Mortgage refinance is next on my to-do list

[Anonymous]

Hey folks...Now that I have gotten my auto loans refinanced to a good rate, the mortgage is next. Since my loan was modified 3 times it's now a 40 year term at 6.75%. My goal is to take at least 20 years off the term and get the rate down under 5% or better. The mortgage is over 10 years old and I have never refinanced before so I am not aware of what is needed to do this. The good news is I am not upside down on the loan. The bad news is my mortgage scores are all 40-60 points lower than my Fico 8 scores. I'm guessing it's due to the many late payments on my loan and perhaps the modifications. So, here's my 5 questions for now:

  1) Are the score requirements for refi the same as for a new mortgage?

  2) What score should I aim for to get a 20 year loan under 5%?

  3) Is there any way to focus on improving the mortgage scores specifically other than paying it on time(no lates since last April).

  4) My loan is a fixed conventional with Chase. Is there a streamline refi option on conventional loans? Am I better off looking for a new loan provider or would it be                  easier to refi with my current bank?

  5) Is HARP an option for me? I know I can't have any lates in the last 12 months so I will be there in 3 months.

        Thanks

        Brian

As of 12/28/15 - EX Fico 2 569 | TU Fico 4 553 | EQ Fico 5 537

[cartwrna]

Unfortunately, with your scores your looking at FHA territory I'd think. FHA requires a minimum midscore of 580, but the lenders who go that low are far between. Most lenders have an overlay of 620-640 midscore, but you can find ones who go to the 580. What is your current LTV? If 80% or less then you won't be required to carry PMI which is a bonus, because with FHA if PMI is needed it's for the life of the loan. FHA rates are going to be better than conventional, I believe in the 3.875% range for a 30 year and 15 year is a bit lower. They are also a little more relaxed on the bumpy parts of a credit profile. With conventional you need a midscore of 640+ if I remember correctly. With your current scores in your signature your not eligible for a refinance yet. Yes, scores needed for a refinance are going to be the same as for a new mortgage, you will do the same process as when you originally got the mortgage, only difference is you already own it. You will be required to get inspections/appraisal etc. good luck and hope this helps

[Anonymous]

Thanks for the response cartwrna. I know my scores are low now...I've only been rebuilding for a couple months. I'm thinking 6-9 months for a timeline. As for LTV, not sure but I know I owe less than it is worth. Would I qualify for a sub 4% rate with a 620 mid score? I'm pretty confident I can get there by summer. My Fico 8 scores are all up since I pulled my 3B report. I can't pull another until March. If I am over 600 by then that tells me another 90 days or so could get me the remaining 20 points I need. Are the terms any different for HARP? Thx!

[ejbmvp]

my recommendation is to not go by the fico 8 scores, most mortgage lenders are not using those (yet). Instead use the scores below the fico 8 in the "mostly used by mortgage lenders".  As a target score, it is a combination of the score and your LTV. If you have more than 10% equity you could possibly get by with something around 660, as long as the credit report is clean. In general without seeing a credit report I would say target 680, but the higher the score the better the rate. As for FHA, no matter your LTV you will be required to have mortgage insurance but the interest rates will always be better than conventional (i see an average .50% better daily). So pick your poision, but this is where a good LO will be able to break down the costs of each and the overall pros and cons during the term of the new mortgage.

[cartwrna]

Re: Mortgage refinance is next on my to-do list
‎02-01-2016 06:54 AM

my recommendation is to not go by the fico 8 scores, most mortgage lenders are not using those (yet). Instead use the scores below the fico 8 in the "mostly used by mortgage lenders". As a target score, it is a combination of the score and your LTV. If you have more than 10% equity you could possibly get by with something around 660, as long as the credit report is clean. In general without seeing a credit report I would say target 680, but the higher the score the better the rate. As for FHA, no matter your LTV you will be required to have mortgage insurance but the interest rates will always be better than conventional (i see an average .50% better daily). So pick your poision, but this is where a good LO will be able to break down the costs of each and the overall pros and cons during the term of the new mortgage.

