Real Estate and Home Mortgages - Refi: From Arm To Fixed Rate

Hi, I am new here..but have got a lot of info from the different posts. We are in Missouri..Here is our situation. 2years ago we refinanced with a cash out to do a home improvement..stupid I know..we got locked into a 2 year ARM at 7.75% (I take full blame...didnt do my homework). Anyhoo, we now owe 157k on our home..recently homes have been selling for upwards 170k and up in the neighborhood, most without the bells and whistles our home has now. Anyway, our 2 year lockin is over April 10th , 05'. I called our current mortgage company to find out about a streamline mortgage, and to go from ARM to fixed rate..they gave me the run around and said that because my credit was only a 655 they could only offer me a 3 year ARM at 7.50%. I think it was pretty crappy, but maybe I am wrong...We are only going to use me as the primary because husband has not so great credit (due to the fact that he cosigned for his mother on her car and she never made a payment on time the whole time...believe me he did this without consulting me....we just paid off the car last week..but know his credit wont be worth anything).I make 50k a year, and due to an insurance settlement are able to pay off all of our credit cards this month down to zero. The refi officer told me that this would not help my credit score (paying off all the cards)..I have not been late on anything so I am unsure how to go about this..I want to get a feel for this so when I go looking to refi at the end of March (cant till then, due to the stipulation of the locked 2 year ARM..pre pay penalty)..HELP!!!

Any and all help in my situation would be great..

Sincerely,

Stacie

You've been dealing with a subprime lender.. That ends now, don't even call back at this point. It doesn't matter how far you are in the refi process. You need to fully test another route first. They can really stick it to you if you let them, and they usually don't have access to loan products that you may now qualify for. They usually make a killing on the closing costs as well. Consider this lesson learned, so previous experience aside, here is what you need to do now:

Go to a reputable bank or mortgage broker. You are NOT looking for a subprime loan this time, nor an ARM. If someone says prepayment penalty when you ask about it, leave. Take receipts for all of your paid off debts, or at least a list of the ones, with account numbers, that you have paid off. Call the lenders for a letter showing the accounts are closed and have a 0 balance. This is to make sure your debt ratio is as low as possible. I'm assuming these debts were not delinquent for the last 12 mos or so? Don't worry about scores so much, they will sort themselves out in time. Score isn't as important as some would have you believe. Actual credit history is the key.

If your husband has poor credit, then see if you budget on your income alone. If the house is your only debt, you should easily qualify at $50k/yr. You're showing that your other debts are paid off, even if the credit bureau isn't reflecting it yet. Also, your bank/broker can call for the tradelines to be manually updated with the new balances if necessary. The scores won't be updated yet, but if you have a good history, that is ok.


THE GOOD NEWS:

1-Get debt free other than the mortgage since you got that settlement! (cause for celebration!)
2-Right now you're used to a 30 year mortgage at a high rate. Also, you've been paying all of these other debts. In other words, you are used to paying out a lot more money than you need to from now on. Refi on 15 year FIXED RATE, 20 if you must. DO NOT start over on a 30 year mortgage or ARM. That's money down the drain. There is a LOT more to a wise mortgage decision than paying out the least on a monthly basis. You have to look at the long haul. I'm assuming you have no plans of moving? Even if you do, the 15 yr is the way to go now. If you have money left of the $50k, pay your closing costs out of pocket. Don't borrow $2000 for the closing costs over 15 years, that just doesn't make good sense. Don't roll the closing costs in if you don't have to. Go ahead and get to work on this loan with your new loan officer. You have a few months before you need to close to avoid the prepayment penalty (probably 4% of balance, or 6 mos interest). That's a good bit of time to have a plan and be ready for the right kind of loan by then. Refi on April 10th, have the closing attorney pay off the current loan on the 11th. I guarantee that first rate adjustment will be a KILLER.


So:
Debt free other than the mortgage, refi on short term conventional loan, then whatever cash is left of the $50k have a 6 mos expense emergency fund and then get some financial advice on retirement and start working on that. Put money away every month, don't start blowing the money you're now saving.


Once you have felt this out, post again if you still have problems.

Bill, Thank you so very, very much...you make me feel a heck of alot better. To clarify though, I didn't recieve 50k in the settlement, that is my salary per year. I recieved $16,000 in the settlement, but is enough to pay off the credit cards and have some left over, so we will pay our closing costs and not roll them into the loan.

My question now is, I have paid the credit cards off, should I cancel the cards? I get differing opinions from different people. Heard that closing them down can hurt you more than keeping them open.

I will start shopping now for a new loan, and feel much better about myself after reading your post..Thanks again so much. I really hated the thought of starting over again at a 30 year loan, but didn't think we could afford a 15 year, but seeing the savings we will have we could afford it... Any ideas on what companies I should check into for mortgages??

If there is one thing I can and have taught my children: Knowledge is Power...and don't get stuck with credit cards!!! They are killers..

