We are in an adjustable, interest only loan that will reach its term in Oct. Plus we've got a second with a

Asked by Bc, Tahoe City, CA Tue Jan 27, 2009

different lender. We are short on the equity we need to refinance and don't have the $40K in cash to put down. We have really good credit and excellent payment history. What are our options?

Also, I take responsibility for signing on the dotted line, however, as a first time buyer, I I feel like we were directed into this by our mortgage lender. I kick myself for not having known better! Have you heard this before?

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Steven Ornel…, Agent, Fremont, CA
Wed Jan 28, 2009
Oh Yes, totally on board with that, thought you meant something else - Thanks!
0 votes
Lori Lewis, Mortgage Broker Or Lender, Bethlehem, PA
Wed Jan 28, 2009
Steve,

Please see on page 1 “Summary of Changes”, under Cash Out Refinances; bullet point 4 - and I quote "Subordinate financing may remain in place, but subordinate to the FHA first Mortgage, regardless of the total indebtedness or combined loan to value ratio, provided the homeowner qualifies for making scheduled payments on all liens.

Please keep in mind this is FHA guideline, but you would still need approval from the Lender.
0 votes
Steven Ornel…, Agent, Fremont, CA
Wed Jan 28, 2009
Hi Lori, help me understand the the point you are trying to make? I care little about being proven wrong, I'm more concerned about having the correct info. HUD Mortgagee letter 2005-43 doc link below..

From what I can tell, this particular doc speaks to Streamline refinances, Bc's would be non-Streamline.

Thanks, Steve
0 votes
Lori Lewis, Mortgage Broker Or Lender, Bethlehem, PA
Wed Jan 28, 2009
Steve and Tony,

Please refer to HUD Mortgagee letter 2005-43
0 votes
Tony Grego, , Indianapolis, IN
Tue Jan 27, 2009
This is a very good question that poses many challenges.
1. Steve is right. If you have not had cash advances or the second was used as purchase money you can do a rate and term refi with FHA
2. The Max loan for FHA is 97.75% LTV so the payoff of both mortgages and fees need to be below 97.75% loan to value.
3. If the combined payoffs and fees exceed 97.75% of apprasied value you need to speak directly to the company holding the second and find out if they will subordinate. Make sure to retain day and date called and who you spoke to.
4. FHA will refi just the first and fees up to 87.75% and you will retain the second if the lender subordinates and both mortgages fall in to established debt ratios.

If you need any help drop me a email
Tony
0 votes
Bc, , Tahoe City, CA
Tue Jan 27, 2009
I talked to the bank who owns the first and they said they didn't think the bank on the second would subordinate. Is there a relatively easy way to find out if this is possible?
0 votes
Steven Ornel…, Agent, Fremont, CA
Tue Jan 27, 2009
Dominique, can you clarify what you mean when you say that "FHA does not have a maximum combined loan to value"?

True, FHA does not use the term "Combined Loan To Value" because an FHA loan is a single loan. However, as of 1/09, isn't the refinancing LTV maximum of non-FHA (aka “non-streamline”), non-cashout, refinances loans 97.75% of appraised value? (not counting Up Front Mortgage Insurance Premium and any Energy Efficient Mortgage, which can effectively take you above this amount).

Also, I believe, that if no additional equity draws have occurred on the 2nd within the last 12 months, FHA will allow the 1st/2nd to be a rate & term refi.

-Steve
0 votes
Lori Lewis, Mortgage Broker Or Lender, Bethlehem, PA
Tue Jan 27, 2009
Dominique is correct; FHA does not have a CLTV minimum.

BUT you may have a hard time getting your second lender to subordinate.
0 votes
Dominique Re…, , 93704
Tue Jan 27, 2009
Hello, You can refinance your first into a 30 year fixed FHA loan. If you don't have enough equity to pay off the second it won't affect your loan as FHA does not have a maximum combined loan to value. We are seeing these situations often these days. I would be happy to answer any questions you have. Please call or email me.

Thank You,

Dominique Ressurreicao
Co-Branch Manager
American Pacific Mortgage
559-892-6812
dominique@apmortgagepros.com
0 votes
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