Refi - Does it make sense for me to try? YES!!! Updated

[Phoenix-rising]

Current mortgage 30 Yr fixed:

Date Opened: 11/2006

Appraisal value: $258,000

Original balance:  $247,350

Principal balance: $242,442

Interest rate:  6.375%

Monthly Principal & Interest: $1,543

Monthly Escrow: $626 (includes $200 PMI)

Total Monthly payment: $2,169

PMI scheduled to drop off: years and years from now

Stats when we bought the house:

My FICO: 720

Hubby's FICO - don't remember.  The lender said it was better to use my credit alone due to DH BK7 back in 1/2003.  That remark didn't do anything to help DH's self esteem.

Reasons for wanting to refi:

1-Get PMI removed

2-Lower our interest rate

3-DH wants his name on the mortgage because he doesn't want all the burden to be on me

My priorities are listed in order 1,2,3

DH's priorities are the reverse of that order: 3,2,1

This was my first mortgage ever.  I didn't know anything about mortgages back then.  I know more now, but there's a lot I don't know.

Right now I'm doing everything I can to try to increase my FICO score.  I've managed to increase my score by 19 points so far.

On my 6/16 report (BEFORE):

FICO score: 708

Your Equifax FICO® score is good

I DON'T have a flag on Accounts with Balances: 9

Recent inquiries: 14

3 negatives:

1-amount owed on revolving credit ($37k)

2-recent new account (7 mos ago)

3-high util (35%)

Since then the balances have gone down by a few k and my CLs have increased a few k.

Today 7/13 (AFTER):

FICO score: 727

Your Equifax FICO® score is very good

I DO have a flag on Accounts with Balances: 10

Recent inquiries: 10

3 negatives:

1-amount owed on revolving credit ($32.5k)

2-recent new account (8 mos ago)

3-high util (30%)

Things I can do:

Wait until December when the last new inq drops off.

Pay down the util/revolving credit. (Not so sure I can come up with $20k by December)

Reduce the number of accounts with balances.

I hope that's enough information for someone to make some sort of recommendation (even though I haven't posted any of DH's stats here).

Message Edited by Phoenix-rising on 07-13-2008 11:55 AM

Message Edited by Phoenix-rising on 06-11-2009 11:23 AM

[Phoenix-rising]

Here's the short story on DH:

BK7 in 1/2003

He gets dings for:

Public record (5yrs / 6mos ago)

Collection ACs (5-7) (most recent 1yr / 5mos ago)

ACs w/ serious delinq (2-4)

ACs with derog info (5-7)

High util (39%)

His positives are:

Established history (16 yrs / 7 mos and avg age of 6 yrs) (ALSO shows as a Neg on one report)

Most recent late (3yrs / 1 mo ago)

Recent use of credit cards

On 6/20 his FICO scores were TU - 661 and EX 656.

On 7/5 his EQ was 635.

He currently has one open mortgage loan.  He's joint on that loan with his ex-wife and they split the payment 50/50 as per the divorce agreement.  That loan balance is at $54k. The original loan was for $65k.

We're working on GWing and PFDing some of the collection ACs. We've had limited success, but we don't plan to give up any time soon.

I'd appreciate any advice on what we might be able to achieve on a refi with either me alone or with the two of us together.

OH, and I know absolutely nothing about refinancing, YET.

[ShanetheMortgageMan]

If your balance is $242k and your appraised value is $258k, you won't be able to remove mortgage insurance... you'll either have to:

1. Pay mortgage insurance again

2. Pay a mortgage insurance buyout fee which is an upfront cost of usually 1% of the new balance or so, or take an increase in the interest rate

Plus if you are in Phoenix (just a guess) you'll need to keep your loan-to-value at 95% or less as lenders are not going over 95% LTV with conventional financing in declining markets.  If you are not in a declining market then you can refinance up to 97% LTV with conventional financing but there is a rate adjustment when going over 95% LTV.

Unless you pay buydown points you probably won't be able to reduce your interest rate by much, .125% or .250% tops without paying points.  Depending on how long you are planning to own the home a refinance could make sense... however keep in mind MI rates are now higher than what they were in 11/06, so even though refinance for a lower rate would help lower your P&I payment, your MI payment could increase, negating the savings you'd have from a lower interest rate.

You might be able to add your husband to the mortgage just by calling up your mortgage servicer and asking if they'd allow it.  Explain the situation, the details of his credit, income & monthly debtds, and see if it's something they'd be OK with.  There would be some forms you have to fill out and would likely also have to add him to the title of the home (if he's not already on there), but I've heard of lenders allowing someone to be added to the mortgage (it's one more person accountable for the debt in their eyes).