The highlighted portion above, is not true. With FHA, as long as you have greater than 20% equity in the home you are not required to carry PMI. That is per the FHA regulations book. Hope that helps.

[ezdriver]

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@cartwrna wrote:

Re: Mortgage refinance is next on my to-do list
‎02-01-2016 06:54 AM

my recommendation is to not go by the fico 8 scores, most mortgage lenders are not using those (yet). Instead use the scores below the fico 8 in the "mostly used by mortgage lenders". As a target score, it is a combination of the score and your LTV. If you have more than 10% equity you could possibly get by with something around 660, as long as the credit report is clean. In general without seeing a credit report I would say target 680, but the higher the score the better the rate. As for FHA, no matter your LTV you will be required to have mortgage insurance but the interest rates will always be better than conventional (i see an average .50% better daily). So pick your poision, but this is where a good LO will be able to break down the costs of each and the overall pros and cons during the term of the new mortgage.

The highlighted portion above, is not true. With FHA, as long as you have greater than 20% equity in the home you are not required to carry PMI. That is per the FHA regulations book. Hope that helps.

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Please post a link to that. As far as I know, every FHA loan requires PMI ... and there are two PMI components with FHA loans. I'd love to be proven wrong.

[cartwrna]

You are correct thus far, reading through the handbook if you are equal to or less than 90% LTV you have MIP for 11 years. Greater than 90% LTV it's for duration of the loan. I will dig deeper, almost certain I saw where it would not be needed if putting 20% down which would put you at 80% LTV. I may be mixing it up with another program though.

[Anonymous]

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@Anonymous wrote:

Hey folks...Now that I have gotten my auto loans refinanced to a good rate, the mortgage is next. Since my loan was modified 3 times it's now a 40 year term at 6.75%. My goal is to take at least 20 years off the term and get the rate down under 5% or better. The mortgage is over 10 years old and I have never refinanced before so I am not aware of what is needed to do this. The good news is I am not upside down on the loan. The bad news is my mortgage scores are all 40-60 points lower than my Fico 8 scores. I'm guessing it's due to the many late payments on my loan and perhaps the modifications. So, here's my 5 questions for now:

  1) Are the score requirements for refi the same as for a new mortgage?

Typically yes, however sometimes a cash-out requires a slightly higher score.

  2) What score should I aim for to get a 20 year loan under 5%?

Depends on what loan type you go with. How much equity do you have in the property?

  3) Is there any way to focus on improving the mortgage scores specifically other than paying it on time(no lates since last April).

Rebuidling forum will be your best bet here.

  4) My loan is a fixed conventional with Chase. Is there a streamline refi option on conventional loans? Am I better off looking for a new loan provider or would it be                  easier to refi with my current bank?

With some of the challenges your situation presents, I'd recommend a direct lender and stay away from the big banks.

  5) Is HARP an option for me? I know I can't have any lates in the last 12 months so I will be there in 3 months.

Most lenders require 620 for HARP.

        Thanks

        Brian

As of 12/28/15 - EX Fico 2 569 | TU Fico 4 553 | EQ Fico 5 537

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[Anonymous]

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@cartwrna wrote:
You are correct thus far, reading through the handbook if you are equal to or less than 90% LTV you have MIP for 11 years. Greater than 90% LTV it's for duration of the loan. I will dig deeper, almost certain I saw where it would not be needed if putting 20% down which would put you at 80% LTV. I may be mixing it up with another program though.

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This is correct. Even if you put 50% down for FHA, you are still required to have MI for 11 years.

[ezdriver]

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@cartwrna wrote:
You are correct thus far, reading through the handbook if you are equal to or less than 90% LTV you have MIP for 11 years. Greater than 90% LTV it's for duration of the loan. I will dig deeper, almost certain I saw where it would not be needed if putting 20% down which would put you at 80% LTV. I may be mixing it up with another program though.

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No worries. It used to be different. As they say ... that was then and this is now. lol