iboughtanightmare asked:


I like many others am in financial trouble and am having problems paying my mortgage.
I’m thinking about refinancing my home (for no more than it’s current market value) and taking my equity so I can pay off my car and a credit card.
If I do that, and still end up facing foreclosure in the future - what can happen to me besides having my credit ruined?
I live in Arizona - the law here states that - “A lender may not bring a deficiency suit against a person who lost a property that is 2.5 acres or less at a foreclosure provided the property is a single one-family or a single two-family dwelling.”
I fall into that catagory. Basicly, I’m wondering about future pit-falls if the worst case scenerio happens and I do end up foreclosing after I do a cash-out refi.

ADRIAN

Carrie Reeder asked:


Refinancing your mortgage can save you money through lower interest rates and smaller monthly payments. You can also choose to cash out all or part of your equity to pay off bills or to remodel your home. But which lender is best for you really depends on your credit.

For those with near perfect credit, a prime lender is your best choice for finding a low rate. But for those with some credit problems or who want flexible loan terms, then check out a sub prime lender for competitive financing.

Benefits Of Prime Lenders

Prime lenders usually offer the lowest rates with the lowest fees, but only to those with excellent credit. That means no late payments on mortgages or other loans in the last 24 months. You should also have a debt ration of 36 or less, meaning your monthly debt payments should equal 36% or less of your monthly income.

With a few late payments, you may still get approved with a prime lender. But your rates will probably be a percent or more over the conventional rate. You may offset this with a large equity base or large cash assets.

Benefits Of Sub Prime Lenders

Getting approved with a sub prime lender is much easier than with a prime lender. Even if you have had a bankruptcy or foreclosure in the last few months, you can get a refi mortgage.

You can also avoid the cost of private mortgage insurance premiums with a sub prime mortgage. Prime lenders require insurance if you have less than 20% of equity in your home. Sub prime lenders also offer a wider variety of terms and loan options.

Finding The Best Refinance Mortgage For You

Even within each category of lender, there is a great range of rates. In order to find the lowest costing refinance package, you really need to request mortgage quotes from several lenders before making a decision.

There is also the trend for financial companies to deal with both types of lending. So don’t rule out conventional lenders if you are looking for a sub prime mortgage.



SHELTON

rjain15 asked:


My lender is giving my 5K back for a mortgage of prime minus one for few months and then he will refinance. He says that I will get huge incentive and then he will refinance at almost no cost.
Any comments or suggestions… ?

MONTE

Devora Witts asked:


If your debt monthly payments including your mortgage installments have become unbearable and you fear you might loose your home to repossession, you might want to consider a refinance mortgage loan. Following you will learn when refinancing is the solution and what type of loan you should request.

Refinancing Explained

When you refinance, you request a loan in order to pay off an outstanding loan. This makes sense if the new loan has better terms. The most important thing is that the resulting monthly installments should be lower than those of the previous loan. However, this reduction can be obtained in different ways.

A reduction on your monthly payments can be the result of a lower interest rate, lower administrative costs and insurance costs, longer repayment programs or a combination of all the above. The nature of this reduction is important since it will determine whether you will be saving money by refinancing or just lowering your monthly payments but by means of adding an extra amount to your debt.

In any case, if you are concerned about the possibility of loosing your home due to your inability to meet your monthly payments, the key is that you make sure that by refinancing your monthly payments will be reduced sufficiently so you can afford them without sacrifices.

The Bad Credit Issue

Even though refinance home loans are secured loans guaranteed by the same asset as the outstanding loan you are planning to pay off, your credit score and history will be important for the lender. If not as regards to loan approval or denial, at least, your credit will determine most of the loan terms, including loan amount, loan length and interest rate.

Since a bad credit score will not let you get a lower interest rate (unless your outstanding home loan was requested in worst conditions), you will have to request a longer loan length in order to get lower monthly payments. Bear in mind though, that a longer loan length will also push your interest rate upwards.

Nevertheless, given your current situation, you can not be conservative enough. Since you never know what unexpected situations may arise, ask for the longest loan length possible. You can always refinance your mortgage loan again in the future if things take a turn for the better.

Other Things To Do

Do not relax once you have refinanced, there is a lot to do yet. You may have gone through a difficult situation but if you had been prepared you would not had to resort to refinancing. Learn how to make a budget and stick to it, cut all unnecessary expenses till your overall situation improves. Every extra cent you make, you need to destine it to repaying your debt. And as the situation gets better and your credit score improves, you should refinance your mortgage again on better terms.

Summing up, Refinancing your home loan with bad credit might be the solution to your problems. You just need to make sure that by refinancing you will get lower monthly payments that will ease your financial situation enough. But refinancing is the first step; you should do whatever possible to improve your credit score and history in order to recover your ability to get finance with better rates and conditions.



