higher than your current), I suggest you consider the potential interest savings.

for 275k, 5.25% simple interest is $14,437; and 4.25% is $11,687; with a potential interest savings of almost $3,000 per year,

Since it looks like you can save more then enough interest to recover the costs, if the payment amount is ok with your budget a refinance appears to be a good idea.

I currently have a 30yr fixed home loan for 5.25%. When does it make sense to refinance?

Posted on July 03

Question: I currently have a 30yr fixed home loan for 5.25%. When does it make sense to refinance?

If your refinance cost is $2,500, then, you can get 4.50% and you would save $3,500 for the 1st year on a $400,000 loan, but, only $450 on a $60,000 loan.

If you calculate the interest savings, then, compare that to how long you’ll be in the home; you’ll have an accurate answer.

Is anyone offering 10% down on jumbo loan???

Posted on September 20

Question: I am looking to purchase a house at $575-$600k with 10% down. I have excellent credit and money in the bank for 20% down but, don’t want to put that much into the house when there is already equity built in. Any advice, suggestions?

US Bank lends to 90% LTV for a loan amount up to $650,000.

Question about impact of credit denial on credit record

Posted on 12 Feb

Question: Last year, we applied for a refinance through a local credit union. In the process, it was discovered that, one of the credit agencies had mixed a history of several delinquent accounts into my wife’s history. I took care of the mix-up and had the records corrected (took about 2-3 days). However, the Credit Unions (CU) took forever to re-check our credit. While waiting, we found another lender and cancelled our application with the CU.

End of story, right? We thought so.

We just got a letter from the CU. In it, they reference our last year application and say that, they are required (by law?) to provide a decision on the credit application – even if it was withdrawn. The letter goes on to state that, the reason our application was denied was due to the several delinquent accounts. Of course, since all of this was cleared up in last year, I no longer have the record of the interactions with the credit reporting agency.

The letter from the CU goes on to state that “this notice has no impact on your consumer credit report or your credit score.” Is this true? It seems like a credit denial would be reported to the credit reporting agencies, or are denials not reported?

The bottom line is…I’m just curious as to how seriously I should treat this notification. I’m at least going to try and clear things up, but, the CU is not likely to make things easy (they’re already providing an out-of-state POC to mail responses to, vice a human to talk to).

It certainly does seem odd to me that, the CU would send such a notice 3+ year after denying/cancelling your loan.

A lender’s credit report will include previous inquiries (normally 24 months), which is why, many lenders ask new applicants to address recent inquiries; however, there is no way for a lender to know why the inquiry did not lead to a new credit/loan.

Since there is nearly zero chance the last year inquiry would be picked-up by a future lender, and even if it was, there is no way for a future lender to know the reason why that inquiry did not lead to new credit, I suggest you just ignore the letter.

For all of the advertisements we’re hearing about how ‘friendly’ and ‘non-big-bank’  Credit Unions are – this is a clear example of them operating under the same rules as the banks.

What do we do about a low-ball appraisal?

Posted on November 28

Question: Back in June, we tried to refinance. Had an appraisal done – house came in at 457k. Husband lost job. It was right before the bank checked his employment history, and so we couldn’t qualify for the mortgage.

Fast forward to last year. Husband has job, everything is in place to refinance. We’re just waiting for the new appraisal. When the appraisal came back, it came in at 415k. A huge difference from 5 months ago. The comps that were used were for un-remodeled houses similar to ours. (We just came out of a major remodel – total gut down to studs, new heating, electrical, plumbing, walls, ceilings, marble & granite baths and high-end kitchen. The new appraisal did use one of the comps that were on the first appraisal, but, he gave our house a much lower value vs this comp than the previous appraisal. There were also inaccuracies on the report on things, like the siding material, floor materials, he didn’t mention hardwood floors. The broker has filed a rebuttal/dispute with the appraisal company to have them look over the appraisal for errors.

Is there anything else that can be done while we’re waiting for the appraisal company to get back to us? The mortgage broker said, he doesn’t think they are going to change the appraisal. It seems so unfair, they can state their opinion, and then, it becomes law with no recourse for the person who actually paid for this thing!!

I would like to point out that, the appraiser’s valuation is not something that can be “low-balled”. The appraiser is a trained professional with education, licensing, and Errors & Omissions Insurance requirements. It is their job to as accurately as possible value the property. They put their license and career on the line with their appraisals.

Each lender has a process to go through to counter/dispute a low value; however, in the crazy market we’re now, it’s really difficult for us to comment, when there is a possibility the comps used 6 months ago have now expired and nearly perfect new ones are available.

It is great, your broker asked someone else to see if there is a problem with the accuracy or the appraisal however, a well trained loan originator should be able to identify problems with an appraisal and not hope someone else will catch them.