2. Most mortgage companies like Quicken Loans for instance have very particular guidelines when it comes to this. With all of the homes listed for sale around the country this is one that can become a real deal breaker. Depending on the company, many have a 12 month delisting period. Some will have a 6 month but for the most part its 12.

3. What does this mean? You need to be able to show the mortgage company that you have taken your house off of the market. You can do this by getting a de-listing ticket from your realtor. On the “De-Listing Ticket” it will show how long the home was listed for sale and the exact date it was taken off of the market. The mortgage company needs this information and must follow all of the guidelines set forth by Fannie Mae. This is one of them.

4. So why does the mortgage lender care when your home was listed and de-listed? It really comes down to you, the home owner. The mortgage companies know that you are just trying to consolidate all of your debts to give you some breathing room while you try to sell the home. The mortgage company wants you to stay in that home and pay them the interest on that loan.

5. You are probably going to find this out the hard way first. I remember being a mortgage banker and getting that phone call from people desperate to refinance their home. I would go through all of the normal application questions and ask them if their home was listed for sale. For the most part people would tell me whether or not it was. If they did not we would find out. Unfortunately, it would be when the appraisal gets back. The appraiser has a database of all of the homes that were listed for sale. The home owner is the one that is affected the most because they just spent $350 on a appraisal and are not going to be able to close the home loan.

6. So what are you to do? The best bet would be to call the mortgage company who holds the note, i.e, Countrywide, Chase, Bank Of America. Ask them if there is anything that they can do. More than likely all that they will do for you now is a “rate/term refinance.” This is for people who are in a adjustable rate mortgage. The mortgage company will not let you do a “cash out refinance” because they do not want you rolling more debt into the equity of the home. You will have to wait the time needed to refinance. Its probably not worth your time to call up a mortgage broker. They have to follow the guidelines set forth by the lender who actually funds the loan.

7. No need to call the original mortgage company that did the loan for you if its different than the one who holds you mortgage note now. You probably noticed after your loan closed your mortgage was sold to another company. The deal is the first company gets paid by the next company a premium for your loan. They keep this money as long as you do not refinance or sell the home within 120 days. The 120 days is known in the mortgage business as the “recapture period.” Its more like 140 days because its not from the day the loan was closed, its from when the mortgage was bought the first time. So you have to look at this from the lenders point of view. Here is somebody who is trying to sell their home, then can’t, and now is trying to roll more debt in to the equity of the home. The company knows you are going to put that house right back up for sale the second after the loan closes. So why waste time on somebody who is going to stick it back to them within 4 months if they can? No need to do that. Move onto the next client.

8. A real big reason why mortgage companies are not letting people refinance after the home was listed for sale was now it gives you the chance to foreclose on the property with all of your debts in the new loan (that is if you are rolling in debts). Now the loan to value (LTV) is way high. You are not going to be able to sell the home now because any wiggle room in the equity of the home is gone. Now the bank is stuck with a mortgage note on a property that is not going to sell for what is needed to cover the mortgage note. The bank will have to write off some of the balance and take a loss just to move the property off their books. You in the mean time have all of your debts paid by the new mortgage and those are included in the house you just foreclosed on. Your credit cards, car loans, past collections, everything. Who cares if you need to rent for two years. At least all of your bills are paid so you can start fresh with just a minor (big) blemish on your credit report.

9. So how can you not get caught? There is only one way to get around this underwriting guideline. It is to list your home “For Sale By Owner.” When you do a “FSBO” (fancy term for “For Sale By Owner) your property never goes in the database called “Multiple Listing Service” or “MLS”. Wikipedia has a great definiton of what it does. As long as you do not contact a Real Estate Agent than you are in the clear. When people told me their house was “FSBO” I told them to walk out into the front yard and take down the sign. Then after we closed the loan they could put it back up if they wanted. Does that sound shady?

10. The most common response I heard from people that I denied on a mortgage was that “you get the house if I foreclose.” Mortgage companies do not want you to foreclose. They do not want your house. They want you in the house paying a mortgage note they earn interest on. The scenario of why mortgage companies will not refinance a home that has been listed for sale is really a lose – lose one. The mortgage company cannot make new loans. The home owner cannot get into a better loan or even roll in some bills to help them keep the house. If you are thinking about putting your house up for sale I suggest you do it “FSBO.”

Post from: The Top 10 Reasons

The Top 10 Reasons Why You Cant Refinance Your Mortgage After The Home Was Listed For Sale On The Market

2. Many parents will have paid off the house or owe little on it and decide to give the house to their kids to help them get started with their lives. Instead of charging the kids full price them give them a deal. Most will just sell them the house for what the parents owe on the mortgage. The kids will call up the mortgage company and tell them that they are getting a gift of equity from their parents. The mortgage company knows the house is worth more but when you get qualified on the loan you are getting qualified at 100% LTV (loan to value) of the house. When this happens the kids will be charged PMI (private mortgage insurance) on top of their mortgage payment.

