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.

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.

Loan implications for someone relocating

Posted on August 17

Question: I will be relocating from MI to PA for a new job (approx 350 miles). The home that I currently own in MI is very underwater so I am in no position to sell at this point. I would like to understand the implications/requirements/programs that may be applicable to my purchase of home in PA (this would become my primary residence). Any advice or pointers to details would be greatly appreciated.

The biggest obstacle would be that, without 30% equity in your MI home, we would need you to qualify with both payments, and also have at least 6 months reserves, plus the down payment for the PA home.

We would not restrict programs for your new purchase – so long as your DTI and down-payment/reserves are within guidelines.