CHUCK

Alan Lim asked:


Before you can successfully get yourself a home loan refinance, lenders usually need to evaluate whether or not you qualify for the said loan. Expect them to go through your credit records, ask you for supporting documents to prove your financial capability, your income, and your collateral. So, to save yourself time, here are some guidelines to help you determine whether or not you qualify for home refinancing.

Your credit history

You should probably know that your credit history has a lot to do with loan approval. If you intend to get a home loan refinance anytime soon, make sure everything about your credit rating is in order. The better your credit history and rating is, the easier it can be for you to get approved, more so to get a good interest rate. Do not get the wrong idea though. People who have poor credit histories may still get themselves some refinancing, but the interest rates can be relatively steep.

If you are planning for a home loan refinance anytime soon, it should also be a good idea to get a hold of your credit reports. Find out how you stand as of the moment, and look for ways to improve your current records. Try to come up with a means to pay your credit card debts, avoid new loans, and pay off all the smaller debts. Do not open a new credit card account, no matter how tempting it would be, as it can only add more to your financial burden.

Your employment or source of income

Lenders usually favor those who have stable sources of income or employment. Remember that lenders are in the business to get them some income as they offer you some home loan refinance, so they will only bank on those who can religiously pay their dues. It is for this reason that they mostly hesitate on those who shift jobs too much, or impose stricter rates to balance out the risk. A stable income is proof that you will be able to pay off your debt. The higher your income, the higher the loan you will qualify for.

Here is how lenders usually determine whether or not you are a low-risk borrower. They take a good look at your income, and determine just how much of it goes to your monthly payments and other loan payables. If your total debt is more than 38% of how much you earn monthly, then you are considered a potentially good borrower.

Your home equity

Home equity, simply put, is the quantitative difference between your home’s assessed value and the balance that you need to pay from your mortgage. As your home equity increases, you are getting closer to being free of your mortgage loan. The lower the remaining balance you need to pay, the higher loan you can borrow for your home loan refinance. Note that lenders usually limit your loan amount to up to 80% of your outstanding balance.

Save yourself and your lender the time it will take for evaluation. Think of your financial circumstances first and keep these three in mind. If you are qualified, then go ahead and get your home loan refinance from a reliable mortgage company.



STUART

jinxies asked:


We have a 1st mortgage & equity line of credit (maxed) and about $1500 revolving credit balances each month (not including utilities, food and incidentals) with not enough coming in to support it. Looking for a lender in hopes to refinance the 1st & ELOC with no avail. Thinking of asking our current lender to do a Mortgage Modification but not sure if we will qualify. We need to lower our 1st & ELOC to be able to start paying on the credit cards but it’s a lose, lose situation. My husband is talking bankrupcy…we’ve never been late on any payment but it’s now coming close. We have 2 kids & a beautiful home…I’m scared. I’ve been trying to get a job but no one is calling back. Even with that, what I’ll make will only cover groceries and gas for the month.

ANDERSON

Kristin Abouelata - Home Loans asked:


Did you ever wonder what a great credit score really gets you in the mortgage market? Many people think it means they get better pricing. Unfortunately, that’s not really the case. It mostly just means your lender won’t have to hassle you for as much documentation to do your loan. In fact, no documentation may be required from you at all if it’s a purchase and you put enough money down. I’ve heard many clients say, “I’ve got great credit, so quote me your best rate.” Good credit can’t directly influence the rate. But it can influence your mortgage loan officer to give you better pricing. If your lender can be assured your loan process is streamlined and smooth, and that they won’t have excessive hours to devote to the process, they may be able to quote you a more competitive rate. Much about a quoted rate depends upon the man hours it will take to make your loan, the loan amount itself and how quickly you can close.

Lenders usually have a minimum percentage of income they are supposed to make on a loan. That percentage is flexible, but only to a certain extent. For instance, the loan amount size is a huge contributing factor. If you’ve got a really large loan amount, your lender doesn’t need to have a feeding frenzy on your loan. The percentages lower because the payback is higher.

However, if you’ve got a really, difficult loan and a modest loan amount, you can expect higher rates or discount points. Or fees. Some lenders may raise your fees to make you think you’re NOT paying as much. But you are. You have to in order for the lender to cover the cost of doing business.

Here’s the secret. Closing a loan is actually a very involved process. Lenders can’t do the loans for free or break even profit because it’s a business and their in it for profit. Plus, there are many people involved in the loan process that you aren’t even aware exist. Processors, closers, post closers, insurers… a staff of thousands! Ok, so maybe not thousands, but your file is probably touched by 5+ different divisions (at minimum) within a mortgage company. Since it is a business, the lenders must make enough money on the loan to cover their costs and actually make money, too. The lender also pays outside parties for services too, like the appraisal, flood cert and automated underwriting system. Paying your originator is just the beginning of the mouths (and families) being fed by your business. It ain’t cheap to close and sell a mortgage.

