Need Mortgage advise and Info?!?

[moniot]

There is no prepayment penalty.

I think I will get copies of my credit reports and then check around and see where I can get the best interest rate and fixed. We had no luck with any of our local banks two years ago. We own our own business and paychecks are on a % and not salary. We search the internet and found our currant company. I have not had any issues with them.

I was hoping to get all of our improvements done before we had to pay for another appraisal. Then we could do one more refinance and be done for 30 years.

I think this will light a fire to get stuff done quicker.

I will start shopping around, my DH can start working and we will see what he has done by the end of April. We have until May I think.

Thank you everyone for all your help. It is so hard to make sense of things when it is all over your head

 

[PrincessDadx2]

Plugging your numbers into a mortgage calculator

Principal 148,000
Term 336 months - 28 years
Interest rate - 9.25%

Your payment will adjust to $1,140.83 on July 1st You will need to add your taxes and insurance to this to see what you new total will be.

You basically have 15% equity if your house is worth $175k

Pros:

You have equity
You have paid on time for 2 years
No prepayment penalty

Cons:

You have self employment income
Your credit is still low, sub 620 is still really bad for mortgages - subprime
Sub prime mortgage market just exploded

Probably your best bet is to work towards an FHA loan as suggested. The govt. is more likely to work with you, especially if your problems were due to medical, etc and you are back on your feet. If you can get your credit score over 620 you can go a more conventional route. You need a mortgage broker who knows what he is doing, your banker will not be much help with this type of loan.

By comparison, a 30 year fixed at 7% would be about $950 per month for someone with average credit. This is the penalty you are paying for the low credit score.

Best wishes, I know it is complicated but you need to get out of that loan as soon as you can. It is going to adjust up to over 11% over the next year.

I would pay the $15 to get your real FICO score. If you can get an appraisal of over $185k after your improvements (20% equity) then you should find someone who will make the loan and get you out of it.

 

[ducklite]

Also the 6.25% margin sounds suspiciously to me like subprime. Regular adjustable rate mortgage loans (ARM's) have margins around 2.50 to 3.00%.

With those credit scores--which the OP admits are better than they were at conception--of course it was subprime. Probably "C" paper based on the rate.

You are also assuming it's based on the LIBOR. Subprime money often uses other indexes, particularly the MAT.

And FYI, the margin on the COFI is often in the 5-7 range--that's for vanilla A+ paper.

Anne

 

[ducklite]

Plugging your numbers into a mortgage calculator

Principal 148,000
Term 336 months - 28 years
Interest rate - 9.25%

Your payment will adjust to $1,140.83 on July 1st You will need to add your taxes and insurance to this to see what you new total will be.

You basically have 15% equity if your house is worth $175k

Pros:

You have equity
You have paid on time for 2 years
No prepayment penalty

Cons:

You have self employment income
Your credit is still low, sub 620 is still really bad for mortgages - subprime
Sub prime mortgage market just exploded

Probably your best bet is to work towards an FHA loan as suggested. The govt. is more likely to work with you, especially if your problems were due to medical, etc and you are back on your feet. If you can get your credit score over 620 you can go a more conventional route. You need a mortgage broker who knows what he is doing, your banker will not be much help with this type of loan.

I was with you up to the highlighted part. Then I have to disagree. The OP is FAR more likely to run into a predatory broker than banker. Many banks now place FHA loans, and I think we both agree that the OP is a prime candidate fot that type of loan. Between not being FICO driven and the equity, it's almost a slam dunk, especially if the payment can stay the same or go lower.

By comparison, a 30 year fixed at 7% would be about $950 per month for someone with average credit. This is the penalty you are paying for the low credit score.

Best wishes, I know it is complicated but you need to get out of that loan as soon as you can. It is going to adjust up to over 11% over the next year.

I would pay the $15 to get your real FICO score. If you can get an appraisal of over $185k after your improvements (20% equity) then you should find someone who will make the loan and get you out of it.

I would not get the appraisal done. Let the lender order it. Especially if they go the FHA route, it will have to be an FHA appraisal, and they will end up paying twice for an appraisal. Also FHA caps the amount that can be charged for an appraisal.

Anne

 

[ducklite]

There is no prepayment penalty.

I think I will get copies of my credit reports and then check around and see where I can get the best interest rate and fixed. We had no luck with any of our local banks two years ago. We own our own business and paychecks are on a % and not salary. We search the internet and found our currant company. I have not had any issues with them.

Mortgage lenders look at your tax returns for two years and average your income on a monthly basis based on teh returns.

I was hoping to get all of our improvements done before we had to pay for another appraisal. Then we could do one more refinance and be done for 30 years.

You do'nt want to start improvements that can't be finished before the appraisal is done, or they will require the work to be complete before the loan can close and fund.

Anne

 

[PrincessDadx2]

I was with you up to the highlighted part. Then I have to disagree. The OP is FAR more likely to run into a predatory broker than banker. Many banks now place FHA loans, and I think we both agree that the OP is a prime candidate fot that type of loan. Between not being FICO driven and the equity, it's almost a slam dunk, especially if the payment can stay the same or go lower.

In my experience, bankers were almost worthless for non standard loans, but its been a long time since I made mortgage loans

I agree about the predatory broker, which is why I suggested a good one

I was not suggesting paying for an independent appraisal, but just that if the improvements increase the value then there are more options. It might be worth paying the higher payments for a few months if you can finish the improvements and increase the value. The one downside to the FHA is that you pay the insurance premium, even if you do not need to, vs. a conventional mortgage with 20% equity.

 

[ducklite]

In my experience, bankers were almost worthless for non standard loans, but its been a long time since I made mortgage loans

About 10 years ago banks began looking at new ways to capitalize on their brand and boost earnings, and mortgage lending was ripe for the picking. So many banks set up mortgage departments, originating loans but acting as a correspondent lender. The difference is that because they are banks, they are held to a higher standard by the banking department, which benefits the consumer, particulaly in the A-/B+ category which is where I see the OP fitting in. Banks also began writing FHA, and to a slightly lesser degree VA loans.

I agree about the predatory broker, which is why I suggested a good one

The problem is that for the borrower who isn't as sophisticated in knowledge of the industry, it can be very difficult to weed out the good from the bad until it's far too late.

I was not suggesting paying for an independent appraisal, but just that if the improvements increase the value then there are more options. It might be worth paying the higher payments for a few months if you can finish the improvements and increase the value. The one downside to the FHA is that you pay the insurance premium, even if you do not need to, vs. a conventional mortgage with 20% equity.

Sorry I misunderstood your appsl. comment. Yes, the MIP is a downside on an FHA loan, although if you hold on to your original case number and re-fi out or pay-out within the first ten years, you are entitled to a pro-rated refund of the upfront. I think the fixed FHA rate with MIP is still going to be a far better long-term choice for the OP than a sub-prime re-fi which will likely carry points and be an ARM that will again need to be addressed in 2-5 years. While it's possible that the credit is in the 620 range, I've got a concern about the income based on her later comments. FHA will be far more lenient on ratios particularly given the LTV and mtg payment history. As long as the PITI is coming down or staying the same, with the LTV as a compensating factor the FHA U/W might go to a 50% DTI on the back end for a SE applicant. FHA underwriting is far more logic and common sense driven than FNMA/FHLMC desktop underwriting will ever be.

Anne