Seeking Refinance Advice

[FarmFam]

Does anyone have advice on refinancing or can point to a post that does?

Q's: Best banks or mortgage brokers, how to refinance an upside down home, how to refinance 2 homes at same time?

I have 2 homes.  One is a rental and the other we live in and no, we are not planning to move out of it!  The rental was our first home and we decided to buy our dream house while the market was low.  But we needed to do an FHA loan that has mortgage insurance.  Now we qualify for a conventional loan and would like to refinance our home that we live in and possibly the rental as well until we can sell it without a short sale or foreclosure.

Our credit scores are about 675-690.  And our current or back-end debt to income ratio is about 46%

Main Home (we live in): Value is 284K and the loan is 237k at 4.5%. Mortgage Insurance monthly is $250. Principle and Insurance is monthly payment $1,243.78

Rental Home: Value is 188k (but comparables/same models are selling for 192-195k) and the loans are 199k (1st is 127k, 2nd is 72k).  I get rent payments of $1125 from renters.

Here are the loan details for the Rental Home:
         
EQUITY LOAN DETAILS            
            
Equity Payment Interest Schedule            
            
No. of Payments              Amount of Payments      When Payments are Due   
60                      Varies from $113.78 to $125.97      March 01,2011   
17                      Varies from $291.57 to $322.81      March 1, 2016   
402                                                        $386.04       April 1, 2017   
1                                                        $437.25       February 1, 2051   
            
Total Cost of Equity Loan            
Annual Percentage      Finance Charge   Amount Financed   Total of Payments   
4.23%                          $94,241.40        $74,164.39            $168,405.79    
            
            
            
MORTGAGE LOAN DETAILS            
            
Interest Rate   Date               Monthly Payment   Number of Payments   
5.125            January 1, 2015   $892.37    253 - end 2/1/36   
            
Total Cost of Mortgage            
Annual Percentage   Finance Charge   Amount Financed   Total of Payments   
5.125                           $85,777.80   134,521.79   $220,299.59   
            

Thanks so much for the wisdom here!

[Axecleaver]

You have two problems to solve before shopping for a loan: you don't have 20% equity in your primary residence, and your credit is not high enough to qualify for the best rates. You'll need some time to build up both of those before you can refinance.

You say your primary residence is worth 284k and you owe 237k. You have equity of 47k, or 16.5%. To avoid PMI, you need equity of 20% or better, and that's if you refinance into a non-FHA loan. Is that estimate from a recent appraisal, or some other source? Real estate agents typically estimate on the high side to win your business, so be wary of estimates from agents. You might want to pay for a new appraisal to see what target you have to hit.

If it appraises for 284k, you'll need 56,800 in equity. You'll also need to cover closing costs in cash to keep that 80% loan-to-value ratio. Get to work on paying down the loan and saving up some cash for closing, and take another look at it when you've done that. Good luck!

[ditheca]

Sorry no advice to give, just a follow up question...  My in-laws recently declared bankruptcy, and have started taking advice from us because they know we're 'good with money'.

I was horrified to see that they are paying 8% interest on a 20 year mortgage.  They have about 10% equity.

Is there any hope for refinancing at a lower rate?

[partgypsy]

I've never used this but this is something on Zillow
http://www.zillow.com/mortgage-rates/underwater/

[FarmFam]

Sorry no advice to give, just a follow up question...  My in-laws recently declared bankruptcy, and have started taking advice from us because they know we're 'good with money'.

I was horrified to see that they are paying 8% interest on a 20 year mortgage.  They have about 10% equity.

Is there any hope for refinancing at a lower rate?

From my research and experience:

You can get a mortgage after 2 years after bankruptcy with an FHA but they have mortgage insurance for the life of the loan (this may have changed recently).  After 4 years, you can get a conventional loan, but with less than 20% equity you will still have to pay mortgage insurance and it will be based of off your credit scores.  The mortgage insurance on a conventional loan will be dismissed after you reach 20% equity.

For refinance, there are some government programs as well like HARP which the other poster posted a link to that information.

[Axecleaver]

The mortgage insurance on a conventional loan will be dismissed after you reach 20% equity.

You have to refinance to get rid of PMI at 20% equity. The PMI doesn't go away on a current loan until you:

* Achieve 22% equity
* Request PMI be canceled in writing
* Demonstrate a perfect payment history.
* Pay for a new appraisal, using a bank-approved appraiser (which costs twice market rate)

If you do not request the cancellation in writing and couple it with all the other rules, banks are not required to drop PMI until you make the payment that would have put you in the 22% equity range, according to your original amortization schedule.

Details: http://files.consumerfinance.gov/f/201508_cfpb_compliance-bulletin_private-mortgage-insurance-cancellation-and-termination.pdf