When you examine all the fees and charges on a good faith estimate, your lender should be able to tell you exactly where that money is going and how it is to be spent. Your lender should have no qualms in telling you what costs are associated with your loan, or which funds cover third party expenses that your lender incurs by doing your loan. And some of that money will be profit. Much of it may be. But remember, you’re not just paying the salary of only one person. However, you shouldn’t pay too much for your loan. After all, the lender will make additional profit on the loan when it is sold on the secondary market.

A good lender will validate any fees and charges for you and should make you feel ok with the fees. If they don’t seem reasonable or fair, always ask questions. If you don’t like the answer, say so. And if you still don’t like the answer, than look for a new lender. Buying a home is such an important purchase and you should feel good about it.



NESTOR

Dale Rogers asked:


While the ‘New Congress’ puts a full court press on the first 100 hours of control, almost three weeks have been spent on a “non-binding” resolution loaded with political positioning and posturing for future replays. High fives all around for that. The minimum wage plan has not passed after much conversation and no action. If this implosion continues in both houses nothing will be accomplished. Election run up time in a lame duck presidency gives cause for Congressmen and Senators to show up in roller blade gear. With helmets, elbow pads, kneepads and thick gloves all around in full dress in preparation for all the sharp elbows and cross body blocks to fight for positions that are nearest to TV cameras for the evening news cycle. This gives the appearance of a lot of motion but in the end no real action. Lip service abounds. With moistened fingers heisted in the prevailing winds to gage the most recent polls, positions change like a fresh pair of socks while the public remains not amused. When Congressmen and Senators job performances are rated below ambulance chasers, something is afoot. The old bromide of “reaching across the aisle” again has proven to be a joke. Once again the minority in the Senate can bring things to a slow grind. Still looking for some forward thinking leadership. How long has it been since the last one?

While the ‘New Congress’ fiddles away valuable time Thursday the 15th of February 2007 the limit will stop future originations of Reverse Mortgages under the federally insured Home Equity Conversion Mortgage. This has been a very successful program. It has been refined over many years to what it is today. Previous private sector programs in many cases were ripping seniors off with high fees. While Congress may put a temporary lift on the 275,000 units per year of Reverse Mortgage cases that will be a Band-Aid at best. If members of the legislative body can stop with the elbows and knees to the groin to pass this Senior Based Program that would show some leadership. Like many entitlement based programs it costs taxpayer’s money. This program, however, unlike FHA insurance on the 203(b) residential program with high foreclosure rates, is carrying itself. This program HECM (Home Equity Conversion Mortgage) utilizes the PROMISE of the full faith and credit of the U.S. Government to render what amounts to a very safe investment for institutional investors. This Mortgage Program HECM comes with a low Loan-To-Value ratio thereby building in a high degree of safety for lenders. Factors such as the value based on an appraisal, the current interest rates, the borrower’s age and the amount of equity the borrower has in the house have all been refined to give the seniors a great program while not costing the government an arm and a leg. This is all predicated on low probability of DEFLATION.

Many seniors are being forced out of their homes due to rising property taxes and insurance costs and upkeep while remaining “property poor”. Their home is worth a lot due to good appreciation over time and has low or no debt. In many cases many seniors are not able to pay a large mortgage payment with lower retirement incomes. So the run of the mill Home Equity Loan or HELOC is not the answer-it requires monthly payments. HECM, on the other hand, is a viable alternative for seniors. This mortgage device allows a 62-year or older seniors to pay off any small mortgage, pay off small outstanding credit cards and other installments and catch up on deferred maintenance of their home such as roofs and heating and air conditioning. This can be a lump sum cash payment, an equity line of credit or a monthly check with automatic deposits or a combination of all of these options. There will never be any monthly payments for the seniors. Rising property taxes and insurance as well as other maintenance issues are forcing many seniors to sell and force them to settle for something less desirable in their twilight years.

All family members are invited to participate in the information aspects of the HECM program so that the beneficiary and the family are all on board with the program. Credit histories past or present do not come into play in the underwriting of the loan, as the recipient never has to pay any type of monthly payment. When the participant leaves the home and will not be returning for whatever reason, then a settlement is effected by selling the home and the loan is paid off and any remainder goes to the borrower or the borrower’s estate. Not one penny beyond that will be owed beyond the home’s sale price less closing costs. Actuaries who ply their trade for life insurance companies have calculated life spans and such to a balance for all involved the Government, Institutional Lender and the borrower participant. HECM is selling this balanced program. Tweaks are expected as the program matures as with any evolving mortgage product.