3. Let’s say that the kids are getting the home with 50% equity in the home. What they want to do is take some cash out to pay off some credit cards, a car loan, and get enough cash out to help remodel their home. They already know what the home is going to be appraised at and they decide to take enough money to go up to 80% of the value of the home.

4. They call up the new mortgage company and tell them about their plan. The new mortgage company does not care that they just closed on the loan the day before. By doing the new home loan at 80% LTV (loan to value) it will eliminate the PMI from their monthly payment. They will probably see their overall payments drop by doing this and will now have more money month to month than they did before.

5. The one thing you do not want to do is tell whatever mortgage company you are going through that you plan to do this. Mortgage companies get paid two different ways. They get paid by collecting your interest that you pay or by selling your home loan on the secondary market. When banks sell your loan to another bank for a quick profit there is an agreement between the two that if the home owner sells or refinances their home four months after the loan is funded (usually three weeks after closing) than the mortgage company that originated the home loan must pay back the proceeds to the larger bank that bought the loan. This is called the “recapture period.”

6. If you tell the bank that you plan on doing this there is a chance that they will not even want to do the home loan for you in the first place because they know they are wasting time on you since you are going to use them to get the loan and more than likely go to another place to get the next mortgage soon. They will be forced to give the money back and their commission. Be expecting a call from an angry loan officer wondering why you are doing this. They will find out because once you get in process with the next company a pay off letter is sent to whoever holds the mortgage note.

7. Most loans done nowadays do not have what is called “seasoning” issues anymore. Most large mortgage companies like Quicken Loans, Countrywide, Chase, Bank Of America, and Wells Fargo have a normal conventional loan program that does not care when you bought the home. So if you were to have closed a loan with another company and call one of these guys you will be able to get your new loan using the true value of the home instead of what it was sold to you for from your parents. Seasoning is a term used by mortgage companies to determine when you bought the home. Some loan programs in the past had underwriting guidelines that required home owners trying to get approved on a loan that they had to be in their home for at least 6 months to a year.

8. The only home loans that you might have some trouble doing right after you closed on a home are jumbo loans and home equity lines of credit. Jumbo loans are riskier than conventional loans and are not backed by Fannie Mae. This makes mortgage companies a little more uneasy about refinancing them so quickly. With home equity loans there is mostly a 6 month waiting period before you can take one out. What the mortgage companies do is use what you bought the home for during that six months. So if you bought the home for $200k and put 20% down on it you could borrow up to 20% back from a line of credit (assuming you find a mortgage company doing second mortgages up to 100% LTV). Let’s say you got a deal on that home and its really worth $250k, to get the value you want you would still have to wait 6 months before the mortgage company recognizes that value. The only downside to having to refinance your home again is that you will ahve to pay closing costs again (there is no such thing as a no closing cost mortgage). Of course the mortgage company will roll the closing costs into your loan so you do not have to come out of pocket with any cash. Be careful with FHA loans. Some of them have a early termination clause where if you sell or refinance your home within a certain time period you have to pay them a fee.  

9. For the most part you should not be calling up a mortgage company right after closing because you think you got a bad deal. All of the sub-prime mortgage companies have gone bankrupt and the companies left doing home loans do not do sub-prime loans at all anymore. Pre-payment penalties have been outlawed by the U.S Government and are illegal to do. No worry about that anymore. What you are going to find is that you are probably going to be offered a 30 year fixed interest rate mortgage from every place you call that has a best of market interest rate. 

10. Be smart when you are trying to play this refinance game. If you know you are buying a fixer upper than do not put a large down payment on the home. Instead, keep the money and put down as little as possible to fix it up so hopefully the value of the home goes back up. When your done remodeling then try to refinance it so this way you do not get caught using credit cards to pay for things and find out you cannot refinance. Right now in the real estate market you are probably not going to be able to refinance at any time in the near future. The only people that will be able to refinance the day after closing their loan or within 6 months of closing are people that inherited a home through a will or were given a gift of equity from family members. Home prices are dropping around the country by 12% a year so do not think that you can refinance your home loan. More than likely if you only have a little bit of equity now it will be gone in a year and the mortgage companies will not be able to refinance you because you owe more than what your house is worth.

Post from: The Top 10 Reasons

The Top 10 Reasons You Do Not Have To Wait To Refinance Your Mortgage After Buying A Home

2. Knowing that this is going to be taken care of by them many homeowners feel that this is comforting to know that its always going to be paid on time and its one less thing for them to worry about. The majority of homeowners elect for the escrow account thinking that they are coming out ahead. But are they?

