Refinancing Decision, NEED YOUR HELP!

[Anonymous]

Hello, mortgage experts

Need a guidance with making decisions on refinancing

Some background info:

Purchase Price: $420K. Purchased about a year ago

Lender: Navy Federal Credit Union (aka. NFCU);

Down payment: 3%

Product: 30yr fixed conventional

Current interest rate is 4.6%

Current Home equity: 5%

No PMI due to the NFCU program (assuming it’s already baked in the interest rate)

No house improvements since

Credit Mid-score: 770 based on Credit Karma for the last 4 months

DTI is at 34% with take home pay (27% based on gross including rent income)

Have enough money in the savings and other investments

Minimum Credit Card debt (will be paying everything off before I process the refinance, have around $200 in balance)

No other debt other than the mortgage itself (no car, no student loan)

Have two tenants that pay the rent monthly

So far, I paid off 5% (including the 3% down payment) of the $420K mortgage balance. My balance is now around $405K

0% credit utilization

-Looking to refinance for:

Interest Rate: 3% or anything below 3%

Product:  new 30 year fixed (29yr if they offer) Conventional loan with or without PMI

No cash-out refinance

Goal: bring down the monthly payment and pay down the principal with the difference, so I can pay it off a few years early.

Been paying the mortgage without an issue except for April this year (I called NFCU to ask about the forbearance plan, and they ended up put me on the program without my consent). I found out a month later and asked them to remove it. So, it currently shows no payment report only in April on my Credit Karma. Everything is paid off and up to date.

Now my credit history is showing 3-consecutive payments since the “no report in April”, so I believe I can apply for a refinance. My questions are…

1. The house was initially appraised for the purchase price, but now three other neighbors are currently selling their homes at ~$475K (unrealized equity increase?). Does it make sense to appraise the house again even though a lender doesn’t require it?
2. Does it make sense to refinance with 5% equity? Or can I with 5%?
3. Does having a low equity (5%) prevents me from getting a good rate?
4. Can I use my tenants as a source of income?
5. With other houses selling for well above (~$475K) my purchase price ($420K). Can I consider that difference as a part of my equity by doing reappraisal? Can I use that argument to drop the PMI if I end up going with the other lenders that require PMI?
6. I’m planning on rate shopping before I reach out to the existing lender. Does it make sense to refinance with same lender, NFCU?
7. If my house gets reappraised for $475K, Loan-to-value ratio is 85%. With old appraisal, LTV is only 5%.
8. Happy to get any inputs/thoughts you have on this

[CramEiko]

following 

Good Luck!

[dragontears]

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@Anonymous wrote:

Hello, mortgage experts

Need a guidance with making decisions on refinancing

Some background info:

Purchase Price: $420K. Purchased about a year ago

Lender: Navy Federal Credit Union (aka. NFCU);

Down payment: 3%

Product: 30yr fixed conventional

Current interest rate is 4.6%

Current Home equity: 5%

No PMI due to the NFCU program (assuming it’s already baked in the interest rate)

No house improvements since

Credit Mid-score: 770 based on Credit Karma for the last 4 months

DTI is at 34% with take home pay (27% based on gross including rent income)

Have enough money in the savings and other investments

Minimum Credit Card debt (will be paying everything off before I process the refinance, have around $200 in balance)

No other debt other than the mortgage itself (no car, no student loan)

Have two tenants that pay the rent monthly

So far, I paid off 5% (including the 3% down payment) of the $420K mortgage balance. My balance is now around $405K

0% credit utilization

-Looking to refinance for:

Interest Rate: 3% or anything below 3%

Product:  new 30 year fixed (29yr if they offer) Conventional loan with or without PMI

No cash-out refinance

Goal: bring down the monthly payment and pay down the principal with the difference, so I can pay it off a few years early.

Been paying the mortgage without an issue except for April this year (I called NFCU to ask about the forbearance plan, and they ended up put me on the program without my consent). I found out a month later and asked them to remove it. So, it currently shows no payment report only in April on my Credit Karma. Everything is paid off and up to date.

Now my credit history is showing 3-consecutive payments since the “no report in April”, so I believe I can apply for a refinance. My questions are…

1. The house was initially appraised for the purchase price, but now three other neighbors are currently selling their homes at ~$475K (unrealized equity increase?). Does it make sense to appraise the house again even though a lender doesn’t require it? your new lender will absolutely require an appraisal, except to pay ~$600 up front for it.
2. Does it make sense to refinance with 5% equity? Or can I with 5%? will depend on the lender you pick 
3. Does having a low equity (5%) prevents me from getting a good rate? you won't get the best rate but it will be lower than your current one since you are in a LPMI situation 
4. Can I use my tenants as a source of income? depends, are your tenants roommates or do they have separate living spaces? Roommates, no you can't; if you have a triplex then most lenders will use 75% of the rents in your income 
5. With other houses selling for well above (~$475K) my purchase price ($420K). Can I consider that difference as a part of my equity by doing reappraisal? Can I use that argument to drop the PMI if I end up going with the other lenders that require PMI? your equity will be dependent on the new appraisal, if you have 20% equity you won't pay PMI 
6. I’m planning on rate shopping before I reach out to the existing lender. Does it make sense to refinance with same lender, NFCU? Only if you either get the best rates with them or feel the need to keep your loan with the same servicer
7. If my house gets reappraised for $475K, Loan-to-value ratio is 85%. With old appraisal, LTV is only 5%.
8. Happy to get any inputs/thoughts you have on this

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answers above