help! need quick and honest advice on a difficult choice

[tamsin26]

Hi everyone,

Our ARM is set to expire in May; it was already at 7.9% (because we've been rebuilding from a lost job and crashed FICO score). 

Our mortgage is with Wells Fargo.  They have offered us a fixed mortgage at 9.7% (because our scores are 599 and 603).  They have also offered to transfer our $18,000 of credit card debt to a line of credit secured by our paid-off 2004 Subaru.  The line of credit will come in with an interest rate of 17%. 

Of course, we feel cornered.  And we don't have scores (yet) that will allow us to make decisions that feel anything like the decisions that we would want to make.

My question: if we take this offer to pay off revolving debt with this secured line from Wells Fargo, will we see a rise in FICO score that might conceivably bring down our fixed rate on the mortgage?  I don't want to sign away the car (esp. at such a high rate) if we won't see a score bump that might bring that rate lower than 9.7%.  How long would we have to wait to see FICO score improvement, if, in fact, we will?  The mortgage lender is pressuring us to do both simultaneously, because, thanks to the depressed housing market, we owe more on our mortgage than the house is worth.  We've been told that WF is willing to take a loan that exceeds the value of our home *because* we're existing customers, but the manager is telling us that WF will not keep this offer out there indefinitely. 

So, I feel rushed to take a horrible fixed mortgage.  And I feel pushed to sign on for this secured credit that may improve our score (our utils are 63 and 85% now), but, at the same time, we're told that we should act without waiting on it.

Thanks for reading my long and tortured post! 

[Anonymous]

honestly looks like a win, win. the mort only goes up 2%. i would take it especially if you think the value of the home has gone down, no one else will touch it unless you bring cash to the table and you really don't want that arm to go up and potentially excede the fixed rate they are offering.

the car loan is high, but maybe worth it short term. take the offer for nada retail value, get the cash out to pay off debt. after the score boost go to a cu and refi out of that 17% rate.

[fishbjc]

Just my 2 cents, but in this instance....I'd wait until my scores got higher and try to get a unsecured loc from a credit union like NFCU.  I don't like the idea of my automobile being secured. 

Of course, you'll get lots of great thoughts from many people, so weed through everything and do what suits you best.

[Anonymous]

can you buy some points to reduce the rate of the mortgage?

[fishbjc]

I think I'd be calling some *friends* to put me on good accts as an au to get a score jump, or loan me a bit to pay down util.  Do you have a parent on either side, a sibling, or a cousin who may be able to help you out for a few months?

I think this whole mtg. thing just sucks.  I'm sorry you're in this predicament. 

~~~~

ducky, it may *only* be 2 pts, but on a 150k mtg (an example), that's quite an increase per month, about $200 or so.  YIKES~

Message Edited by fishbjc on 03-16-2008 08:07 PM

[Anonymous]

even 200 bucks a month could equal a savings if the closing cost are low enough, vs having to refi and pay closing costs. at least this way it would be fixed and constant.

[Anonymous]

Fish the Arm is going to reset in May and will likely go as high or higher in this market. At least this way the rate is fixed and in a few years when the market improves hopefully they will be able to refi into a lower rate.

To the OP  Unfortunately you may not really have time for your scores to adjust from doing the installment loan first and paying down your credit cards. It can take 2-3 months for everything to update and your scores to fully rise. You need to talk to your banker and see how much your scores need to rise to lower your rate. It may be worth while to do the loan and pay for rapid re-scoring. Talk to your banker about this also.