Will we be able to re-finance our house next year? Need some advice!

[STEPH1079]

We have 11 more months left in our Ch.13!
We decided not to re-finance while in the bk, since our plan is to be paid back at 100%. With only being able to get an 80/20 loan on top of that, we decided to wait until our Ch.13 is over.

We are currently suffering through an ARM loan on our house right now. Our interest rate adjusts every 6 months and caps off at 14.75% We have been lucky so far. It started adjusting last year, and has actually gone down a little, but is still high - we are at a little over 10% now.

All of our payments to the Trustee have been on time and we haven't missed one. All of our mortgage payments are being paid on time. Here is my question.

When our BK is discharged in June of 2008, I'd like to go ahead and re-finance at a 100% as soon as it is discharged. I pulled our credit reports last year and got a few things cleared up. I plan on pulling it again in a few months and doing the same thing, making sure everything is right on track. I think the last time I pulled it, both of our average scores were in the 590 range.

I realize that we will still have a higher interest rate, but I am hoping it will be lower than 10-11%. We have a lot of equity in our house, probably close to 90k. Ultimately, I'd like to do a cash out re-fi and to make some needed repairs and upgrades to our house. We don't plan on moving for at least 7 more years, if even then. For example, say we owe 120k on the house. Is it possible to re-fi for 170k at a fixed rate next summer?

[Logan]

Steph,

I would not count on 100% refi unless your credit score is at least 660. With your interest rate so high I would call a couple of Brokers in your area and see what they could do now and possibly buy you out of BK. There were some lenders going to 90% to buy out BK's but alot of it will depend on your credit score and if they've tightened guidelines recently.

Also, a broker should run your credit for free and they can work with you to see if there is anything you can do to get your score up.

Also, call your current lender and tell them that you want to refi because your rate is so high. Probably won't do any good but it's worth a try.

Logan

[MTG_BANKER_OH]

We have 11 more months left in our Ch.13!
We decided not to re-finance while in the bk, since our plan is to be paid back at 100%. With only being able to get an 80/20 loan on top of that, we decided to wait until our Ch.13 is over.

We are currently suffering through an ARM loan on our house right now. Our interest rate adjusts every 6 months and caps off at 14.75% We have been lucky so far. It started adjusting last year, and has actually gone down a little, but is still high - we are at a little over 10% now.

All of our payments to the Trustee have been on time and we haven't missed one. All of our mortgage payments are being paid on time. Here is my question.

When our BK is discharged in June of 2008, I'd like to go ahead and re-finance at a 100% as soon as it is discharged. I pulled our credit reports last year and got a few things cleared up. I plan on pulling it again in a few months and doing the same thing, making sure everything is right on track. I think the last time I pulled it, both of our average scores were in the 590 range.

I realize that we will still have a higher interest rate, but I am hoping it will be lower than 10-11%. We have a lot of equity in our house, probably close to 90k. Ultimately, I'd like to do a cash out re-fi and to make some needed repairs and upgrades to our house. We don't plan on moving for at least 7 more years, if even then. For example, say we owe 120k on the house. Is it possible to re-fi for 170k at a fixed rate next summer?

You should be able to get a refinance through an FHA loan if you are looking for cash out. You should be able to get rates in the upper 6's if you were to do it today. If everything is in line and your home will pass FHA inspection. If FHA does not work there are a few other ways you may qualify as well. If you have equity in your home you can definitley do something. I think you should be ok next year.

[emoney]

You have nothing to lose by starting now. But remember that too many new applications for new credit will lower your FICO score.
I suggest that you get your credit report as correct as possible and then pay for your FICO score from the three CRAs. Then take those numbers to several loan brokers who will work for you and see where you stand today.
It is a shame that you had to miss out on the under 6% fixed rate period that ended a few months ago.
regards,
emoney

[Logan]

You have nothing to lose by starting now. But remember that too many new applications for new credit will lower your FICO score.
I suggest that you get your credit report as correct as possible and then pay for your FICO score from the three CRAs. Then take those numbers to several loan brokers who will work for you and see where you stand today.
It is a shame that you had to miss out on the under 6% fixed rate period that ended a few months ago.
regards,
emoney

You can run your credit report with a few brokers within 30 days and it won't hurt your credit score. You could also have a broker run your credit and get him/her to give you a copy that way you know what a lender will have for scores.

Logan

[STEPH1079]

I have done some research on FHA loans, and I believe we would qualify. All of our payments to the Trustee have been on time for the past 2 years. We have at least 75k in equity in our house. From what I've read, it looks like you can do a cash out re-fi of up to 85%, but I've also read where they do 95% now. Can anyone confirm this?

Even if we got the 95% re-fi, we would still be in our city's FHA loan limit.

Our Ch.13 is 100%, meaning if we end it before 36m, we would owe 100% which would be about 10k. If we wait 11 more months, we wouldn't have to pay back anything.

I am wondering if we should re-fi now and pay the Ch.13 off. I'd like to wait 11 more months, but interest rates seem to be going up. We wouldn't necessarily be out 10k, b/c if we wait 11 months we would still be making our payments to the Trustee each month.

Any thoughts on if we should wait it out or re-fi now?

[Logan]

If you have to pay a penalty if you buyout the BK then I would wait to refi. You can get the ball rolling a month or 2 before the BK so that you can close as soon as you're case is closed.

I would get into a 5, 7 or 10 year interest only ARM. What's the point of paying your Mortgage down if you're going to keep borrowing against your house and you think you will sell it in 7 years.

Actually, you most likely will have a 1st and 2nd Mtg. Get an interest only 1st and pay down the 2nd since the interest rate will be much higher.

Good Luck,

Logan

[STEPH1079]

Looks like we will wait it out until the BK is discharged. Thanks for all of the advice!

We do want to borrow a substantial amount to continue to make improvements on our house. For example, say we owe 120k on our mortgage now. Our home would be appraised at around 205k, based on improvements we've done and sales of other houses in our area. We'd like to cash out around 60k to add on and do other improvements.

Would a 5 year ARM still be a good choice in this scenario?

[MTG_BANKER_OH]

Looks like we will wait it out until the BK is discharged. Thanks for all of the advice!

We do want to borrow a substantial amount to continue to make improvements on our house. For example, say we owe 120k on our mortgage now. Our home would be appraised at around 205k, based on improvements we've done and sales of other houses in our area. We'd like to cash out around 60k to add on and do other improvements.

Would a 5 year ARM still be a good choice in this scenario?

For the most part the 5 year arm's have the same rate as the 30 year fixed loans. You are probably better off taking the security of the fixed rate in your case. There are interest only options out there but you typically have to have a decent score in order to qualify for the programs with good rates when it comes to interest only and going over 80%. With being in the CH 13 i am assuming your scores may not be all that good, have you checked them lately?

If your scores are under 620 FHA may be your best bet if you are going over 80% of the value of your home. Since it might be tough to get a second mortgage to avoid the PMI. Second mortgage lenders are credit score driven first mortgage lenders are not as dependent on score. All Conventional and FHA, loans whether you go to a large bank or a broker, they all use the same underwriting system for your loan. Therefore your answer should be about the same no matter where you go. Some lenders have different products that others do not and some are a little more lenient on some items whereas others are not. This can come into play with FHA especially if you require a manual underwrite by a human and not a computer system. The best thing to do is call a bank, and a broker and compare the estimates. Your best bet is to get referrals from friends and family or a realtor. I would not just pick up the phone book and call around.