re-finance questions

[Anonymous]

Hi everyone!

I wrote in a short while ago about my mortgage company not reporting on my credit report.  Last late was October 07, mortgage company has reported on time from Nov 07 to July 08 and then stopped reporting.  When I wrote on the forums, you indicated I did not need to wait for it to show.

So, I called a reputable mortgage broker in our area to see what could happen.  Our mid scores are 657 and 660, low scores are 631 and 650.  Mortgage broker says we can re-finance and get cash back for home improvements @ 5.5% FHA Loan.  We owe $62,500 on our home, and would want $5,000 back plus pay closing costs... new loan amount will be $71.050.  We think home will appraise for $85,000.  We went in today and completed the application, got the approval... she said not to lock in the rate as she thinks rates will be going down... she is hoping to get in the 4 % bracket...hopefully 4.875 or 4.5%.  She said we don't have to lock in until a few days from closing which could be 30 days out.  She wants to go ahead and get the appraisal going and she is submitting our app tomorrow to whomever (who does it go to?) since I brought in everything she needed up front, all our W-2's, paystubs, etc.

Called our credit union, they may be willing to do it on conventional mortgage @ 5.875% but only do 80/20 loans, so we would be right at having 20% equity for the downpay, but wouldn't get the cash back to get the new carpet, siding, etc.  Also, it would be 25 year mortgage, not 30.

I really want the lower interest rate with the cash back, so I think I will go with the FHA... are rates supposed to go lower?  What's the best % rate I can get do you think within the next 30 days?

Also, I am kind of worried about something.  I had to supply 2 months checking account statements. Gave her Nov/ Dec.  She looked on there to make sure no negative balances/overdraws, which we were fine... but in Jan had an overdraw, first time in like 2 years, for some stupid automatic payment I forgot about, and it was only for $15.  but it does show negative.  Will they ask for my Jan checking account statement, and could that void the whole loan, or you think I am ok?

We signed all of the paperwork to proceed and get the appraisal going, but I don't want to have to be responsible for the appraisal if the loan doesn't go through (which I would be).

Finally, what do you think about my situation for the FHA vs the conventional? 

I know, lots of questions, but I am on a 9% a.r.m. now, just came down from 11.5 to 11 to 10 now to 9... started in 2003 at 8.75%... so anything is better than what I am on.

Pls help! Thanks!

[ShanetheMortgageMan]

Rates have started to head down so I'd wait to lock, keep in touch with your loan officer and play it day by day.

Loan is being sent to the underwriter for review.

80/20 loans are usually 100% financing split into a 1st & 2nd mortgage, the 1st at 80% and the 2nd for the remaining 20%... these are not very common, actually do not know of any lender still offering them, but they are referred to as "80/20 combo loans".. but it sounds like your CU is using the 80/20 as a different term.

If the NSF is isolated it shouldn't be a problem, underwriters are looking for patterns of NSF's.

If you want the cash out then FHA is going to be the way to get it - if you don't want the cash out then go with conventional as you wouldn't have to pay MI like you will on FHA (assuming the mortgage term with FHA is longer than 15 years).  If you can get cash out another way than using your equity, go for conventional and get the cash the other way.

[Anonymous]

Thanks Shane. 

When I said 80/20, I meant they only do 80% loans, meaning you have to have 20% down.  I owe $62,500 now and my house should appraise for $85,000. which should be enough to apply for the conventional through the credit union but I think I want the cash back with the FHA, so I guess I will go that route.

Mortgage broker for the FHA said I will have to pay private mortgage insurance -- but she said if I did a conventional with cash back it would be like $2600 just to do the loan because of credit score in the 650's and the points they are assessing.

I will keep you posted, may need other questions answered.  Thanks for helping me. I will sleep better tonight!

[ShanetheMortgageMan]

Yeah rate will definitely be higher with conventional due to your scores.