3. The answer is no. Think about it this way. You are paying your taxes and insurance 6 or 12 months in advanced to a company to hold it in their escrow account. Not your account but their escrow account. What do you think this extra money you pay on top of your mortgage payment is doing? How about earning the mortgage company interest on your money. Since your property taxes and home owners insurance are not due for another 6 months its not like they are going to give up free money. They keep your money in their account and earn interest on it. Bet you did not want to hear that. This is such a cash cow for the mortgage company servicing your home loan. Not only will they know you are up to date with your property taxes and home owners insurance but they are just letting their bank account get fatter with interest you could have been earning. All because you want them to pay your bills.

4. Grow up already. If you can write out your monthly bill to pay your mortgage on time, why can’t you write a check to your county tax office or home owners insurance company on time. I know its depressing when you ahve to write a check out for a couple extra thousand dollars to pay your taxes and insurance (and it always seems that they are due around Christmas time) but think about how much you are giving up. I’m sure you didn’t buy the home in the first place thinking you could not pay your mortgage. So why go against your thinking to help out the mortgage company more.

5. As an example, let’s say your yearly property taxes and home owners insurance are $4,000. This would make your monthly esrow payment $333. If you had a 30 year fixed rate mortgage of $125k at 6% your principal and interest payment would be $750 a month. If you escrowed it would be $750 + $333= $1,083. Now, let’s put that $333 in a savings account that earns 2.5% -3%. You can find many online bank accounts like ING Direct and Emmigrant Bank that pay you these rates. If you put the $333 away each month and over one year your $4k would earn $120 at 3% in interest. This is for doing nothing but just putting it aside each month. The $120 is almost half of a month of escrow payments. A $120 might not sound like a lot but its better than giving the mortgage company the money.

6. Going back to the mortgage company if you let them escrow your money and they put it in a savings account earning them 3% its like you are paying them 9% interest on your money. The 6% from your 30 year fixed rate mortgage and the 3% they are earning on your money in interest from your escrow. Sucks seeing that. Take your money back and earn some your self.

7. Some county tax offices and home owners insurance companies will offer you a discount if you can pay ahead of time. It might not be a lot but if you have the extra money laying around to do it then why not. If the discount is more than what you could earn in interest in your savings account then the opportunity cost to do it far out weighs not doing it. If you asked your mortgage company to do this for you they will not do it and why would they. They will not earn interest on your money and they do not care about paying less taxes with your money. All they need to do is have your check post dated one day before its due. This way they can earn maximum amount of interest off of your money.

8. One of the biggest complaints with mortgage companies is that they screw up the escrow accounts anyways. If you plan on refinancing your mortgage with a different company than your current one than the new one will have to set up a new escrow account. Whatever money you had in your previous escrow account will be sent to you in a check within 10 days after closing but now the new escrow account needs to collect more from you to have at least 2 months worth of reserves. This is a policy most mortgage companies make. They want the two months of additional cash in there in case your state or county raises property taxes or if your home owners insurance company does the same. So with our example above with $4k, they really need $4,666 laying around earning them interest. If you ask to pay your taxes and insurance separately most mortgage lenders charge you an additional cost of .25% of the loan amount to do that. On our $125k this is $312 on top of your normal closing costs. Its like they want to earn more money from you some way or another. If you plan on buying a home I hope you have more than just your down payment and closing costs saved up. If you plan to escrow you will need your down payment + closing costs (no such thing as a no closing cost mortgage) + 2-6 months worth of escrow (need to put that reserve in there for the mortgage company to make sure they have enough to pay your taxes and home owners insurance) + any money that the previous home owner has paid on the tax bill for that property up to date. This can be a shocker for most first time home buyers because they did not know about the extra money for the escrow. Sometimes this will dis-qualify them for buying a home all together because they do not have enough saved up.

9. When your property taxes and home owners insurance goes up so will your monthly mortgage payment if you have it escrowed. It might only be $10 but it does go up. You will get a notice but I’m sure its a notice you do not want to see. If you did not have them escrowed you could deal with the county office at your own time. Since you escrowed you have to make the full mortgage payment or you will get a late on your credit report dropping your credit score and possible declining you from future refinances or home purchases. If you are battling with the tax office over raised property taxes and refuse to pay them then it will not show up on your credit report until well after they are due. You have been saving the money so you have it but hate seeing the Government raise taxes just because they can. Keep on making your mortgage payment so you do not fall behind. If you escrowed you would be forced to make the higher payment.

10. Do the smart thing and budget to pay your taxes and home owners insurance on your own. By doing so you will earn interest on your money and have better control of what your money is doing. You will not have to worry about your mortgage company sending your bill to the wrong office or getting notices that you do not have enough in your escrow account to make the tax bill (it does happen sometimes). Don’t give the mortgage company any more money than you need to. It does look like our President is going to sign a law in reforming the whole mortgage industry pretty soon. All and all it looks like a good bill except for the part where he is making new home owners and people refinancing, escrow their property taxes and insurance. I hope that part of the bill gets taken out. I think he’s doing it so the mortgage lenders can have more cash reserves on hand to help them get through this financial disaster. If you need to refinance a home loan or plan on buying a home get it done before the bill gets passed so you do not have to escrow with your mortgage.

