Home Selling in 55401>Question Details

dimkawedding, Both Buyer and Seller in Minneapolis, MN

We would like to refi our two mortgages into one in order to lease our condo and nottake a loss. We did an

Asked by dimkawedding, Minneapolis, MN Sat Aug 9, 2008

interest-only arm, 0% down so we still owe the full cost of the property today, two years after we bought it. What will happen if we try to refi the loans into one? Will the house appraise for less than it did when we bought it in '06 (it appraised for 305,000..we paid 290,000)..and if so, will we have to make up any difference in the new mortgage? I really don't know how this works at all, any advice and recommendations for good mortgage brokers/companies is much appreciated!

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You may have better options available depending on some particular factors. Do you know if your condo complex is approved by FHA? If so, then you could do a rate/term (no cash out) refinance up to a maximum of 97% loan to value. This means that you could take out a mortgage loan up to 97% of the appraised value of your property. You would need to have a minimum 3% equity in your property to be able to pull it off. This is not exactly a down payment since down payments only apply to purchases, but it is a similar idea. If you don't know whether your condo comples is approved, here is a link where you can search your complex to see if it is on the FHA approved list:

https://entp.hud.gov/idapp/html/condlook.cfm

Just to give you a rough idea of the minimum value you need from your property, if your current mortgage payoff amount is $290,000, then your property must be worth a bare minimum of $298,970 to be able to pay off your current mortgage. This does not take into consideration the closing costs and upfront mortgage insurance that would need to be added into the new mortgage amount if you do not want to pay out of pocket. But at least this gives you an idea of where you need to be as far as your property value is concerned.

If your condo complex is not approved by FHA, another option would be to get what we call a spot approval which would mean that only your unit would be approved. This would depend on certain information filled out by the home owners association on a questionnaire.

If this cannot be done, then your other option would be a conventional loan. You are pretty much limited to 95% loan to value (minimum equity of 5%) unless we could find you a loan at 97%, which would depend on some particular factors according to your circumstances. It is not easy (the 97% condo option), but sometimes it can still be done on condos. But if you need to go the 5% equity route, then your minimum property value would need to be around $305,265 not taking into account closing costs, etc.

A good start would be to find out what the estimated appraised value would be on your property and from there you can determine what your options would be. Of course, you also need to know if your condo complex is FHA approved. I would recommend that you speak to a knowledgable Mortgage Consultant that can help you determine what your specific options would be.

If you have any more questions, please feel free to contact me.
0 votes Thank Flag Link Sun Aug 10, 2008
Evidently, you are correct. The 710 or 720 Lofts are not listed on the FHA list and it appears that they have never been approved, rejected or haven their application withdrawn. The only condo complex in Minneapolis that shows up with the name "Lofts" is The Lofts on Arts Avenue.

Your other option, if you want to try an FHA loan, is to obtain a spot approval for your unit. This would involve a Mortgage Consultant sending the Home Owners Association a brief questionnaire to determine if the complex would qualify for a spot approval for your unit.

Otherwise, the other option would be to use a conventional loan with a minimum 5% equity although sometimes 3% equity might be available depending on some factors.

If you have any further questions or need more help, don't hesitate to contact me. If you would like to contact me directly, you can view my profile and contact me that way or you can send an e-mail to David at D hyphen Garcia dot com.
0 votes Thank Flag Link Mon Aug 11, 2008
Hi Susan, thank you for doing that research for me! We live in a 1+1 (1 bedroom + den), 1 and 3/4 bath, 1100 spare feet, on the city view side of the building, on a higher floor. My email is dimkawedding at lycos dot com. There was one forclosure in our building--not sure if that accounts for the 219,000 sale or not, but I'm sure it doesn't help either way.
Thanks again!
0 votes Thank Flag Link Mon Aug 11, 2008
I did a little research. It looks like in the 710,720 and 730 buildings, the highest most recent sale price (since the first of the year 2008) was $490,000 for a 3 bedroom 2 bath unit. I don't know how big your unit is, but that one was over 1800 square feet. The next price down was $250K for a 1 bedroom 1 bath. It goes down pretty dramatically from there, $219K for a 2 bedroom 1 bath. These are the same comps an appraiser will look at. I can send you this list if you want me to. I cannot post it here, but I can e mail it to you. Let me know what you'd like me to do.
0 votes Thank Flag Link Mon Aug 11, 2008
Mortgage Expert--your answers were very helpful. Thank you for taking the time to answer all my questions. It looks as though the appraisal will be the biggest part of the equation in our dilemma. 3-5% is not an issue, we just don't want to put down 10-20% if we can avoid it--plus that leaves us with nothing for the next house we might want to buy.
I went to the link you posted and attempted to search for my condo complex--it kept coming back with no result, even though I tried to keep the search as general as possible. Am I doing something wrong? We live in the 720 Lofts building in Minneapolis, MN 55401...the association name is 710 Lofts (the association maintains 3 building--the 710, 720 and 730 but has one association name). I searched for "720 Lofts" and generally just "720" and "710" but still no result. Is there another way to find out?

