Refinance Advice

[lpjohnso]

You’re welcome, Mark!

HLS, our MIP payment will increase from $302 to $315. The refi will be lowering our loan by about $27/mo. However, it will actually lower it more because Quicken brought to my attention that are not paying enough taxes on our current mortgage. I called Wells Fargo, our current lender and they confirmed that was true. They said we will owe around $900 in October and then they will correct (i.e.-increase) our current mortgage payment. The refi will immediately correct the tax issue (of course, we will still have to owe Wells Fargo $900), and in the process our current mortgage payment will go down $27/mo, not increase even higher than it is now in order to correct the taxes that were initially miscalculated in escrow.

Recent comps would support that our house could appraise for about $370,000. We remodeled it and now it has maple floors throughout, 5″ baseboards, granite countertops, etc., etc. Unfortunately, we decided to do the entire $40,000+ remodel on our credit cards. They are low interest, but still, none-the-less, a terrible decision, but we knew that when we did it. We are claiming ‘0’ on our taxes, so we are on the 5 year plan to pay the cards off with each tax refund (last year’s refund was $10,000). Due to charging all of our cards up to the top, our credit has taken a massive hit, going from the high 700s, down to the low 700s/high 600s. Honestly, we did’t care because our house is exactly how we want it and we never plan on leaving, but now I am caring because it matters for the refi.

We do not have a date to close yet, but Quicken said it usually takes 3-4 weeks and we started it last week. Our exact current principle balance is $318,696.86.

I would have loved to get a conventional loan to get rid of that damn MIP payment, but we only had 3.5% down.

[HLS]

LPJ..
1. According to your figures you have plenty of equity to consider a NON FHA loan (and possibly a better loan) You will still need mortg ins without 20% equity, but you will not have the FHA funding fee with a conventional loan AND the possibility of mortg ins being removed sooner than with an FHA loan.

2. Was your first payment in Dec or January ?
Your taxes/insurance portion of your payment are what they are. Don’t let this confuse your payment analysis.

3. You will still be making your August payment which will reduce your loan balance even further, closer to $318K and cost you another $2000+/- out of pocket before this new loan closes next month.

4. By starting over with a new 30yr loan, you will be adding at least 9 payments of $1450 (P&I) that you no longer have on your existing loan.
If you only compare monthly payment savings,it’s $13,000 more in payments than the loan you have now,did you consider this vs.your savings ?

My point is that the benefit of a Streamline might be no appraisal, but for a $385 appraisal fee, if you have the equity that you say you have you may have another option to consider, at a lower cost.

You are definitely going to be better off in a lower rate and you may decide to stick with FHA, but did you get a comparison of rate, cost and mortg ins payment ???

[bearishgurl]

[quote=HLS] . . . With FHA loans it is possible that MIP payments will go up, making a refi less attractive, even at a lower interest rate.

I believe FHA is a problem, not a solution.[/quote]

Yes, HLS, the already-exorbitant FHA MIP just went up this past April 1 and it very well could go up again, since these loans are losing more money every month that goes by.

http://www.ncpa.org/sub/dpd/index.php?Article_ID=21593

I predict the program will be insolvent within two years from today as there is not enough of an insurance “cushion” combined on all the recent high-ceiling loans they made in recent years.

FHA IS the problem. The officials running the program are rock-dumb. In the last decade its ceiling has exploded into levels sufficient to buy a “luxury home” in SD County with a 3.5% downpayment! This is NOT what the FHA 203b program was put in place for! Its lending limit should be no higher than $300K in SD County and that is really pushing it. The program was orginally put in place in 1934 to give first-time and/or moderate income buyers a “leg up” in a home purchase for a principal residence. Here are some examples of properties (and the homebuyers who will purchase them) for which the program was intended to serve:

http://www.sdlookup.com/MLS-110058443-2730_Bonita_St_Lemon_Grove_CA_91945

http://www.sdlookup.com/MLS-110067477-2621_Calle_Tres_Lomas_San_Diego_CA_92139

http://www.sdlookup.com/MLS-120007011-1634_Portola_Ave_Spring_Valley_CA_91977

http://www.sdlookup.com/MLS-120016884-1310_L_Ave_National_City_CA_91950

http://www.sdlookup.com/MLS-110048073-5976_Fennell_Ave_San_Diego_CA_92114

http://www.sdlookup.com/MLS-110066308-4917_Magnus_Way_San_Diego_CA_92113

[HLS]