Post from: The Top 10 Reasons

The Top 10 Reasons You Should Never Escrow Your Property Taxes And Home Owners Insurance With Your Mortgage

2. The Option Arm Mortgage came with a feature that let you have a choice on what payment you would like to make each month. You would get a 15 year fixed, 30 year fixed, Interest Only, and a Minimum payment. Every single month your bill would be calculated and it would tell you what you would need to pay to stay on track with what your financial goals are. If you wanted to pay it faster than make the 15 year payment. If money was tight then the minimum payment was what you needed to make and then play catch up.

3. The problem is that nobody ever played catch up with this mortgage. A many of mortgage brokers sold this Option Arm loan and made an absolute killing doing it. These loans could make a mortgage broker some crazy money on a commission because it paid double what a normal 30 year fixed interest rate mortgage does. Needless to say that there was an incentive for these loans to be pushed onto the home owners who were not educated in finances.

4. The major selling point of this mortgage was the minimum payment option and this is why so many people took this loan. As an example a home owner looking to refinance their $250k mortgage would take this loan because they were told that the interest rate they were paying was 3% even though it was actually 8%. Many mortgage brokers told potential clients that their interest rate was fixed at 3% but how this loan worked was that you were given a 3% payment. Of course this is all that the home owner hears after hearing from other mortgage companies that rates are higher. Sounds like a better deal so you took it. Your payments on a $250k mortgage at 8% are: 15 year = $2,390, 30 year = $1,834, Interest Only = $1,666, and Minimum Payment = $1,041. How the minimum payment is figured out is you take the actual interest rate of 8% – 3% = 5%. You figure out what the interest is on the payment at 5% and that’s your payment. It sounds too good to be true and it is.

5. What many mortgage brokers did not tell their clients is how this loan really worked. The Option Arm Mortgage did not have a fixed interest rate and interest rates were typically 2% higher than the normal 30 year fixed rate mortgage. The Option Arm loans typically had a huge pre-payment penalty during the first 3 years which was usually 3% of the balance if refinanced in the first year, 2% the second year, and 1% the third year. On a $250k loan with a 3% pre-payment penalty your looking at $7,500 in costs. Not good. The saddest part is that nobody was telling their clients that if they made the minimum payment the difference between that payment and the interest only payment would be rolled onto the back end of the loan. From our example of $250k that is $1,666 – $1,041 = $625. Let’s say that you make the minimum payment the first month. Next month your mortgage statement will show a balance of $250,625. I hope you can see how this number can grow very fast.

6. Many home owners took the Option Arm Mortgage because it was all that they could get approved on at the time. Many mortgage companies would qualify them based on the minimum payment and would give them the loan and then sell it after closing. The mortgage companies knew what they were doing and knew you could never afford the house after the neg am loan re-amortized. Re-amortized you say? What does that mean?

7. The Option Arm Mortgage came with a clause that let you defer up to 110%, 115%, or even 125% of the original mortgage balance before you had to start paying back the mortgage. Going back to the $250 mortgage and using the maximum 125% this means you could defer paying $62,500 in interest before you have to pay it back. Your new mortgage balance would be $312,500. Now you have a mortgage balance that is 25% higher than what you first borrowed ,i.e negative amortizing (not moving in a positive direction in paying the mortgage off). You can’t afford to make a payment higher than the minimum payment to begin with so there was never a month where you could pay even $5 more to the monthly mortgage payment. As soon as the balance gets to the maximum amount you can defer you have to start paying it back. You receive a letter in the mail from your neg am lender, probably Countrywide, Washington Mutual, or Wachovia (these 3 mortgage companies hold the most of these loans) saying your payment is going to be changing next month because you hit your 125% mortgage payment. You can’t believe this and you pass out on the floor.

8. After awaking you look at what your new payment is going to be like. The payment is now calculated at 27 years because you have been in the loan for 3 of the 30 years. You are required to make a principal and interest payment now and are you ready…I hope you are…cause its going to suck. You take the $312,500 mortgage balance, use 8% as your mortgage rate with 27 years left. Using a mortgage calculator you get a new principal and interest payment of $2,357.12. That is $2,357.12 – $1,041 = $1,316.12 higher than what you have been paying for the past 3 years. How are you ever going to be able to afford a payment that is more than double what you have been paying. The answer is there is no way.

