Your Questions About Mortgage Refinancing Options

Sandra asks…

Does anyone know of a good mortgage company who will refinance a home with credit scores in the 560 range?

We own a home worth @ $200,000 and only owe $80,000. We need to refinance to pay off some tax debt. Can anyone reccomend a good reliable company?

Thanks!

John answers:

You never know until you talk with a mortgage professional who can get your full financial situation, but due to your credit score, your options may be limited. Part of the reason is that regulations for less than perfect credit loans have seriously tightened in just the past few months. A mortgage that you would have qualified for in April may not be available today.

So, If you can wait, then I suggest trying to improve your credit score. Here are a few ways you can do that:

1. Pay your bills on time. Even if you’ve had delinquencies in the past, over time, they will count less if your recent history shows timely payments.

2. Keep your credit card balances low. The higher your outstanding debt, the lower your score will go. Pay down high credit card balances, starting with the highest interest rate first.

3. Check your report for inaccuracies. You may have errors on your report that can easily be cleared up. You can request a free copy of your credit report every 12 months.

4. Pay off debt rather than move it around. Consolidating your debt onto fewer cards will not improve your score because you’ll still owe the same amount. It is better to work towards paying it off.

5. Have credit cards, but manage them responsibly. Having credit cards that are paid on time is better than having no credit cards. It shows that you can soundly manage your debt.

6. Don’t open multiple accounts too quickly, especially if you have a short credit history. This may look risky because you’re taking on a lot of possible debt. It also shortens the average age of your credit history.

7. Don’t close an account to remove it from your credit record. Accounts show up on your credit report for seven years whether they’re open or closed. Closing accounts can actually hurt your credit score if you’re not paying down debt at the same time.

8. Don’t shop for a loan from different lenders over a long period of time. Try to keep it to within 30 days or less. Credit bureaus disregard inquiries for your credit report made within 30 days of each other and consider requests made within a 14 day period as a single request.

9. Don’t open new credit card accounts you don’t actually need. This might backfire and lower your score.

10. Contact your creditors or consult a legitimate credit counselor if you’re having financial difficulties.

Good luck and feel free to contact me through my profile if you need more information.

Richard asks…

What do ‘points’ on a mortgage represent?

I am looking at refinance options and I would like to do a 15 year rather than a 30 year but most of them have points. What do these points mean?

John answers:

Points represent the cost to get a certain rate. So…

For example 5% costs .5 points or 4.875% costs 1.25 points. This isn’t something that lenders dictate, this is what the market dictates. So wherever you go, it is going to be about the same. Email adamlesner@quickenloans.com for more info

David asks…

My mortgage is overdue and I’d like to have my daughter assume it is that possible?

She can’t come up with 10 percent downpayment and I’d like to keep the house in the family. She is able to make the payments and after reading my mortgage it doesn’t appear to be assumable. Also do I need a realtor to handle this?

John answers:

A realtor can’t help you with this. The mortgage is probably not assumable (very few are). You do have several options. First off she could just pay the bills and you leave the house to her in your will (this requires alot of trust on her part as you could change your will). Also you could give her some sort of contract to give her the house at a later date (a contract to buy later, even a rent to own contract where the rent is the same as the mortgage payment). The problem with all these options (including willing her the property) is that in order for her to take over the house you will need to get a new mortgage. Also, until you get a new mortgage you will be responsible for the current one and it will bring down your ability to by another house or anything else (if you care about this).

Anyhow I don’t see how she can take over the house and pull you off it, without refinancing but you can do some other thing to give her possession of it in the future. A realtor would not help with this, to do any contractual stuff you’d need a lawyer.

Jenny asks…

what is the benefit and process of combining two mortgages into one loan?

I have heard that you could combine two mortgages into one loan, I have two investment properties, one loan is for $142000 and the othe is for $130000, will it be possible to combind them and own one property free and clear ?

John answers:

The only why you could combine your mortgages into one monthly mortgage is if one property is worth enough where you can refinance and take cash out to pay off the second home. If you are having difficulty paying both mortgages I might recommend refinancing one (providing you can’t refinance and pay off the second home) and do either an interest only or an option arm loan to lower your monthly mortgage. I hope this helps you but if you have any further questions or need any assistance please feel free to email me.

Betty asks…

Is it worth paying off 2nd mortgage balloon payment?

I have 260K 1st mortgage at 5.25% and 49K 2nd mortgage at 7.5%.
My 2nd mortgage is a balloon loan due next April.
The home market value is 265K.
Do I need to payoff my balloon payment?
Is it worth paying of the balloon payment when we have negative equity?
Is there any way to avoid this balloon payment?
I have contacted the bank. They said I need to contact them 2 months before expiration ie February. I need to show financial hardship to get 2nd mortgage modified.

John answers:

It’s worth it if you want to continue living in that house and you don’t want to have your credit done under.

If you don’t pay it off they’ll likely foreclose on the property. You don’t have enough equity in the home to refinance both loans. I can’t think of any options to avoid the balloon payment. You’ll need to talk to the bank and see what they have to offer.

Plenty of people are backwards on their loan but they still make their payments. Just because you have negative equity doesn’t entitle you to disregard your obligations.

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