Author Topic: Any mortgage refi suggestions for someone paid on an NIH grant?  (Read 2195 times)

waltworks

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I have been battling with this for a month or two now and I'm going to go ahead and admit I need some ideas from the collective.

Here's the story:
-My wife and I bought a house that we love. The sale was a bit rushed, though, as we didn't realize we'd find exactly what we wanted so quickly. We were selling another house and rolling that equity into the new downpayment, but surprise surprise - *that* sale took forever to close.
-In order to not have the deal fall apart, we did a minimal (10%) downpayment 30 year fixed loan at 4.375%. I figured we'd just refi it and get a better rate/pay up to 20% to get rid of PMI once the house we were selling closed.
-*Just after* we closed on the house, we got great news - my wife's grant application with the NIH was successful and she got a little raise as well as some nice prestige and guaranteed funding for 3 years.

Fast forward to now (a month later):
-My wife's employer, who administers the grant, does not provide her with a traditional paystub. Because of an odd loophole in the law, postdocs don't pay FICA and I guess for whatever reason the university feels it's a waste of their time to do any tax withholding or anything else either. She literally gets an electronic transfer once a month along with a 1-line CSV file emailed telling her how much she makes, and is expected to pay quarterly taxes to the IRS. No W-2. No 1099. NOTHING at the end of the year! As you might expect, this is basically giving the mortgage underwriters a heart attack.

So now we're in the odd situation of having a pile of cash earning us nothing, a house with a stupid huge payment and relatively high (compared to what it would be based on our credit scores/income/downpayment we would have put down) interest rate. Lenders seem disinclined to allow my wife's income to be counted, so thus far we've been unable to refi, no matter how much money we offer to put down.

I figure worst case scenario I'll pay down the loan enough to get rid of the PMI and then just live with the non-ideal interest rate, while investing the leftover cash in index funds. But I'd really like to be able to refi the house into a 15 year at ~3-3.5% while rates are crazy low.

Any thoughts? I've considered:
-HELOC both other properties (assuming that is possible with the odd income situation) and pay off the entire mortgage using basically all our cash. Honestly I don't want to have that much dough tied up in real estate, though, and 4.375% really is not the end of the world.
-Find a lender who can work with PhD scientists getting government cheese. I have thus far been unable to locate one (including the university's own credit union!)
-Pay down to 20% equity and jump through all the hoops (lender probably will require *another* appraisal, sigh) to get rid of the PMI, then suck it up and live with the rate.

Any ideas? We did not know that getting a grant/raise/big gold star would cause this much trouble. Annoyingly, the university provides NO information about this to grant recipients - we could have just had her wait a month to activate the funding and been home free.

-W

mulescent

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Re: Any mortgage refi suggestions for someone paid on an NIH grant?
« Reply #1 on: March 17, 2014, 06:35:40 PM »
Hi there,

First, congratulations to your wife on the great accomplishment.  I've been in a similar situation before, and the solution for me was to ask different lenders.  First obtain the most ironclad proof of past/future income possible.  At the very minimum, her supervisor/PI should be able to write a letter (on letterhead from her fancy university) saying "XX has a federal grant number YY that will pay her ZZ for AA years.  You can verify this award by going to the NIH RePORTER website (http://projectreporter.nih.gov/reporter.cfm) and entering her grant number YY."  However, every institution I've been at will do much more than this.  You should be able to obtain a letter from her department chair, grants administrator or, even better, the provost/dean of the office of research (or whatever it is at her institution).  With proof in hand, you should be able to find a lender that will work with you.

If that fails, my instinct would be to avoid any HELOC craziness and just eat the slightly higher rate.  You can put your pile of cash to work in the stock market (better long term investment than a house, anyway).

arebelspy

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Re: Any mortgage refi suggestions for someone paid on an NIH grant?
« Reply #2 on: March 18, 2014, 06:57:00 AM »
Great advice from mulescent.  I would add that you'll want to talk to several mortgage broker / underwriters and see what THEY want in terms of documentation, etc.  You should be able to find someone to work with you in your situation, but it may take a little work.
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waltworks

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Re: Any mortgage refi suggestions for someone paid on an NIH grant?
« Reply #3 on: March 18, 2014, 08:45:32 AM »
Yeah, I've got a pile of stamped and signed things from the department, university, and NIH... no go so far. This is lender #3 (we're working our way up in interest rates and down in pickiness) and if it's a no-go again, I'll just pull the plug, pay up to 20%, and put the money to other use.

Thanks for the ideas!