9. After picking you jaw up from the ground and letting your hear rate slow down a little bit you get on the phone with your spouse and start thinking about options. You don’t have the money to make the mortgage payment so that does not help. Friends and family are going to throw an extra $1k at you every month for as long as you live in this house. Your only option is to try to refinance the Option Arm Mortgage. You call up your mortgage lender and tell them about the letter you received in the mail and how concerned you are. They don’t care because you did sign a document 3 years earlier saying you would pay this loan back. The customer service person forwards you to one of their loan officers who can maybe find out a new home loan for you. Since all of your information is in their computer system it does not take that long for them to bring everything up. Most loan officers dread looking at a credit report and seeing what the original balance was on your credit report and then seeing what it is now. Your credit report shows the exact date, original mortgage balance, current mortgage balance, and the exact month you may of had any mortgage lates. Many loan officers are already thinking there is nothing they can do for you now before you start telling them anything on your new mortgage application.

10. The reason no mortgage company is going to be able to refinance you out of your Option Arm Mortgage is because a lot or all of those loans have been eliminated all together. Option Arm Loans were considered sub-prime loans and nobody is doing them anymore. Even if you could qualify for a normal 30 year fixed rate mortgage at current 30 year mortgage rates around 6.5% with a payment of $2,054 on a balance of $325k your home is probably not going to appraise for what it needs to. During the refi boom, mortgage companies could do an Option Arm Mortgage at a loan to value (LTV) of 90%. If you deferred the maximum 125% you mortgage balance would be at 115% of the original value of the home. Home prices were going up everywhere at 15%-30% so in reality at that time the mortgage companies were betting your home would go up to. You would then still have 10% equity in your home to cover you in 3 years if you had to sell. Well, that just did not happen. At the end of 2007, home values across the country started plummeting at 5%-15% every month. Most homes across the United States have seen at least a 20% drop in what their homes were worth just a year ago. Some mortgage companies can do loans up to 95% as long as you are not taking cash out but in our example above you have already deferred 125% of the original loan meaning that you owe about 35% more than what the home is worth. No mortgage company is going to help you out now because if they do and you foreclose on the house then the mortgage note they hold is 30% more than what its really worth. This is bad business for an industry that is already hurting and nobody is going to refinance your Option Arm Mortgage. Your best bet is to try to get approved on a new home loan and buy a new, cheaper house before your current one goes into foreclosure.

Post from: The Top 10 Reasons

The Top 10 Reasons You Can’t Refinance Your Option Arm Mortgage

2. During the refinance boom of 2002-2007 every single mortgage company was doing every single loan they could get their hands on. The mortgage companies had two kinds of loans, a desktop underwritten loan and a manually underwritten loan. Both were very similar in their guidelines but one had more restrictions than the other. A desktop underwritten loan was a system that the mortgage companies had connected to Fannie Mae that would approve or deny your application based on the factors you put on your mortgage application such as your income, assets, loan to value, credit score, and income. Each of those factors had a strength value that would be put into consideration when doing your home. The best factor anybody can have when applying for a home loan is their loan to value. Many think its a credit score but its not. Mortgage companies like seeing equity in the home. The desktop underwritten (DU) application would be sent and returned in less than a minute with an approval or denial. If there was a denial it would say why it was denied. In turn it would tell the mortgage broker what they need to tell the client to do for an approval. This underwriting system was and is the most flexible. You could have a 585 credit score but 35% equity in your home if your trying to refinance to pay off debt and it would approve with the best 30 year fixed mortgage rates for the day. Its like you had good credit scores just because you had some equity in your home.

3. A manually underwritten loan is one that is not backed by Fannie Mae but by investors such as hedge funds and pensions. These loans are tailored for each investor. For a loan to get an approval it had to meet all guidelines not just a couple. For instance if you wanted to do an 80/20 loan you had to have 720 credit scores, no cash-out, rate/term refinance, no mortgage lates in a year, debt to income ratio below 45%, 6 months worth of assets saved in accounts, been working for two years straight in the same profession, and there are a couple more to go with it. For a manually underwritten loan you would have to have a a credit score of 620 and above to get approved on one of these loans. As of the year 2008 these loans have pretty much gone away. During the refi boom these loans had the same interest rates as the Fannie Mae backed mortgages but now no mortgage company is doing them because their not backed by the government. Too much risk. There still is a market for them and they are considered jumbo loans now.

4. With your poor credit scores you want to make sure your bad credit is not going to be a factor when getting a mortgage. Let’s say that you are trying to refinance your home. On your credit report is a bankruptcy from 6 years ago (you bought the home 4 years ago when mortgage guidelines were very easy to get approved on so they found a loan for you), back property taxes, credit card bills in collections, late child support, and you have missed payments on your car loans. You don’t have any mortgage lates since you have owned the home (never miss a mortgage payment ever, especially after having a bankruptcy). Your credit score is a 590 (which is low, you want over 700), and all of the debts above equal up to $20k to get caught back up to date. You owe $125k on the first mortgage and the home is worth $175k giving you 29% equity in the home.

