Refi Question

[GirlBoyGirl]

Do you have to have the same amount of income that you had when you bought the house when you do a refi? Also, do you have to put anything down? Thanks!

[heatherdeg]

Confirm with mortgage rep, but...

* You should not have to put anything down to REFI a house you already own.  If you have owned it less than a year, you may have to hunt around for a bank that WILL refi.  Most banks want you to have owned the house a minimum of 6mo before they will refi nowadays.  But if you have the equity in the house, you shouldn't have to put anything out.  And frankly, if you're underwater and having trouble making payments, you still shouldn't have to--it's in their best interest to help you afford staying in the house (although occasionally some banks don't realize that and aren't particularly pleasant about it... just keep calling back until you find a reasonable human  :)  )

* Whether or not you need to be making the same amount as when you first bought the house really depends on 1) how long ago that was (because lending guidelines have changed over time); and 2) how much you were originally qualified for vs. what you spent.  So if your income back then would've allowed you to buy a $200k house and you bought a $100k house that you've now paid down to like $60k... you'll LIKELY get by with less income.  Also, if you were carrying debt when you bought the house that is now paid off, you could make less money and possibly be fine.  Last, your credit score and reserves will play into all of this, too.

A mortgage rep recently told me that as long as no more than 45% of your GROSS monthly income goes to debt, you're good.  

THAT. IS. IN. SANE.  That is WAY too much rope to hang yourself with.  But a lot of banks have been at 40% or more for years.  You'd think that the recent turn of events would put them back down to the 33% range (where they were in the early 90s)

So if you brought in $5,000/month before taxes, etc. were taken out, all of your monthly debt payments (every kind of debt--using the minimum payments, and including the mortgage) couldn't exceed $2,250 for a bank that allows up to 45% ($5,000 x 0.45).  If it's a bank that won't allow more than 40%, it would be $2,000.

The other thing is, if you refinance now and you do not have 20% of equity based on today's market value, 1) you'll have to pay PMI, plus 2) if you were paying your taxes & insurance on your own, they will now have to be included in your monthly mortgage payment--which means you'll have to shell out 3-4mo of each for an escrow account.  This is what killed us when we tried to refi in 2007 (because our taxes were $14,000/year).  See, you can roll over the PMI upfront cost (1% of the loan amount) into the loan, but you can't do that for the escrow.

Stuff to consider.

[GirlBoyGirl]

Thank you SO much for taking the time to reply, I really appreciate it!!!

[cschick]

Originally Posted by heatherdeg 

Confirm with mortgage rep, but...

* You should not have to put anything down to REFI a house you already own.

As long as you have equity at current market value. If you are underwater on the loan (depending on factors, more than a certain percentage) you will need to bring money to the table in order to refinance.

[heatherdeg]

Originally Posted by heatherdeg 

Confirm with mortgage rep, but...

* You should not have to put anything down to REFI a house you already own.  If you have owned it less than a year, you may have to hunt around for a bank that WILL refi.  Most banks want you to have owned the house a minimum of 6mo before they will refi nowadays.  But if you have the equity in the house, you shouldn't have to put anything out.  And frankly, if you're underwater and having trouble making payments, you still shouldn't have to--it's in their best interest to help you afford staying in the house (although occasionally some banks don't realize that and aren't particularly pleasant about it... just keep calling back until you find a reasonable human  :)  )

So the bolded stuff doesn't apply?  If you're underwater, they're not going to work with you to lower the payments via the interest rate when they could be facing a short sale?  Or do they not consider short sale a risk because you're making your payments?

[cschick]

Originally Posted by heatherdeg 

Originally Posted by heatherdeg 

Confirm with mortgage rep, but...

* You should not have to put anything down to REFI a house you already own.  If you have owned it less than a year, you may have to hunt around for a bank that WILL refi.  Most banks want you to have owned the house a minimum of 6mo before they will refi nowadays.  But if you have the equity in the house, you shouldn't have to put anything out.  And frankly, if you're underwater and having trouble making payments, you still shouldn't have to--it's in their best interest to help you afford staying in the house (although occasionally some banks don't realize that and aren't particularly pleasant about it... just keep calling back until you find a reasonable human  :)  )

So the bolded stuff doesn't apply?  If you're underwater, they're not going to work with you to lower the payments via the interest rate when they could be facing a short sale?  Or do they not consider short sale a risk because you're making your payments?

What I've been told by brokers is that banks are willing to work up to 105% (so, 5% underwater). Over that, you're going to need to bring money to the table OR you need to be working through a loan modification program, not on a refinance.

And I think it's pretty evident that most banks have been making loan modifications almost impossible to get. I know 1 family that has succeeded in receiving a modification, and several which have been foreclosed on after starting on and then being refused modification.

[Mulvah]

 

Edited by Mulvah - 1/29/11 at 4:00pm

[heatherdeg]

Originally Posted by cschick 

Originally Posted by heatherdeg 

Originally Posted by heatherdeg 

Confirm with mortgage rep, but...

* You should not have to put anything down to REFI a house you already own.  If you have owned it less than a year, you may have to hunt around for a bank that WILL refi.  Most banks want you to have owned the house a minimum of 6mo before they will refi nowadays.  But if you have the equity in the house, you shouldn't have to put anything out.  And frankly, if you're underwater and having trouble making payments, you still shouldn't have to--it's in their best interest to help you afford staying in the house (although occasionally some banks don't realize that and aren't particularly pleasant about it... just keep calling back until you find a reasonable human  :)  )

So the bolded stuff doesn't apply?  If you're underwater, they're not going to work with you to lower the payments via the interest rate when they could be facing a short sale?  Or do they not consider short sale a risk because you're making your payments?

What I've been told by brokers is that banks are willing to work up to 105% (so, 5% underwater). Over that, you're going to need to bring money to the table OR you need to be working through a loan modification program, not on a refinance.

And I think it's pretty evident that most banks have been making loan modifications almost impossible to get. I know 1 family that has succeeded in receiving a modification, and several which have been foreclosed on after starting on and then being refused modification.

Okay... you know, I was thinking of the loan modification and throwing it under refinancing.  Sorry--yes, I understand what you mean and that's what I meant, but not what I wrote.

I have to wonder if the recent crackdown on large number of mishandled and "fraudulent" foreclosures is going to slow the foreclosure process going forward and force banks to consider loan modifications with a little more of an open mind and willingness.  :/