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What to do about Refinancing?

January 24th, 2009 8:56 PM by Sam Kader

Piggyback mortgage was very popular in the real estate boom era to obtain 100% financing without paying mortgage insurance. The loan would be structured as 80/20 first and second mortgage respectively. The current market situations is conducive for refinancing provided if homeowners can provide 2 years solid employment history, 720 FICO score and at least 20% equity on the house. In general, most homeowners fail either one of the acid-test requirements. Compounded with lenders' tightening their underwriting guidelines, refinancing could be a challenge. This is an era of hope over fear.

Here are some tips on overcoming Refinancing Challenge:

  1. If financially feasible, homeowners can apply an additional a few hundred dollars a month towards principal over a period of time. Thus lowering the principal balance, interest, and LTV.
  2. Homeowners can apply for FHA streamlined refinance (without an appraisal). Only if you already have FHA loan.  
  3. If the first and second loans are from the same bank, try combining the two. If second loan was obtained afterwards, this will be considered a cash-out refinancing - subject to further constraints.
  4. Debt-to-Income (DTI) is another crucial measure of affordability. Try FHA refinancing if DTI exceeds 45%.

Hope for Homeowners program which allows the Federal Housing Administration to insure a new mortgage IF the lender VOLUNTARILY writes down the mortgage principal to 90% of the new value of the home. The requirements are that the notes must have reset and that homeowners on the brink of foreclosure.

Homeowners could also apply for Loan Modification.


Posted in:General
Posted by Sam Kader on January 24th, 2009 8:56 PM



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