5. You call up a mortgage company and tell them that you need to take care of all of these past debts because they are starting to bother you and the courts and collection agencies are calling you up all hours of the day. You are really concerned about your bad credit history and feel that there is no way you are going to get approved on a mortgage. You talk to your mortgage broker and when they pull your credit they see your credit report. More than likely they are thinking that there is no way you are going to get approved on anything with your bad credit history. Back in the good old days they probably would have tried to open up a home equity line of credit for you but doing so would have been hard. You need to have credit scores over 680 now to get approved on a second mortgage with bad credit. The mortgage broker is not going to say anything but depending on how experienced this person is they listen to your whole story and take an application.

6. Your only chance now is to have your mortgage broker run your application through their desktop underwriting system. Remember how this system is flexible and looks at different factors and weighs them. Let’s say as an example you make okay money and your debt to income ratio (DTI) is 40% after including the credit card debts, you have two months worth of assets in accounts to show that you have some money to pay for mortgage payments (these could be in retirement, savings, checking, stock accounts, etc). This is low and they usually want to see 6 months of asset reserves. Your credit score is low at 590. Recently banks have started charging a 2% risk factor to your closing costs because of this low score and be prepared to have this rolled into your closing costs. The risk factor is 2% of the loan amount, i.e $145k x 2% = $2,900 in costs added on top of your normal mortgage closing costs. Then after rolling your past credit card debts and collections into the new loan your have a balance of $145k and the home is still worth $175k. This will give you a new loan to value (LTV) of 83%.

7. Your mortgage broker takes the time and inputs your information into the system. A loan officer who has done this before can enter all of this info in less than 3 minutes. You more than likely are going to get an approval based on some of the strengths of your application. Your loan to value is what’s going to save you. Fannie Mae’s underwriting system likes the equity and has decided to approve you because they know that after all of these debts are paid off that your bad credit score is going to go away and will slowly start going up. Plus, you still have 17% equity left in the home.

8. Most mortgage companies are being limited to the system now so if you do not get an approval at one place than you should try maybe your local bank and one more large mortgage company like Countrywide, Quicken Loans, or Chase. All of the exotic loans for people with bad credit are going or have gone away already. If one can’t get an approval for you on a mortgage than your probably going to find the same at the other places.

9. Even if you do not get an approval based on your application, the system will say what it will take to get an approval. Maybe it will say you need to have a loan to value (LTV) of 80%, or 4 months worth of assets saved up, or some other factors. This is when you need to hope for your appraisal to come in a little higher or see if you can lower the loan amount by not paying something off. There is usually one way or another that under the current guidelines a smart loan officer will find a loan that will help you clean up your poor credit scores.

10. Don’t give up trying to find a mortgage for your home. Your loan officer is trying to find you one because that’s how they get paid. You may need to be a little flexible in what you are trying to do with the mortgage but just be patient. Even if you do not get an approval at that time at least you know what you need to do to get approved on a mortgage with bad credit scores.

Post from: The Top 10 Reasons

The Top 10 Reasons You Can Still Get A Mortgage With Bad Credit Scores

2. If you currently own a home and hopefully you have owned it for awhile you could try opening up a home equity line of credit(HELOC). To open up a home equity loan you will need to have some equity in your home to be able to borrow against it. To determine how much you can borrow against your home you will need to call up a mortgage company and ask them what are their guidelines with their home equity loans. Many mortgage companies nowadays will only do a home equity loan up to 90% of the value of the home. The bank might have some guidelines that say you have credit scores over 700 and have not missed a mortgage payment in the last twelve months. Each mortgage company has their own guidelines but you want to make sure that you find the one that can give you the most help. Some mortgage companies and banks will not even do a home equity loan or a second mortgage anymore due to deteriorating home values across the United States. If you call 5 different mortgage companies, credit unions, or banks and none can help you then its going to be the same with all mortgage companies.

3. Let’s stay on the bright side of things and say that you have found a mortgage lender that is going to help you out. As an example ou currently have a first mortgage that goes up to 60% of the value of the home leaving you with 40% equity in the home. The mortgage company says they can give you a home equity loan up to 90% LTV (loan to value). You will want to take the home equity loan up to the full 90% even if you do not need the full amount. The reason is because you just never know how much you might need in the future and with home values dropping everywhere you might not be able to refinance this home equity loan in the future. Better safe than sorry.

4. A home equity loan typically has low closing costs and are usually in the couple of hundred dollars to do. This is much cheaper than redoing your first mortgage which closing costs on first mortgages range in the $3k-$4k area. Home equity loans will also close in a faster time. Most mortgage companies can have your home equity line of credit done and closed in sometimes a week. A first mortgage will take anywhere from 2-4 weeks to close mainly because there is more title work to do.