PS: For your situation, the lowest borrower’s mid credit score (680-699, 700-719, 720-739)is crucial to pricing a NON FHA loan, as well as whether you have 10-14% equity OR 15-19% equity.

If mid credit score is below 680, FHA may in fact be your best option.

By planning in advance, it is possible to only use credit cards in the name of one spouse and possibly qualify for a loan with the other spouse’s income & credit.
Joint debt can be very hurtful, as in cases like this.

People can still be on the deed to a property without being obligated on the loan.

[HLS]

[quote=lpjohnso] we decided to do the entire $40,000+ remodel on our credit cards. They are low interest, but still, none-the-less, a terrible decision, but we knew that when we did it. We are claiming ‘0’ on our taxes, so we are on the 5 year plan to pay the cards off with each tax refund (last year’s refund was $10,000)..[/quote]

I would suggest raising your exemptions and getting more money in every paycheck and pay down credit cards as quickly as possible. Forget about the $10K check once a year.

I see no benefit to loaning the govt your money at 0% while you are paying daily interest on your credit cards. It is really silly to wait until next year to get a big check.

Did you max out credit cards with low rates for the life of the balance… Does the low rate apply for 4-5 years ?
You may have a way out of this sooner than you think.

[bearishgurl]

[quote=HLS][quote=lpjohnso] we decided to do the entire $40,000+ remodel on our credit cards. They are low interest, but still, none-the-less, a terrible decision, but we knew that when we did it. We are claiming ‘0’ on our taxes, so we are on the 5 year plan to pay the cards off with each tax refund (last year’s refund was $10,000)..[/quote]

I would suggest raising your exemptions and getting more money in every paycheck and pay down credit cards as quickly as possible. Forget about the $10K check once a year.

I see no benefit to loaning the govt your money at 0% while you are paying daily interest on your credit cards. It is really silly to wait until next year to get a big check.

Did you max out credit cards with low rates for the life of the balance… Does the low rate apply for 4-5 years ?
You may have a way out of this sooner than you think.[/quote]

Very good advice, HLS.

[sdrealtor]

FLU
Recourse loans are out of the picture now and only dinosaurs still worry about them. A first was never effectively a recourse loan whether it was purchase money or refi’d. CA has a one action law in non-judicial forecloses so if the lender forecloses (and it’s always the first as the second would not foreclose unless the 1st could be paid off in full). Recently the law changed and a refi’d 2nd is no longer subject to recourse unless there was cash out over and above loan fees or costs. Even then the recourse is only for the incremental cash out.

Perhaps our resident unemployed paralegal can dredge up some outdated cases in her copious spare time?

[HLS]

Is it prudent to tell someone not to worry about recourse debt at all OR is it better to let them know that it could be a problem and come to their own conclusion ?

To me, there is a difference between a situation that absolutely, definitely will not be a problem at all AND possibly being a problem, regardless of how unlikely that is.

Although I’m not aware of anybody who has ever had a problem with recourse debt, I’m not prepared to tell someone that it could never happen to them.

[sdrealtor]

HLS
I am not an attorney nor do I have an agency relationship here. When dealing with clients we give them the actual laws. Folks around here often provide outdated information and fearmonger. The idea of a recourse mortgage is a very small risk for most in CA. Telling people not to refi a first mortgage because it would become recourse debt when they can get much better rates and terms is bad advice. The real danger was always in refined 2nds. With the new law that real danger is limited to the cash out portion over and above loan costs/fees that were built in the new loan. Spreading fear about risks that are minimal does not serve the general population. It’s like telling people not to leave their homes when the weather report calls for lightening in SD County

[Author]

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