Mortgage people - whats the deal with these new mortgage insurance rules and offers??

[mtgldr]

We have 7 acres with a small cabin in north ga
Like to refi to lower rate and term
Can't find any lender over than local bank

Too rural
We don't finance over 5 acres

Blah blah
I've heard every excuse
You know any one besides United community that does rural mortgages ?

Rural is not the issue as much as unique properties. I recently financed a cabin in Polk county with 10 acres, a pool, a pond and a separate 3 car garage. The appraiser was able to find comparables within a reasonable distance so it worked out. If there weren't any comps it never would have worked. If the area has other cabins that are similar that have sold in the past 3-6 months or single family homes of similar size and acreage it should not be a big issue. 7 acres is not too much, 20 - 25 acres is where we run into trouble. Another thing is if the land is worth more than @ 30 - 40% of the total value it may be an issue. We've taken homes on large lots and had some of the acreage split off so the ratio of land vs homes is more in line.

If it's a very small loan you may find lenders telling you they can't do it just because it's not worth their time. I know guys that won't do a loan if it's under $100,000, I don't understand it personally.

 

[jjrock]

Great thread guys, thanks for all the input. Definitely going to do some more homework to see if there is a refi option that will actually save me money.

Have a good weekend gents

 

[mtgldr]

If I refi now and buy a house in six months. Will that hurt me?

Ken,
There are 2 things to consider. If you refinance without cost it won't hurt you equitywise but that depends on if you are going to keep the house or sell it and when you are going to sell it. If you are going to sell it and you can refinance for free then go for it. If you are not going to sell it and keep it as a second home or rental then you have time to recoup costs if there are any. The other thing to consider is this, when you refinance you sign a document stating you intend to occupy the home for at least 12 months, some lenders won't give you another mortgage within 12 months unless you have a good reason to buy another home. It's about intent. If your intent is to refinance as an owner occupant to put yourself in a better position for cash flow because you are planning to rent the home then you could meet with resistance getting a mortgage 6 months later. The way around this is to have a reason to move. In other words, you refinanced 6 months ago but now your family size, family needs, school district, neighborhood, medical needs etc.. have changed and you "need" to move to wherever. Intent is subjective so who's to say you didn't plan to live there 20 years but due to circumstances you must now move. That doesn't work well if you don't have a need or you move to the same area. Most lenders won't make a fuss once you reach 10 months but at 6 you may have some issues.
If you are selling the home then unless you are refinancing for free there's really no point.

 

[mtgldr]

Great thread guys, thanks for all the input. Definitely going to do some more homework to see if there is a refi option that will actually save me money.

Have a good weekend gents

A good rule of thumb is this. If you can save .50% for free go for it, if you can save 1.5% or more with some costs go for it, if you can save 2% of more even with standard costs go for it. My test is if you can get back whatever costs incurred within 24 or so months. If it takes 3+ years to recoup costs then that's iffy to me. When you refinance it's all about how much longer you will stay in the home, savings $150 per months is great but it's not so great is it takes 4 years to recoup the closing costs and chances are you will be moving is 5. Here's another thing to consider, if you refinance and save $100 per month and the closing costs are $2400 theoretically you break even in 24 months however... If you did this and 24 months later I see you at the home deport and you were selling your home and I said, "Hey good thing you've been putting that $100 you saved into that special savings account so when you sell your home you break even" you'd think I was crazy. What special account???? What you ended up doing was adding $2400 to your loan and then received it back $100 per month for 24 months and that $100 is long gone. The best way to counter closing costs is to either never pay them or take all or a portion of the savings and pay extra principle every month until you have reduced the balance back to where it would have been if you didn't add those costs to your mortgage. If you don't pay down the costs all you did was transfer the savings in the form or additional debt to your loan. For example, if you save $200 then keep $75 and pay the other $125 on the loan until you have paid off the closings costs that were added when you refinanced. Once that's paid then you can take the full $200 and spend / save it however you like because at that point it truly is "freed up" money. If you never pay back the closing costs you never really "freed up" those funds because when you sell you will still owe more than you did before you refinanced and because you have a higher payoff you are simply paying back the costs at that time. Yes, you had $XXX dollars more per month for XX months but chances are unless you are very disciplined you will not be able to put you hands on a lump sum of cash to offset the additional balance you have on your loan.

 

[mtgldr]

Same here, I put 20% down to avoid PMI, locked in @ 3.75%. Closing cost was somewhere around $6,000 but I was able to get 1/2 paid by the seller. My credit is above 800 and I still had to show all of the information, where it came from, account statements proving earnest money had cleared, etc.

After reading the above, maybe I also should've shopped Quicken mortgages.

Welcome to the new world of mortgage lending. Don't feel bad, if you were making $50,000 per month, putting down 50%, had $200,000 in your checking account after closing and an 825 score we would still get everything you had to provide. Fed's put some stiff rules in place for lenders due to all of the "abuse" and putting people into homes they could not afford so now everyone has to document the heck out of everything. Believe me, I don't appreciate it any more than you do. You don't hear about it but mortgage fraud is still pretty common and there are those that constantly try to get around the guidelines or lie about jobs, funds, debt etc.. because of them, everyone gets put under the microscope.

