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YAMT: Questions about Refinancing

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YAMT: Questions about Refinancing

Old 10-02-09, 05:38 PM
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YAMT: Questions about Refinancing

My sister and her boyfriend own a house together, as I understand it he's the only one on the mortgage, but they are both on the title (why, I don't know...). He/they want to refinance.

It was purchased in November of 2007 for about $190,000, and is probably worth about the same now.

He had terrible credit, but made the vast majority of the income, so I guess there was no reason for my sister (who had/has excellent credit) to be on it, according to the mortgage broker they used.

At the time I think his scores were in the low to mid 600s, and now they are around 700.

Their rate now is 7.5%, regular 30-year fixed.

Also, she now makes more...about 35% of the household income (still file separately).

One more thing that might matter - they will be living there another 2 years probably, 3 or 4 at the absolute most. I'd like to say they'll definitely be getting married before long, but both are the non-committal type, so who knows for sure (again, not sure that matters, but there you have it).

So...I would imagine it's probably worth refinancing, but what route would you suggest they go? Both in terms of who to work with and how to structure things.

They used a mortgage broker from another state last time, meaning almost everything was done over the phone and email, and while he seemed to be genuinely trying to help them, it turned into a clusterfuck. He ended up giving them back most of the loan origination fee because of all the problems.

If we could assume they'll always be together and will eventually be married (I know, we can't assume that, but for argument's sake), would it make more sense for them to both be on the mortgage?

Given that they won't be there more than a few years (99.9% chance they're gone within 4 years), does looking at something other than a 30-year fixed make sense?

Thanks a lot for any help.
Old 10-02-09, 05:41 PM
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Re: YAMT: Questions about Refinancing

Look for a refinance that will be no fees, no origination, etc. The rate will be higher, but should still be lower than they currently have. otherwise, a regular refinance may not make much sense if they shell out $6,000 for the loan.
Old 10-02-09, 05:57 PM
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Re: YAMT: Questions about Refinancing

i agree with dave. since they're only gonna be there a few years, look for something with no fees, since they're gonna be there for as little as 2 more years.

as for who to work with, check with friends and family, maybe they had good experiences with someone or another.
Old 02-22-10, 11:12 AM
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Re: YAMT: Questions about Refinancing

Old thread bump...no, they still haven't done anything. Apparently he called and talked to a few different places, but none had closing costs of less than a few thousand. I think he was mostly talking to banks/CU's, but I know he talked to at least one mortgage broker and they also claimed to have nothing with zero or very low closing costs.

So where should he look for somebody who does?

Thanks again.
Old 02-22-10, 11:45 AM
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Re: YAMT: Questions about Refinancing

Originally Posted by aktick View Post
My sister and her boyfriend own a house together, as I understand it he's the only one on the mortgage, but they are both on the title (why, I don't know...). He/they want to refinance.

It was purchased in November of 2007 for about $190,000, and is probably worth about the same now.
I'm really surprised it's still worth what they purchased it for in 2007.
Old 02-22-10, 11:54 AM
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Re: YAMT: Questions about Refinancing

Originally Posted by aktick View Post
Old thread bump...no, they still haven't done anything. Apparently he called and talked to a few different places, but none had closing costs of less than a few thousand. I think he was mostly talking to banks/CU's, but I know he talked to at least one mortgage broker and they also claimed to have nothing with zero or very low closing costs.

So where should he look for somebody who does?

Thanks again.
Now things are a little different. Go for the lowest fees you can and the main goal should be to refinance no matter what to get rid of that 7.5% rate. Provided there is just a little equity, he may be able to roll the costs of the refinance into his new loan.
Old 02-22-10, 12:15 PM
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Re: YAMT: Questions about Refinancing

Originally Posted by kvrdave View Post
Now things are a little different. Go for the lowest fees you can and the main goal should be to refinance no matter what to get rid of that 7.5% rate. Provided there is just a little equity, he may be able to roll the costs of the refinance into his new loan.
I think they only put 5% down, and obviously haven't knocked much of the principal balance down yet, so yeah there is some equity but not a lot. Thanks.
Old 02-22-10, 12:48 PM
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Re: YAMT: Questions about Refinancing

The biggest issue in that case is whether or not the house has gone down in value over that time. If it has and they can't refinance, look into a mortgage adjustment program. Some are scams, but the bank they are working with should be able to point them in a good direction.
Old 02-22-10, 01:29 PM
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Re: YAMT: Questions about Refinancing

Originally Posted by kvrdave View Post
The biggest issue in that case is whether or not the house has gone down in value over that time. If it has and they can't refinance, look into a mortgage adjustment program. Some are scams, but the bank they are working with should be able to point them in a good direction.
I know it sounds odd, but I'm pretty sure it has basically retained its value - they are in Iowa, and things haven't been hit too hard there, plus it's in a popular subdivision. They have plenty of extra income though, so I imagine that helps their case?
Old 02-22-10, 03:58 PM
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Re: YAMT: Questions about Refinancing

There are plenty of places that didn't lose value, so that is very possible. However, if it did, extra income won't play a factor. The bank will only lend based on the value of a house. So if you are upside down in it, doesn't matter if you have millions in the bank and just want to refinance for shits and giggles, because it won't fit guidelines.
Old 02-22-10, 05:03 PM
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Re: YAMT: Questions about Refinancing

Originally Posted by kvrdave View Post
There are plenty of places that didn't lose value, so that is very possible. However, if it did, extra income won't play a factor. The bank will only lend based on the value of a house. So if you are upside down in it, doesn't matter if you have millions in the bank and just want to refinance for shits and giggles, because it won't fit guidelines.
Ohhh, gotcha, wasn't thinking of it that way.

What do people usually do when they are upside-down on one and want to refinance? 2nd mortgage?
Old 02-22-10, 06:11 PM
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Re: YAMT: Questions about Refinancing

Originally Posted by aktick View Post
Ohhh, gotcha, wasn't thinking of it that way.

What do people usually do when they are upside-down on one and want to refinance? 2nd mortgage?
Upside down = negative equity = SOL
Old 02-22-10, 06:12 PM
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Re: YAMT: Questions about Refinancing

No, the 2nd mortgage is generally limited to the value of the home, but sometimes 110% of the home, but as a result, they are higher interest and generally a variable rate. Honestly, it is rare (historically) to become upside down on your home. So what do people do? Suck it up. It gets tougher if they have more income, too. Because then the bank doesn't have much incentive to bring a rate down.

But first things first, have him talk to a realtor to get a ball park figure on the house. That way he can tell if it is worth the next step before he has to put money out for an appraisal.
Old 02-22-10, 06:47 PM
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Re: YAMT: Questions about Refinancing

With closing costs it's mostly local taxes and escrow for property taxes
Old 02-22-10, 09:48 PM
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Re: YAMT: Questions about Refinancing

Have him call his lender and check to see if he qualifies for a HARP (Home Affordability Refinance Program). Can only do it with the current lender. If he went through a broker, might not be eligible; but doesn't hurt to check.


Edit:

You can refi even if you are upsidedown. I believe up to 125% LTV but don't quote me on that.

Last edited by tbone; 02-22-10 at 09:49 PM. Reason: update

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