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Old 04-10-2015, 09:13 AM
 
Location: Elko, NV
474 posts, read 717,220 times
Reputation: 422

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My husband and I bought our house 2 years ago and based on our finances at the time we went with a 15 year FHA. We could afford the monthly rate, the MIP would be eliminated sooner, and the interest rate was lower. We are now running into the problem that, more than likely, my husband will be losing his job sometime this summer, and he works in a very narrow/niche field so he won't be able to find something similar anytime soon. What we are doing instead is re-figuring our budget based on my income alone and he is planning on going back to school for his Masters while working part time just to help bring in a little extra.

Our current largest monthly expense is the mortgage, and based on my calculations refinancing to a 30 year mortgage at current rates will save us just over $500 per month. MIP is another $75 per month.

I know we will be paying more in interest, but with the changing finances that extra $500-$600 per month will really come in handy.

Our balance is currently at 86% of our purchase price and 80% of the original appraised value. Does that mean we can qualify for a conventional 30 year mortgage without having to pay MIP? How does the refinance process compare to the original mortgage process? I'm just really not sure what to expect.

Also, I'm wondering if an ARM would make more sense, since we could use the lower interest rate in the short term.
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Old 04-10-2015, 10:26 AM
 
274 posts, read 263,492 times
Reputation: 138
You would need to get a new appraisal done to see if you are at a low enough LTV to eliminate the PMI, have homes in your home been increasing in value or staying the same?

(and the bank would order an appraisal as the first step).
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Old 04-10-2015, 10:40 AM
 
12,404 posts, read 9,199,643 times
Reputation: 8863
Quote:
Originally Posted by awestover89 View Post
My husband and I bought our house 2 years ago and based on our finances at the time we went with a 15 year FHA. We could afford the monthly rate, the MIP would be eliminated sooner, and the interest rate was lower. We are now running into the problem that, more than likely, my husband will be losing his job sometime this summer, and he works in a very narrow/niche field so he won't be able to find something similar anytime soon. What we are doing instead is re-figuring our budget based on my income alone and he is planning on going back to school for his Masters while working part time just to help bring in a little extra.

Our current largest monthly expense is the mortgage, and based on my calculations refinancing to a 30 year mortgage at current rates will save us just over $500 per month. MIP is another $75 per month.

I know we will be paying more in interest, but with the changing finances that extra $500-$600 per month will really come in handy.

Our balance is currently at 86% of our purchase price and 80% of the original appraised value. Does that mean we can qualify for a conventional 30 year mortgage without having to pay MIP? How does the refinance process compare to the original mortgage process? I'm just really not sure what to expect.

Also, I'm wondering if an ARM would make more sense, since we could use the lower interest rate in the short term.
Do you not earn enough to keep everything afloat without husband income? If money is this tight you need to go with the 30-year loan, otherwise you are asking for a liquidity crunch.

I'd avoid an ARM also. If the rates go up it will be a stretch.
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Old 04-10-2015, 10:42 AM
 
394 posts, read 244,865 times
Reputation: 1461
As low as rates are now I would avoid an ARM like the plague
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Old 04-10-2015, 10:54 AM
 
Location: Jollyville, TX
3,704 posts, read 9,097,342 times
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We did something similar. We bought in 1994 and our interest rate at the time was high. When rates came down substantially and our credit improved, we refinanced into a 15 year loan. A few years later, rates had gone down even more and we needed the extra cash flow a 30 year loan would provide. Did it and didn't look back. The thing is, with a 30 year loan you can always pay more or pay down the principle faster when you are back to having two incomes.
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Old 04-10-2015, 11:01 AM
 
Location: Elko, NV
474 posts, read 717,220 times
Reputation: 422
Quote:
Originally Posted by ncole1 View Post
Do you not earn enough to keep everything afloat without husband income? If money is this tight you need to go with the 30-year loan, otherwise you are asking for a liquidity crunch.

I'd avoid an ARM also. If the rates go up it will be a stretch.
I am the larger income earner, and we won't be at risk of foreclosure or missing on payments, it's just a matter of figuring out where to trim the budget. His take home pay is around $2300 a month, and it will cost me an extra $125 or so per month to add him onto my health insurance, so we are looking at a cut of about $2500 per month. After all bills are paid we usually have around $1500-$2000 extra which gets split between a vacation fund (maximum of $400 per month), retirement fund (auto deduct of $500 per month), and emergency savings. That leaves about $500-$1000 per month we need to trim the budget if we stop all savings, but I really don't want to have to do that. We will definitely be cutting cable, cutting back on vacations, and cutting back on how frequently we eat out, but that will only save around $600 each month, give or take a bit, which is why I was looking at refinancing. If we can cut $600 from the budget, plus $500 for the mortgage, we can still put away about $500-$1000 each month into savings.
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Old 04-10-2015, 12:25 PM
 
Location: New York
2,251 posts, read 4,161,023 times
Reputation: 1607
Quote:
Originally Posted by awestover89 View Post
...Our current largest monthly expense is the mortgage
awestover89
  • I recommend contacting your existing lender for an in-house refinance. Using a different lender will cost you $$$$$ in closing costs.
  • The 15 year FHA loan you took out two years ago, you have another 3 out of a mandatory 5 years before the MIP can drop off. Refinancing back into another FHA mortgage the MIP will become lifetime.
  • Two years with present loan, most of your payments have been applied to interest. It takes over five years when more of the payment starts being applied towards principle. How you can benefit going back to a 30 year loan, making one extra payment towards principle a year can reduce your term to 23.5 years (approx).
  • I Do Not recommend refinancing into an ARM unless you are planning to move in the short term future. If a republican is elected in the next presidential election, history shows interest rates will be going up!!! (topic for another post). Another point to consider what will be lost by refinancing again. How much you would save/cost by a fixed rate vs an adjustable rate.
  • If your loan-to-value score (LTV) is 80% or less, have possibility of refinancing into a conventional loan without (PMI) principle mortgage insurance. The LTV is determines by what you owe verse the value of your home. The value is determined by similar properties in your neighborhood.
  • As stated above FHA loans now have lifetime MIP. If you LTV is above 80% it could be better to look at a conventional loan with PMI. Which would drop off when LTV drops below 80%. When that happens most likely wil be required to pay for the appraisal.
  • Another option to consider if you can no longer afford your mortgage. Work on an exit plan to a smaller property. Think of this as an analogy of a leaking ship drifting out into the ocean. How many band-aids will it take before going under. This sounds kinda hard, recommend you looking at this as a last ditch back plan for your well being.
  • Your situation is an example of working hard for a job, take away the position and what do you have? Something to think about for your future is building circles of income (different sources of income). Also understanding it is not what you know, it is who you know how to make it in today's economy (keyword is net working).
Good Luck

..

Last edited by Modification Specialist; 04-10-2015 at 12:51 PM..
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