Financing in Irving>Question Details

Primus, Both Buyer and Seller in Irving, TX

Closing costs - Converting from 15 to 30 yr loan

Asked by Primus, Irving, TX Tue Apr 22, 2008

I plan to rent my current house (La Villita twnhm) after (end of the year) buying a new house. I currently have a 15yr loan for my primary lien (80%) and I wonder if it is sensible to convert it to a 30yr loan in order to use the rent to cover loan payments.

- Does changing from 15 to 30 involve closing costs? Is it as good as refinancing your loan?
- If yes, is it possible to waive the closing costs?Does that depend on credit scores?
- I am obviously not a first time buyer, but I would still like to re-visit some of my home buying basics. Are there any good sites that serve as good reads for first time home buyers?

ex:
Step1 - start with pre-qualifying before shopping for a home loan
Step 2 - how much you can afford - calculator etc

Appreciate your inputs!

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Why would you want to loose your current equity build-up and strap yourself with 15 more years of interest on your loan. As a seasoned real estate broker and a seasoned mortgage broker my recommendation woud be to arrange other flexible terms on your new home and remain in your current loan. Over the years I have seen the very scenario that you are suggesting and honestly it is one of the contributing factors to today's current mortgage meltdown. Your home is your greatest asset and your equity (which in today's market is fluxuating daily) is to great of an asset to put at risk. I would consider the following options:

#1 - Consider possibly charging a high enough rent to cover your current carrying costs.
#2 - Consider a lease with the option to purchase where you can usually charge a more premium rental rate for a subject property.
#3 - Investigate your financing options on your new home.

I have a true case I am working with right now that applies to your situation. I have a client who had a property and leased it to purchase a new property with a 100% financed (80/20) loan option. The client recently lost their new job and now cannot afford the mortgage payments on both properties. They leased the first property below their carrying costs and now they are struggling financially.

You don't want this situation to occur to you. AVOID IT at all cost. Evaluate how important the new property is to you and is the change of a mortgage worth it. Your change will involve closing costs or an increased interest rate in lieu of closing costs either way - you will pay! The greatest loss I feel is your equity and the additional 15 years baggage you pick up.

The average lender will only allow you to carry total debt of 43 - 46 % of your Gross Income. This includes all your monthly payments with exception of food, utilities and personal expenses. Credit cards, mortgages, taxes & insurance on real estate owned, installment loans, car loans, and other revolving accounts will be considered. Where do you stand when you total your annual income, divide it by 12, and take your monthly total times an average of 43 - 46%

I hope this information is helpful and I truly hope your goals can be realistically acheived.
0 votes Thank Flag Link Tue Apr 22, 2008
Primus, Good question. A few things I can point out. One is that you probably do need to refinance into an investor loan. Your current mortgage is likely one that requires the home to be owner-occupied. There's probably lots of people who keep the existing mortgage in place, but this could be considered fraudulent depending on your loan terms. The risk is higher for investment properties and priced higher as well. Another idea is that these townhomes in La Villita rarely make sense as good investment properties. Better to cash out and reinvest the money into a property that makes sense as an investment property. The HOA dues are so high in La Villita, that you'll likely go negative, even with refinance to 30 year loan. The best thing to do is probably sit down with a loan officer, tell them what you want to do and then let them work out the details for you regarding closing costs, what kind of loan you can qualify for, etc.
Web Reference: http://www.teamlynn.com
1 vote Thank Flag Link Wed Apr 23, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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Just a few issues. First, closing costs. Without question, your present mortgage company can refi you with the lowest costs. Whether they will or not is another question. All mortgage loans incur costs, how and who pays them is the key. With a higher rate, lenders can rebate you money to close.
Now, when you apply to refinance, since you are planning to rent this home, you must certify to the fact the home is primary, second home, or investment. This is tricky since your plan is to make it an investment property. Investment loans require lower LTV's and higher rates. Lenders are on the lookout for fraud, so you must think long and hard when filling out your application. Certainly if you plan on renting it 6 months out, this is not as critical as two months out. However, if you choose to refi as a primary residence, do not share your future plans with your loan officer. This will put them in an untenable situation.
Shop for your lender first, then pre-qualify. I would begin with your present lender, then interview 3 or 4 lenders with regard to rates, costs, and service levels.
In terms of reviewing items for new homebuyers, in this age of the internet, there are so many blogs, articles etc a quick Google search is probably your best bet. Check out Fannie Mae and FHA's websites too, good info there. Perhaps your county has a free first time homebuyer class as well.
Best wishes, Jim
0 votes Thank Flag Link Thu Jun 21, 2012
a) Yes there will be closing costs that would not be waived.

I am a Dallas real estate agent, Dallas home mortgage loan officer, Dallas real estate investor

b) Depends on your payments to lower the monthly have the rental payments cover your mortgage keep in mind you also obtain all the tax benefits from owning the home, insurance is approx.50% less on rental property you are only have to cover the structure not the content of the renter
c) We can locate you a Dallas home foreclosure for another purchase, you would be making increasing profits from your real estate investments in Dallas

You can visit my website http://www.lynn911.com there is a wealth of information for buyers, seller and etc. that can address your concerns, if not contact my office.
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Tue Apr 22, 2008
Contact the company that is currently servicing your loan. Tell them what you want to do and see what their cost will be. Next, find a local mortgage broker and see what you will be charged. Shop like you would for a new car. There more than likely will be closing costs associated with your plan.
Web Reference: http://www.interest.com
0 votes Thank Flag Link Tue Apr 22, 2008
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