Refi with little to no equity?

[coconutchips]

Because of a very unexpected bonus Dh and I can pay down our jumbo mortgage at 6.7% to the standard mortgage amount of 417. We'd obviously like to lower that interest rates that aren't available for jumbos. Can we refinance even if an appraisal came back at 425? Are there other options?

[nookworm]

Do you know if your mortgage is backed by Freddie Mac or Fannie Mae? If it is, you can probably refi through Harp (as long as the loan is in good standing and you are more than 80% on loan to vaue) Look up your current mortgage on the link below. There are several banks that do Harp loans, but I know a lot of peope who have had good luck with Regions Mortgage. You can look on their website to see if there is one near you.
If your mortgage is NOT backed by Freddie or Fannie, you could still possibly qualify fora refi. If you or your spouse have military experience of any kind there are programs that can do 100%. Keep in mid though that most lenders prefer to stay at 80% in a typical RE loan.
Talk to a mortgage officer to see what you qualify for.

Link:

www.makinghomeaffordable.gov/get-assistance/loan-look-up/Pages/default.aspx

[jenjen]

I don't know for sure but I would assume you could refi to an FHA loan with 3.5% equity. The monthly and upfront PMI might be kind of expensive though. I am not sure if the FHA mortgage limit is the same as a non jumbo? Also with FHA, you'll probably need to pay the monthly PMI for 5 years.

You could also refi to a conventional with 5% equity. You would still have PMI but its much less than an FHA and also you can drop it at 80% loan to value. This would probably be the least costly if you can get to 5% equity... Just not sure how large your bonus is.

[ellipses84]

We had a very specific type of loan you probably don't qualify for, but we were told if the appraisal was low, we could just pay the difference and still get the low interest rate. I thought that was the case for most types of refinancing. Do you have a few thousand extra to do that?

Luckily our appraisal came in high. We cleaned up the house and yard, cleaned carpets, etc. for the appraisal and I really think that helps, even of they claim it doesn't.

[puppyluv]

Yes, you can refinance into a conventional loan as long as you are financing less than the jumbo limit and have at least the mininmum required equity/down payment required for your type of loan (will vary by lender). The more equity or down payment you have, the lower your rate will be. Since the house appraised for $425k, if you were able to finance only $340k it would get you the best rate because it would be 20% down.

[pacificrules]

We recently did a refi through our current company that was at NO cost to us. I think it was through HARP, but our mortgage guy said all of the closing costs would be reimbursed to his company from Fannie Mae. It was super easy and helped a lot on our % and monthly payment.

[coconutchips]

Harp isn't an option, Because the current loan is jumbo the loan will never be sold to Frannie or Freddie or at least that was my understanding PMI would probably be our only option. With such a low appraisal (250k lower than the first!) we won't have the 20% down.

We've never needed PMI, how does that work?

[chessie]

FHA streamline if your qualified to do it. We decided not to since the PMI would be higher then it would have been. You get a lower rate, but its all a wash since PMI has gone up quite a bit in last few years.

[brit1017]

Jan 7, 2013 6:31:12 GMT -5 coconutchips said:

Harp isn't an option, Because the current loan is jumbo the loan will never be sold to Frannie or Freddie or at least that was my understanding PMI would probably be our only option. With such a low appraisal (250k lower than the first!) we won't have the 20% down.

We've never needed PMI, how does that work?

With PMI, you pay a monthly "insurance" payment until you reach 20% equity. This insurance is for the lender in case you foreclose. As a PP said, it has gone up drastically in the past 2 years. We bought in 2010 with 10% down (VHCOL), so our rate is 5.25% and we pay PMI. We looked into refi'ing late last year, but they basically told us that though our rate would go down ~2% points, our payment would go up b/c the PMI had gone up.

It's work your time to at least talk to a bank though. I had talked to Quicken Loans, and was grateful that they advised against the refi after looking at the true numbers.

[coconutchips]

No we're not on an FHA loan and not eligible for the FHA Streamline. So that leaves the options of PMI or bringing more to the table?

[LoveTrains]

Jan 7, 2013 8:17:38 GMT -5 coconutchips said:

No we're not on an FHA loan and not eligible for the FHA Streamline. So that leaves the options of PMI or bringing more to the table?

Yes.

Although regular PMI isn't actually that much money. On a $417K loan it will probably be about $250/month, but keep in mind that it would go away when you hit 78% equity (according to original appraisal for the loan) or if you pay for another appraisal and hit 80% equity along the way.

Only you can decide if that is better then what you ahve now. It might be if you can get a loan for 3.25%.

[coconutchips]

Yes even at 250$ a month, dropping 3 percentage points could be worth it. But even if payments stayed the same, are we better off getting out of the jumbo situation and throw about 30k into this mortgage. I'm not sure what factors into that decision.

[imojoebunny]

We have a house like this, that while not really under water if we were to sell it, has a hard time being appraised because it is somewhat unique to the neighborhood, and there are few sales of silimar properties. It is income producing, so we don't really care, simce the cash flows are good. We refied it recently through our current lender withoit having to worry about the appraised amount. We didn't get a great rate, but it did drop by 1 7/8 points, so an improvement.

[coconutchips]

Jan 7, 2013 9:08:24 GMT -5 imojoebunny said:

We have a house like this, that while not really under water if we were to sell it, has a hard time being appraised because it is somewhat unique to the neighborhood, and there are few sales of silimar properties. It is income producing, so we don't really care, simce the cash flows are good. We refied it recently through our current lender withoit having to worry about the appraised amount. We didn't get a great rate, but it did drop by 1 7/8 points, so an improvement.

So I guess the moral of this story is start with my current lender?

[LoveTrains]

Jan 7, 2013 10:57:03 GMT -5 coconutchips said:

Jan 7, 2013 9:08:24 GMT -5 imojoebunny said:

We have a house like this, that while not really under water if we were to sell it, has a hard time being appraised because it is somewhat unique to the neighborhood, and there are few sales of silimar properties. It is income producing, so we don't really care, simce the cash flows are good. We refied it recently through our current lender withoit having to worry about the appraised amount. We didn't get a great rate, but it did drop by 1 7/8 points, so an improvement.

So I guess the moral of this story is start with my current lender?

I think it is worth to start with them and then check rates, etc with at least one or two others to make sure oyu are getting the best deal. Good luck!