5. So how does paying off your credit card debt with a home equity loan improve your financial situation? Let’s say you have $30k in credit card debt spread over 3 different credit cards with an average interest rate of 19%. Credit cards are based on a variable rate and are calculated much differently. You are required to make a 4% monthly payment to the credit card companies because now they want their money back. So $30k x 4% = $1,200 a month in total monthly payments you need to make to them. The sad thing is that if you never use your credit card again and just make the $1,200 a month payment it will take you 16.7 years to pay off the entire credit card balance and you will pay $19,469 in interest on that $30k. So the $30k you racked up in credit card debt really costs you $49,469 over a 17 year period (you can figure this out with a credit card payoff calculator). Not good news.

6. This is where the home equity loan comes in to save you. Even if you make decent money between you and your spouse it just seems that everything you make is going right out the door to cover the credit card bills. The sad thing is that the $1,200 payment is barely even making a dent in your balances. More than likely you need to use your credit cards every month anyways to make the payments because you do not get paid in time. Your credit score might be low on your credit report but we are going to assume you can at least make your monthly credit card minimum payments.

7. The home equity loan is a 30 year adjustable loan (very few are fixed) where the first 10 years of the loan are a interest only payment period. After the 10th year it turns into a 20 year principal and interest loan whre you are required to start paying the line of credit back. The interest rates for the home equity loans are based off of the prime rate which is set forth by The Federal Reserve. Right now the prime rate is low and you can find home equity loan rates in the 5%-7% range depending on your credit score, loan to value, and some other factors. A home equity loan is also called a second mortgage. Second mortgage rates are typically higher than first mortgage rates due to a number of different factors but being a risky loan is one of the top reasons. You can borrow up to the maximum amount at any time. Some banks give you a checkbook for your HELOC and you use it just like your personal checking account. At the end of the month you get a bill showing what you used it for and a new monthly payment. Since the home equity loan is considered a lien against the home you get to write any interest that you pay on the loan off on your taxes.

8. Going back to our scenario with the $30k in credit card debt. You are able to get the HELOC with a $50k maximum line of credit but you only need the $30k to pay off the credit card debt. Remember that there is another $50k – $30k available to use at any time for you, but you only pay on what you borrow. So you are only going to be paying on the $30k. Let’s say you get approved on the HELOC for 6%. This is a lot better then the 19% you were paying on your credit card. Right off the get go you are saving 13% in interest. Now you are also getting a bigger tax write off too. Good news everywhere.

9. Your monthly mortgage payment on the $30k at 6% is $150 interest only. A easy way to figure this out is take the balance $30k x mortgage rate of 6% = $1800 which is your yearly required interest payments, than divide by 12 which equals $150. So now  you go from paying $1,200 a month on your credit cards to $150 on your HELOC. This saves you $1,200 – $150 = $1,050 a month in payments. This is exciting news for you. Over a year that is $1,050 x 12 months = $12,600 in cash back in your pocket. Imagine how fast you could have $50k saved up in a bank account or retirement account now. You can more than afford the $150 payment. If you do not put more than $1 on top of your home equity loan payment in 10 years the balance will be the same $30k because you were only paying interest. Now you have to start paying it back on a 20 year amortization schedule which will be $214.93 a month. Still very affordable.

10. The best thing you could probably do is if you are accustomed to making the $1,200 payment a month to the credit cards than you should make that payment to the HELOC. Now every single month the balance will drop by $1,200 – $150= $1,050. In a year you could pay down $12,600 of the balance. If you made the $1,200 payment every month you would have the home equity loan paid off in 2.23 years. This is much better than paying interest on credit cards for 17 years. What is also neat about the HELOC is that your payment re-adjusts every month to the new payment. Let’s say you get the balance down to $20k. Your required interest only mortgage payment will be just $100 a month. As you can see, it pays to pay more. More of your payment will be going to the balance. If you get into a tight situation one month than don’t make the larger payment but pay in cash. Once things pick back or resume withe the larger payments. You will see that your credit score wis going to jump up considerable within two months after paying the credit cards off. Do not close out your credit cards. You will need to keep them open because you have all of that time showing payments being made. Cut the credit cards up and never use them again, just do not call the bank and say you want to close them. You need to show a history of payments on those credit cards. There are two things that everybody should do at this point. Never close your home equity loan. Most home equity loans do not have a yearly servicing fee to keep it open so just keep it there. You never know when you might need that money for an emergency like a job loss or medical expenses, etc. The second is to not see this extra $1,200 a month of money as a reason to go out and buy more stuff and rack up the credit card debt again. Be responsible with your money and start paying it back. This is your opportunity to pay it back faster and you better take it and do the right thing.

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The Top 10 Reasons Why Paying Off Credit Card Debt With A Home Equity Loan (HELOC) Is Good

2. The best reason to refinance your mortgage is to lower the interest rate. It only makes sense to do this if you can lower the interest by at least 2% from your current interest rate. There are times when lowering your interest rate by .5%-1% makes sense as long as the bank gives you a no closing cost mortgage. They can do this by working the numbers around but a lot of times you will need to have a higher balance to be able to do this. If they can do it and save you $50 a month in interest and keep your mortgage balance the same then go ahead and do it. If not, then stay where you are at.