Again,

Thanks so much

Stacie

Bill, Thank you so very, very much...you make me feel a heck of alot better. To clarify though, I didn't recieve 50k in the settlement, that is my salary per year. I recieved $16,000 in the settlement, but is enough to pay off the credit cards and have some left over, so we will pay our closing costs and not roll them into the loan.

My question now is, I have paid the credit cards off, should I cancel the cards? I get differing opinions from different people. Heard that closing them down can hurt you more than keeping them open.


I'd cut them up and send letters closing them out. You need an emergency fund for emergencies, not a credit card. I don't see any reason to have credit cards--I've been through the nightmare too. I haven't had one in 4-5 years now, I use a debit card, cash or check. Don't worry about your credit score, that will be fine. Worrying about a credit score is a horrible reason to keep a credit card, but I hear it all the time. Credit scores are only used when you borrow money, and the goal is to not borrow money, other than the house. Regardless, your scores will be fine so don't worry about it. Credit always improves month to month as long as you don't screw it up. ;)


Any ideas on what companies I should check into for mortgages??


Read this and then do your calling. Shop, shop, shop.
http://forum.doityourself.com/showthread.php?t=176367


If there is one thing I can and have taught my children: Knowledge is Power...and don't get stuck with credit cards!!! They are killers..

Again,

Thanks so much

Stacie


I agree, I'm trying to teach my 5 year old to save already. I plan to make sure that he's armed with the reality of using credit as he grows up so that he doesn't fall into the trap.
Saving > owing. Good luck, feel free to stick around.

Family Guy....

What about her possible past credit history. If she closes them now.....then she may have a LACK of credit history.

Mommie2aaa.....

You may wish to close all of them but 2. Keep those 2 and NEVER use one of them. Just cut it up and never tell a sole it exists. That one you chop up but keep open should be one with NO "annual fee". Who cares about the rate....you're NOT gonna use it. You just don't need a fee popping on when you will forget about the card in months ahead.

NOW...the other card you "keep" should have NO annual fee and the lowest rate available in your hand. I would use that one occasionally for timy purchases. Like dinner....charge it once a month and then pay it off every month. This keeps a easily controlled balance and retains a perfect credit "history". No card...no history.

And the guy lied to you at your lender when he said your score won't change when you payoff your cards.....IT WILL for sure. But, again.....you don't need so much as a "score". It is the overall credit worthiness that gets you in.

Also.....you are looking for a 80/15 combo on this here refi. that avoids the PMI. Also...there is NO such thing as a "streamline" anything really anymore. especially with your loan. Don't be sucked in on that sales pitch. Keep options open from all.

Also....the reason why your rate is so high now is NOT that you did not do your homework. Quick math says you "max'd" out the value of the home at the time with the cash out portion. I would say that may be a OK loan with NO PMI in that situation.

Now....Mommie2aaa, contact Family Guy because he can help you in the State of MS. That would be my recommendation. I don't think he can ask you (as the rules in this forum).....but I can't see why you can't ask him.


Brian

Bill,

Once again, thank you so very much...wish I was in good ole MS so I could go through you...alas...will start doing my shopping now.

Brian, too, thank you....Will not be using those CC puppies anymore..we are now at the "need vs want" stage..if it is a need and we have the cash it will be done...wants are just that..wants..will not whip out the old Credit card anymore..

I think this board is out here for all of us and am so appreciative for all the feedback...what a great sounding board..

And FYI to all others whom read this, my lender told me that I would need to put $500 up front to "lock in this great rate"..now I may be pretty ignorant when it comes to the mortgage biz, but I am not stupid enough to fall for this one. Everything I have been reading on the threads tells me that one was downright DUMB!!!

Thanks again to all...will update everyone when we get the process going..

Stacie

Stacie....

Family guy IS in Missouri....I am almost positive.

I did the wrong abreviation. :wall:

MO....thats better yes?

I live in the wild wild west were thars no needs for dem "ritein ang leters". :cheshire:

Good luck.

And just to note....the lock "fee" may be true IF you are looking to "lock" a rate and NOT close for a long time....like more than 60 days. that would be a fair shake to charge.

In your case....it is robbery.

Thanks for the vote of confidence. :)
I'm in Mississippi, she's in Missouri. I don't get any business through this site though, I don't want anyone to think I'm here to stir up business or have some hidden agenda.


If she has a few delinquencies, keeping one open might be a good idea--just don't use it, like Brian said. You want to show a difference between last reported date and date of last delinquency.
Otherwise, if the last 12 mos have all been paid within 30 days of the due date, I'd still cancel them and let the timely mortgage payments straighten things out and just stay away from borrowing. Plan ahead and save for that next car, home improvement etc. Either way, you can't lose if you're debt free. :thumbup:

So I was right AND I was wrong. Amazing!

I guess I could have checked first. Naw, that would be the simple way to do things.