[Phoenix-rising]

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ShanetheMortgageMan wrote:

If your balance is $242k and your appraised value is $258k, you won't be able to remove mortgage insurance... you'll either have to:

1. Pay mortgage insurance again

2. Pay a mortgage insurance buyout fee which is an upfront cost of usually 1% of the new balance or so, or take an increase in the interest rate

Plus if you are in Phoenix (just a guess) you'll need to keep your loan-to-value at 95% or less as lenders are not going over 95% LTV with conventional financing in declining markets.  If you are not in a declining market then you can refinance up to 97% LTV with conventional financing but there is a rate adjustment when going over 95% LTV.

Unless you pay buydown points you probably won't be able to reduce your interest rate by much, .125% or .250% tops without paying points.  Depending on how long you are planning to own the home a refinance could make sense... however keep in mind MI rates are now higher than what they were in 11/06, so even though refinance for a lower rate would help lower your P&I payment, your MI payment could increase, negating the savings you'd have from a lower interest rate.

You might be able to add your husband to the mortgage just by calling up your mortgage servicer and asking if they'd allow it.  Explain the situation, the details of his credit, income & monthly debtds, and see if it's something they'd be OK with.  There would be some forms you have to fill out and would likely also have to add him to the title of the home (if he's not already on there), but I've heard of lenders allowing someone to be added to the mortgage (it's one more person accountable for the debt in their eyes).

---

Thanks for the reply, Shane.

We're not in Phoenix, we're in south Louisiana.  We've made some improvements to the house and other houses in this area have risen in value over the past 2 years.  We're guessing (hoping) it might appraise close to $290k.

When we bought the house, the lender mentioned the possibility of getting a 2nd mortgage to cover the 80/20 difference so we'd be paying toward a 2nd mortgage instead of PMI.  We were thinking along those lines if the house doesn't appraise high enough.

Does that make sense?

[ShanetheMortgageMan]

If your home is worth $290k then at least you could reduce the amount of monthly mortgage insurance you'd have to pay if you just take 1 new loan, and it's possible you could do a combo loan refinance to avoid the mortgage insurance completely if you find a lender who is OK with your husbands FICO scores as 2nd mortgages usually need pretty darn good credit & scores.

[Phoenix-rising]

Let me see if I've got this right?

IF our #1 priority is get DH on the mortgage, we should just ask the lender.  There's a chance we could get on DH as easily as that.  (I'm pretty sure the initial lender had intentions to sell the loan and that's why they didn't want DH on the mortgage.  It was sold to GMAC the month after we closed.) 

IF the house value is up to $290k it might be worth the effort to refi just to get lower PMI.

IF there's a chance we might relocate in the next 3-5 years, then what?  Would it make any sense to refi?

Should we get a reappraisal first so we know what we're dealing with?

[ShanetheMortgageMan]

Yeah I'd try asking the lender first, it's free (or the cost of recording some documents) vs. refinacing carries $2k+ in costs.

I can tell you your PMI will be about $150/mo less if you were to refinance due to the lower LTV.  At 36 months of $150/mo savings that's $5,400 and would very likely be worth it to refinance.

Your new mortgage lender would need to order the appraisal as they need to be the "client" listed on it.  The one who orders the appraisal is the client.  Plus the new mortgage lender might require someone from a specific approved appraiser list to do the appraisal, and you wouldn't want to have to pay for two different appraisals if not needed.

Message Edited by ShanetheMortgageMan on 07-13-2008 10:38 PM

[Phoenix-rising]

Thanks so much for the information Shane.  I really appreciate it.

Just for the record I checked my records and the original estimate on our house was $264,900.  Our purchase price was $255k and we paid down 3%.

I think the house would have to appraise at around $303k for us to get rid of PMI completely.

Now that we have this input from you, we can make a more informed decision about what to do.

[ShanetheMortgageMan]

You are most welcome, good luck with the refinance and all!

[Phoenix-rising]

Resurrecting an old thread here.

I gave up on the re-fi plans back in July, but I decided to pursue this again because the interest rates look so darn good and a friend of mine just refinanced her 6.?% mortgage for 5.?%.

I was on the GMAC web site last week checking out our mortgage and saw that it's possible to apply for a re-fi online.  I started filling out the forms and saved but didn't hit SUBMIT.  I got cold feet again.

Things have changed since July in that my FICO score today is 758 (down a little from last month since some account balances are a little higher due to Christmas spending).

DH's FICO scores are TU-693 / EQ-681 / EX-679

The mortgage is still in my name only.  We've had the loan for over 2 years with perfect payment history.

Is a re-fi with the same bank just like getting the mortgage the first time?  Do they check EVERYTHING all over again?  Do they re-appraise?  Right now my util is around 24%.  DTI ratio to refi in my name only would be pretty steep.

I'm nervous.  Should I hit the SUBMIT button now or maybe shop around first?  And should I apply in my name only or along with DH?

Post #1 on this topic has just about all the relevant info.