3. With the adjustable rate mortgage coming into the public’s eye over the past 10 years many people that chose to get an ARM are now having to refinance into a 30 year fixed rate mortgage. Make sure that before you refinance into a fixed rate mortgage that it makes sense to do so. Many people that have an ARM will save money their first year by not refinancing. They could be currently locked in a ARM at 4.5% and at the first rate adjustment it will only go up 2% giving them a 6.5% interest rate. Mortgage rates right now are about the same. So why do you want to spend $3k on closing costs to do it again. The only thing you need to watch out for is if you elect to stay your payment will go up. Your loan will adjust to how many years are remaining on your amortization schedule now. This forces you to pay more. As an example a $150k home loan at 6.5% on a 30 year amortization schedule has a monthly mortgage payment of $948. If you had a 5 year ARM that adjusted to 6.5% the payment recalculates to 25 years left. Now you take the same $150k at 6.5% with 25 years left and your monthly mortgage payment is $1,012. It’s only $64 more but remember that you have paid off 5 years more of the mortgage.

4. Many people will refinance their home because they want to take cash out of the equity of their home. There are many reasons why people do this. The most common reason is to roll in credit card debt. By doing so it will improve your credit scores pretty fast and take care of some of the burden of monthly credit card bills. Some other reasons are to pay for college education, weddings, boats, rental properties, dream vacations, collections, liens, property taxes, income taxes, and pretty much anything you can think of. If you ahve the equity in your home to do it there is a mortgage company out there that will will do your mortgage for you.

5. Before looking to redo a new mortgage make sure you take a look at a home equity line of credit. A home equity loan is a quick and cost effective way to have cash on hand for emergencies like a job loss or medical expenses. They usually only cost about $100 to open which is a lot less that the normal $3k in closing cost to do a normal 30 year fixed mortgage. Plus, you only pay interest on what you borrow.

6. If you are currently in a financial crisis but pay all of your bills on time you might be interested in getting a interest only mortgage on your home. Make sure it makes sense for you first. If you do not have credit card debt or any other loans on the house or cars do the numbers first. A lot of home owners get sold into doing a interest only loan (which is a good loan) by a mortgage broker because it will save them a $100 on their monthly payments, but they fail to realize that they already have a good loan on their house. A $150k loan at 6.5% has a $948 mortgage payment. A interest only payment on $150k at 7% has a $875 payment saving the person $948 – $875 = $73 x 12 months = $876 a year in cash. As you can see even though your interest rate might be higher your required payment is lower. What you are doing is not paying down the mortgage and only paying interest. Your interest rate is fixed for all 30 years but at year 10 the loan will re-amortize into a 20 year mortgage making your payment go up. Some smooth mortgage brokers and bankers will tell you how much this makes sense because they are trying for a sale. Don’t blame them because they have a loan that achieves your goals. Instead you need to check yourself and maybe not go out twice a week or start riding your bike to work or give up on cable television. All of these things will save you more than the $73. This will let you keep your great mortgage that you have and about $3k in closing costs.

7. Divorces and marriage separations are another reason. They are trying to get their ex spouse off of the loan and title of the home. There is only one way to get somebody off of the home and that is to refinance the entire loan into one persons name. Some people are finding out now that they cannot get approved on a new mortgage without their ex’s income. This can be quite the dilemma because one person usually wants to keep the house. If their is a lot of equity in the home than the spouse that is no longer living there needs to get paid from whatevr equity that has been earned. It can be quite messy and some couples are finding out that they still have to live together until the house can be sold.

8. Sometimes people have to refinance their homes to clean up their credit report for a job. Many employers nowadays are doing credit checks on possible candidates. If they see a bunch of collections, judgments, liens, child support payments, foreclosures, and late payments on bills they may not hirer you. A quick fix to this is if you have been living in your home to do a new loan and roll all of those into one payment. Your credit report will still show whatever you had on your report for 10 years but at least now all of it will show as being paid and your credit scores should start climbing up.

9. Putting an addition on a home is sometimes better than going out and buying a bigger house. If you move than you are starting over in a whole new area and you may lose out on any tax breaks you are grandfathered into. If all you needed was another 500 square feet on your home for a nursery, office, or game room, and you have the property to do it then taking the cash out of the equity of the home will be a quick and cheaper long term fix to moving all together.

10. Refinancing your home mortgage is different for everybody. Some do it for cash and some do it for a lower mortgage payment. Make sure the reason you are doing it is in your best favor and not the banks. A lot of times your current mortgage is already a good one. You might need to trim a couple other expenses in your daily life to save the extra money you need to get by. If its something you want or need to buy try going old school and saving it up in cash. This will save you a lot of money over the years and keep you from having to refinance every 3 years.

Post from: The Top 10 Reasons

The Top 10 Reasons To Refinance Your Mortgage