Does The Most Common Refinance Problem Have A Solution?
What is the problem?
It’s the shrinking value of your little bungalow. Yes, that is what our mortgage business, “Homes And Loans” is facing, many clients where the only problem is the lower home value.
An example: Bob and Carol put 10% down two years ago. They have a 6.25% mortgage rate. They still have good credit, the same employment, and want to lower their payment. The problem – their home value has gone down 10% and no lender is willing to loan 100% any more.
Example 2 is even more concerning. Is there are solution to this? Bob lost his job.
Here are two surprising options for folks like this.
1- FHA may save the day. An FHA loan allows a loan with only 3% equity in the home. When you need a refi and think you have almost no equity it is possibly worth taking a run at a real appraisal. Appraisals are often not an exact science. Determining if you have 3% instead of 0% equity by having an actual appraisal may save the day.
2- Two is big if available, “Streamline Refi” is the term. Many banks do them, VA and FHA do them, and some of the larger mortgage banks are bringing them back. The concept is simple. They have your loan. You have been making your payments on time. Why not reduce your payment for you with a simple streamlined refinance. This would save Bob, even though unemployed. This would overcome an appraisal problem.
Saving money on your mortgage payment is a good thing. Check with us or a trusted loan officer to determine your will allow a streamlined refi. See if it is worth the effort to use the insured FHA loan process. A nice bonus, the costs are lower.
For everyone: rates are volatile. A great rate at 10AM may be gone at 11:AM. Last month many valiant efforts to lock in a great rate were vaporized by the system. I wrote about this on the Seattle P I Real Estate Professionals blog and I suggest you consider its points seriously if you want to be ready to pounce on a good rate. Here is the link to the P I article; Now You See It Now You Don’t Then You Saw It Now You Don’t.
Larry Cragun