Won't matter what lender you use, unless it's a small bank or credit union using their money to lend, you will go thru the same process documenting everything you mentioned.

 

[Ken Ford]

Ken,
There are 2 things to consider. If you refinance without cost it won't hurt you equitywise but that depends on if you are going to keep the house or sell it and when you are going to sell it. If you are going to sell it and you can refinance for free then go for it. If you are not going to sell it and keep it as a second home or rental then you have time to recoup costs if there are any. The other thing to consider is this, when you refinance you sign a document stating you intend to occupy the home for at least 12 months, some lenders won't give you another mortgage within 12 months unless you have a good reason to buy another home. It's about intent. If your intent is to refinance as an owner occupant to put yourself in a better position for cash flow because you are planning to rent the home then you could meet with resistance getting a mortgage 6 months later. The way around this is to have a reason to move. In other words, you refinanced 6 months ago but now your family size, family needs, school district, neighborhood, medical needs etc.. have changed and you "need" to move to wherever. Intent is subjective so who's to say you didn't plan to live there 20 years but due to circumstances you must now move. That doesn't work well if you don't have a need or you move to the same area. Most lenders won't make a fuss once you reach 10 months but at 6 you may have some issues.
If you are selling the home then unless you are refinancing for free there's really no point.

Thanks! That makes sense.

 

[mtgldr]

Thanks for the insight. We just our E-appraisal back and are at exactly at 80% now. My wife and I have great credit, so we are doing a 7/yr at 3.25%. I see no need to buy lower as that's already a great rate/term with a payment we can definitely afford. We are going to auto-debit bi-weekly, so we hope to have this thing paid off in around 6 years. With this plan vs our current 30/yr at 5.5%, we are looking to save $50k in finance charges between the 2 loans. We don't own an expensive house or have a ton of debt, so it seems like the logical choice at our age to be debt free in around 72/mos.

I appreciate your time responding to all of us! Your detailed responses make it very easy to weigh out pros and cons!

Glad I can help, the ODT has always been a great place and I finally have something to contribute.
PM me your balance and I'll tell you how much to pay bi-weekly to pay your home off in 72 months. Bi-weekly's do accelerate the principle reduction but they won't turn a standard 7/1 ARM into a 7 year loan unless the term on the ARM is 7 years to begin with. You can cut 5-6 years off your mortgage paying bi-weekly or by making one extra payment per year but not much more. A typical 7/1 is fixed for 7 years but it's setup to be a 30 year amortization meaning it's designed to be paid off over 30 years. If you are getting a 7/1 that has a 7 year term then that would be an except to a standard ARM.

CORRECTION: I misread Wallace's post, the HELOAN for 7 years should be a true 7 year loan that will pay off in 7 years. My apologies.

 

[Wallace's]

Glad I can help, the ODT has always been a great place and I finally have something to contribute.
PM me your balance and I'll tell you how much to pay bi-weekly to pay your home off in 72 months. Bi-weekly's do accelerate the principle reduction but they won't turn a standard 7/1 ARM into a 7 year loan unless the term on the ARM is 7 years to begin with. You can cut 5-6 years off your mortgage paying bi-weekly or by making one extra payment per year but not much more. A typical 7/1 is fixed for 7 years but it's setup to be a 30 year amortization meaning it's designed to be paid off over 30 years. If you are getting a 7/1 that has a 7 year term then that would be an except to a standard ARM.

Its a fixed rate for 7yrs. I will not do an ARM. Just to many "what ifs" that can affect you payment way too much. We are doing the HELOAN, not the HELOC, so we avoid the whole ARM situation.

 

[Ken Ford]

Ken,
There are 2 things to consider. If you refinance without cost it won't hurt you equitywise but that depends on if you are going to keep the house or sell it and when you are going to sell it. If you are going to sell it and you can refinance for free then go for it. If you are not going to sell it and keep it as a second home or rental then you have time to recoup costs if there are any. The other thing to consider is this, when you refinance you sign a document stating you intend to occupy the home for at least 12 months, some lenders won't give you another mortgage within 12 months unless you have a good reason to buy another home. It's about intent. If your intent is to refinance as an owner occupant to put yourself in a better position for cash flow because you are planning to rent the home then you could meet with resistance getting a mortgage 6 months later. The way around this is to have a reason to move. In other words, you refinanced 6 months ago but now your family size, family needs, school district, neighborhood, medical needs etc.. have changed and you "need" to move to wherever. Intent is subjective so who's to say you didn't plan to live there 20 years but due to circumstances you must now move. That doesn't work well if you don't have a need or you move to the same area. Most lenders won't make a fuss once you reach 10 months but at 6 you may have some issues.
If you are selling the home then unless you are refinancing for free there's really no point.

Thanks.

 

[NWSharpshooter]

I would like to refine ours but we bought it in 2010 with a USDA loan so we don't pay PMI. Worried that if we refinance we will start having to pay PMI.

For now we are just throwing an extra 200 dollar a month equity payment at the loan.