Messy Mortgage Loans: Do you have one?
Buying your home was a very exciting time and process for both of us. As your Realtor, I had an important role with the purchase of your home. However, I was not involved in your loan process. As you may have already know by now, the mortgage industry has tighten up tremendously resulting in more and more foreclosures.
An Adjustable Rate Mortgage is an inexpensive and great way to get into your home. An ARM is a wonderful loan program and if you know how to use it, you can win. If you had a 2-Yr ARM, your loan will stay fixed for 2 years and then adjust thereafter…same if your loan is a 3 year ARM, etc. If you got a 2 or 3-year ARM in 2004-06, then your loan is either coming due very soon or as already came due.
With today’s tighter mortgage market, if your credit is 620+, you should be able to refinance your home loan easily into a “cheaper” rate. Along with excellent credit another factor when refinancing your home that most lenders don't tell you is that your home must appraise for 20% above what you paid for it. With home prices falling, it is very difficult to get your home to appreciate. To add more mess to the mortgage meltdown, 100% financing is gone. You may have to put down 3% or 10%.
If your credit rating is preventing you from refinancing your home loan, your next options are to either 1) try to make payments with a stronger budget plan by cutting expenses elsewhere, 2) rent out your home to avoid foreclosure or 3) sell your home
What to do? Don’t wait until your loan gets ready to adjust. Try to plan 4 to 6 months in advance to have a mortgage lender pull your credit to see your current credit rating. Don’t worry if you haven’t made the deadline to refinance. If you can survive the adjusted payments for a while, say 6 months, you can call me to market your home for sale during that time. If the foreclosure process has started, then it’s too late.
You do not have to wait until your rate adjusts to refinance into a fixed loan. North Carolina is not a pre-payment penalty State; therefore you can refinance your loans at anytime. Check your loan documents to make sure.
Rates are currently around 6.0%. You will need to pay closing cost again but not as much when you closed on your home the first time. If you have built enough equity into your home, you should be able to roll that closing cost into your loan. If you had an Interest-Only loan, you’re okay, but if you didn’t pay towards your mortgage you didn’t build up enough equity. However, with the excellent growth our real estate market is experiencing, your home should have appreciate enough to cover your expenses.
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