I currently have two loans with the same mortagage company. The first loan has a principal balance of 114K. It s an ARM financed at 7.49% for (2) years. The (2) years are up February 2008. The second loan has a prinicipal balance of 29K with a locked rate of 9.7%. The mortagage compnay has informed me that the interest rate on the ARM will ncrease by 3% beginning March 2008. I want to refinance for a fixed rate 30 year and combine both loans with the VA. What do I need to do?
I am not the mortgage expert, but you have a problem - you have $1,000 negative equity in you home. Also, if the appraisal was more than a few months ago, it is probably high.
Originally posted by Dave_M: I am not the mortgage expert, but you have a problem - you have $1,000 negative equity in you home. Also, if the appraisal was more than a few months ago, it is probably high.
Since you're not the expert, please allow MortgageGuru to handle this.
You're on the edge of a catch 22 which happens to be the one thing I hate about the VA loan guidelines. Since you have a first and 2nd mortgage, even when the 2nd mortgage is used as part of the purchase money financing, VA still looks at combining the two loans as a cash out refinance and caps the maximum loan amount at $144,000 including the VA funding fee and a maximum loan to value of 90%. Which means you may end up having to go with an FHA loan instead of VA or depending on another conventional type loan.No matter what, refinancing will lower your monthly payments. Basically, long story short, unless your home appraises for more than what you have stated then you are going to have to bring money to closing in order to refinance. How long ago was the last appraisal done? Do you have the means to bring money to closing in order to refinance it?
The last appraisal was wdone in February 2006 when I purchased my home. Even though th purchase price of my home was 139,900. the appraisal was 142K. As I said that was in 2006. My property taxes fopr 2007 however are based on a home value of $139,900. I don't know if that means that now my home is only worth 139,900. I could borrow some cash from my Thrift Saving Plan with my federal job. How much cash are we talking about?
Being a disabled vet doesn't help in this case. VA is going to cap the loan at 90% of the home's value which comes up roughly $14,000 short. You have several factors that do help you though. First of which is that you are in Texas. Texas is the only state with lending laws that make sense. During the refi boom where literally millions of people were taking cash out against their homes and recklessly driving up property values, Texas properties could not exceed 80% loan to value. This is the number one reason why Texas has maintained a much more stable real estate market than the rest of the nation. Secondly, your home appraised higher than the purchase price. When an appraiser does an appraisal for a purchase, they typically do not bring the value in higher than the purchase price if they can avoid it. It reduces their liability if a foreclosure were to occur. The value coming in higher tells me that he probably couldn't bring it in lower because of the strength of the comps used. So my gut instinct is that while the value may be close, you should be ok. As far as how much would be necessary to bring to closing, you're worst case scenario is probably going to be in the $2,000 to $4,000 range. That's just a guesstimate. All in all, it doesn't sound like it is going to be hard for you to refinance.
That's good to know. Does this mean that I can or can not qualify for the VA Loan? If not VA, who? When should I start the ball rolling as February 2008 is right around the corner? Where do I go from here?
OK I erred again. I spoke to you before I verified with my settlement statement. The house was a new build at $139,900 but because it was on a corner lot,the price was 143,909. This is the actual contract sales price on my Settlement Statement. sorry for the confusion. So does this fact change anything either way? Thanks again and sorry for the confusion.
It doesn't change things much. It only takes the warm and fuzzy feeling away about what your house is likely to appraise for. The main thing you need to check is to see if you have a pre-payment penalty or not. 95% of all the 2 and 3 year ARM's have them. If not then go ahead and refinance it now, no sense in waiting. If you have a pre-pay then it's going to be best to wait and refi once it expires. Because of the loan caps on VA, you are going to be better off doing either a My Community loan or an FHA loan. My Community will be just a hair cheaper than FHA. The difference is that it is much more credit score based.