Thanks again.
0 votes Thank Flag Link Mon Aug 11, 2008
This is a post script to my previous answer.

The 3% percent equity required on an FHA loan is still valid until September 30, 2008. As of October 1, 2008, then the minimum equity will be 3.5%.
0 votes Thank Flag Link Sun Aug 10, 2008
Well, yes, you could pursue an FHA mortgage and they do require, as of now, 3.5% downpayment. In the event that situation would work, you would also need to consider how much more you'd have to put in to cover the shortage between what you currently owe and what the current value is, plus your closing costs. If it's not that much, that seems like a feasible option. So, if your place is worth (just an example) $250K, you'll have to have $8750 down payment, plus about $7500 for closing costs plus whatever the difference is between what you owe and what ever the appraised value is according to the lender. I'll let the mortgage experts figure out the specific details, but you do have some other expenses with FHA like the upfront fee which would be part of your closing costs and a monthly MIP, Mortgage Insurance Premium. Again, I will suggest you contact any of the very qualified lenders on the link below to get more specific answers. Our company only represents home buyers, so we are very picky about the lenders we will recommend. I would suggest Laura Turrittin at Prime Mortgage to start. She is great at matching loan programs with buyers get them in to something that works. Good Luck dimkawedding!
0 votes Thank Flag Link Sun Aug 10, 2008
These are all great questions but really one for a loan officer. Unfortunately neither Susan or myself are loan professionals and our input while useful would be 2nd rate to what you could get from someone who originates mortgages for a living. If one doesn't pop in here and answer your questions for you send me an email and I can put you in touch with someone that I work with.

Cameron Piper
Web Reference: http://www.campiper.com
0 votes Thank Flag Link Sun Aug 10, 2008
We had a six figure income when we took the loan out, it was just proving it that was the issue. We have money in savings and investments, but, no, we don't want to clean ourselves out to refinance this house. 20% down would be about 50-60K and that's everything we have right now that's liquid. That would be an obviously bad move. Aren't there any financing programs that would be available to us that would only require (maximum) 5% down? That would seem more reasonable. Or could we do another 80%/20% mortgage, but just with better terms, like a lower interest rate? Do you have to be low income to qualify for an FHA mortgage? I know an FHA only requires 3% down--what are the limitations on such a loan?
0 votes Thank Flag Link Sun Aug 10, 2008
So, with your now 6 figure income (and congratulations by the way for really working hard to turn your situation around), do you have cash to put in to the deal if your property doesn't show an appraised value for 80-90% LTV? If your property is worth less than you paid for it, the bank will find that out from your appraisal. And, because lenders are not doing the 0% loan programs anymore, you will need to have a certain amount of "equity" in the property, which means that the bank will only lend you an amount of perhaps 80-90% of the property's value TODAY for a mortgage. So, that leaves you not only having to have 10-20% of the property's value in cash to offset your loan, but additional moneys to pay off the difference between your existing loan and the property's new value which is less than what you paid for it. Does that make sense? That's a very simplistic explanation, and perhaps those who are better versed in mortgages than I can explain it better. Or they might know of a program that could work for your situation.
0 votes Thank Flag Link Sun Aug 10, 2008
We want to refinance because one mortgage is an ARM at 7.95% (payment is $1867/month) and the second, smaller mortage is a fixed at 10.649% (payment is $552/month). When we took out the mortgage, we accept these terms because my husband was not a candidate for better terms--he is self-employed and did not have two solid years of financial statements and, his credit score was below a 680. Two years later, this is different: 4 solid years of income statements showing a current income (gross) of $200,000/year and his credit score has improved beyond the 680 mark. We would like to keep this current property for several more years and allow it to appreciate (when the market finally improves), yet, rent it out in the meantime. Other rental units in this building that are similar rent for about $1750/month (average). If we rented at approximately the same rent, we would need to refinance the two mortgages so our payments were not significantly higher than the rental income we received for the property.
0 votes Thank Flag Link Sun Aug 10, 2008
My impression is that you will have trouble refinancing the property. The appraisal will be an issue, in addition you will also struggle to find a mortgage program that will accept a 100% LTV today.

More importantly you need to answer the question of whether or not you should refinance. What are you hoping to accomplish with one mortgage that you can't accomplish with two?

If you can post back some more information about why you want to refinance. We as a community can help you with whether or not it is a good idea for you.

Cameron Piper
Web Reference: http://www.campiper.com
0 votes Thank Flag Link Sun Aug 10, 2008
I'm no mortgage expert, but from what I do know if the property today is not worth what you paid for it in '06 and you want to refinance and you have been paying interest only and you had no downpayment, it's unlikely you will be able to get a refinance done without putting cash out of pocket in to the deal to make the numbers work. The market has not appreciated in those 2 years, except for a very few categories, and even those have only appreciated minimally, which is the equivalent of remaining flat. I'm sure you'll get answers from those who know mortgages. Check out the page below and feel free to call any of those experts. Good luck!
0 votes Thank Flag Link Sun Aug 10, 2008
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