With the HECM program seniors are able to stay in their homes and live out their years while keeping up on deferred maintenance, rising property taxes and insurance without looking for a handout. It’s a program that has been proven over time to make sense and in many cases has brought great comfort and piece of mind to this aging population segment.

A Band Aide is not an answer. A long-term comprehensive plan can be put into play without taking on the cloak of an entitlement program. This makes sense for all parties and genuinely helps seniors. If the number would be moved to the 500,000 units per year range with built in increases say over a ten year period this would bring a decided stability to the program and to the seniors engaged in fighting to keep their homes.

Everyone has representation in the House of Representatives and the Senate. Seniors vote and vote in very high numbers. Many seniors who have been forced to sell are facing a very soft market in many areas and would receive a further reduction of equity at the closing table while facing being uprooted and starting over with something they really don’t like.

It’s important to urge the House of Representatives to pass this HECM number limitation to a level that allows more senior homeowners to participate. 500,000 units per year would be a good start. Raising the loan limit closer to the Fannie Mae limits would help seniors even more. The rubber is now hitting the road. While the ‘New Congress’ fiddles seniors are being left in the dust. Motion does not equal action. Watch the sharp elbows and knees to the groin. Congress is in session. Let’s pray (am I allowed to say that?) they can come out from under the ether and pass this important continuation of the HECM. Let’s pray some more.

Dale Rogers

http://www.brokencredit.com

http://www.sellerhelpsbuyer.com



RONALD

Kristin Abouelata - Home Loans asked:


Have you been reading the papers or listening to the news lately? (Ok, I guess you have been because you are reading THIS paper. Just call me Master of the Obvious). Rates are low. Actually, rates are really quite low. You may be considering refinancing in the next couple of months. Maybe you need equity from your home but you’re hesitant to touch that great rate you got a couple of years ago. Or, maybe you’re sure you want to refinance but are waiting for the latest news from the "Fed" before you take the plunge. Well, there are a few reasons why you may want to take action sooner than later.

Fannie Mae and Freddie Mac, the major lending institutions for non-government loans, have recently announced that they will move to risk based pricing in the new year. What is risk based pricing and why do you care? This announcement means that loans with higher risk characteristics will receive a higher rate. In the recent past, risk based pricing was typically reserved for non-conforming loans, or loans that were outside conventional guidelines. In 2008, you can expect to see risk based pricing passed on to conforming loans. What constitutes a higher risk? First and foremost is your credit score. If your loan to value is greater than 70% - your rather healthy credit score of 680 won’t get you the same rate that your neighbor’s 720 credit score will get him. Same goes for your sister and her 620 credit score. Her mortgage rate will be much higher than yours. Fannie and Freddie will assess tiered "hits" or cost increases to borrowers based upon their credit scores. That could make a huge difference in the rate you will be quoted in December and the rate you would be quoted next year. It may also mean you might not qualify for a loan tomorrow that you would qualify for today. And now lenders will have to pull your credit to actually give you a hard and fast quote. If you have a good idea of what your credit score is, you can compare lender’s quotes more effectively. But if you haven’t a clue as to what your credit score is, a lender will have to know it in order to be on target with a quote.

And there’s more. Although pundits say the rates will stay low (and no, I’m not a pundit), another cost will be passed on to the consumer that will begin to be realized by many lenders very shortly. As a result of recent increases in foreclosure rates, Fannie Mae has decided to increase its margin in order to maintain adequate capital reserves for federal regulators. And Freddie Mac is expected to follow suit, although the announcement is not official as of the date I am writing this column. It may be official by the time you are reading it. Even if rates remain stable through the upcoming period, increased margins mean higher effective rates to consumers. Thus, if you are mildly considering a refinance for whatever reason, you should really decide now if it’s right for you. Waiting too long could cost you money.

Of course, refinancing has to make sense. You need to consult with a reputable mortgage lender who can help you analyze your options and choose what’s right for you. You need to weigh the savings against the closing costs and also take into consideration how the refinance may or may not benefit you. But, don’t drag your feet. Do your homework. Get your ducks in a row. And finally, the risk based pricing and all that other stuff I discussed will also apply to new home purchases (but not select first time homebuyer programs- they remain the same). Whatever type of mortgage you are considering, now is the time to investigate before the changes occur.



JACKIE

Dark Magician asked:


I understand equity is value you have built up in your home by making loan payments but why is it required to refinance? Is it because lenders want to see you are in the process of paying off the loan instead of simply refinancing frequently?

Thanks

TEDDY