Want out of our lousy bubble-era mortgage - what are our odds?

[Anonymous]

If you want to tell me how stupid we were in 2005, go right ahead. I do it daily.

We bought a house for $580k, with an interest-only mortgage for 80% of the value and a regular 30 year for 10% of it. (We put 10% down.) Let's say we owe $460k on the larger, lousier mortgage.

The house is now worth maybe $620k. Not a huge increase, but definitely no loss in value.

Our incomes have stayed pretty much the same, unfortunately. We bring in about $120k, which is about a 10% increase over what it was 7 years ago. No need to go into the reasons for this; it is what it is. Also, we don't have a ton of cash lying around. Could maybe swing $10k at the problem. My credit is nearly perfect, my husband's is... not.

I'd love to take advantage of these low interest rates, but I'm really afraid that the lenders are all responsible now and won't talk to me. Our situation hasn't changed much, but the market for mortgages sure has.

Would you share some general thoughts on this? Are there online calculators that could help me get my head around it? Is it like buying a house all over again? In 2013, no one with our HHI would look at houses in that price range. 2005 was a crazy time...

[Anonymous]

Oh, and very little other debt. No credit card, no car payment... husband has a little in student loans.

[Anonymous]

That's a 74% LTV. That's reasonable, and below the magic 80.

With no other debt, youre looking at a debt to income ratio that's reasonable as well. 2,000 a mo on $120k seems quite fair.

We worked with First Place Bank: guy named Chad Loube. He was nice (I'll admit we had a lot more equity so there was no debate or issues). I'm sure if you google him you'll find a number. No idea if he can help, but there you go

[Anonymous]

Oh I just realized its not $460 total, it's maybe $510 total? That's cutting a little closer but not bad. You might also find an appraiser that's friendly. Even just an extra $10k might be enough.

[Anonymous]

Can't hurt to ask, OP.

[Anonymous]

Yea, I'd literally pick up the phone and ask. Tell them you think the house is worth $650.

[Anonymous]

Why is your husband credit bad and yours good if you've been married for the past 7 years

[Anonymous]

I like Ajay Dutt at Fidelity Direct- he is a problem solver - you could try him. I've also talked with Roger Dennis - not sure which company but he and his wife have posted here before. He was helpful.

I agree with PP - just call!! The only thing stupid you are doing is not calling (I mean that in a nice way).

[Anonymous]

Anonymous wrote:Yea, I'd literally pick up the phone and ask. Tell them you think the house is worth $650.

ITA. Just call!

[Anonymous]

I would suggest working with quicken loans. Their process is so cheap and streamlined. If it doesn't work you're not out very much in terms of time/money. I found it very easy.

[Anonymous]

I'd recommend checking the possibility of refinancing with the lender you have or other major banks or with a broker. Just start talking to lenders.
I also bought in 2005, at 585k, with 10% down, 80% on interest only, and 10% on 30 year fixed on a 125k salary at the time I got the mortgage with Wells Fargo. I had enormous stress about the overwhelming mortgage burden faced with declining real estate values. Numbers on my situation are remarkably similar as yours, except my property went DOWN... to $430k and I lost my job. Fast forward to a short sale and a shot credit. But in your situation, because your home value is around $620k, you are not that far off 80% LTV, especially since appraising is not science so you might get a bank appraiser that appraises it higher or a lender that will go under 80% LTV. Heck, when I was selling my place, the bank appraised it at $440k, the seller got it appraised it at $400k. That's 10%, a big difference. So just give some lenders a call. One tip is that people who do the initial talking to you on Quicken or other such seemingly low rate lenders are like low level customer service reps. They don't have any discretion in going beyond the cookie cutter over 80% LTV cases and can't give you the best rates either. Tons of wasted time. Just ask to talk to senior loan officers if the lender looks promising. My husband has used Columbia Bank twice (they are local and small but have really good rates). But they are mostly good for best rates, not necessarily being flexible about going outside the box, so in your case, you need a bank that will refi when you haven't hit 80% LTV.

[Anonymous]

$510k of $600k is still 85%.

That's workable with PMI, my lender said PMI can be bought out for a point or two at closing. Or at least that is what I thought he said, others might have to confirm.

If calling lenders doesn't work, then consider doubling down on paying the 2nd trust.

Can you swing something -- a 401k loan, a loan against something else, etc., -- to get you the magic $30k?

Check your place out on Zillow. Use that in lieu of a 'real' appraisal.

[Anonymous]

Zillow's value was much lower than the value our lender used for our re-fi from the Freddie Mac home valuation tool (not something you can look up for yourself online). We used Aimloan.com's HARP mortgage program with a LTV ratio of about 90% and got a rate of 3.625%. You probably won't qualify for HARP because your mortgage don't sound like they're backed by Freddie or Fannie since you have an interest-only mortgage, but Aimloan does other types of mortgages. They were straightforward to deal with, although the company they contracted with to handle the closing was unprofessional. You don't have anything to lose by applying for refinancing, whoever you choose to work with! Hope you get a great rate!