All I can say is @#*&!!! (PMI, loan, recourse, refinance)

[a3593]

Long story short: Closed on a small investment property in November. Approached the same broker who closed that loan the following month to re-fi my primary residence to take advantage of the tumbling rates. (No cash-out.) Broker says I will send the loan to the bank you just closed with to make it fast & easy. Did application, paid $350 for appraisal, once broker submitted the loan they come back with TWENTY-FOUR conditions that need to be filled (copies of 1040x, more chk stubs, old W-2's, etc, etc) which we jumped through hoops to do! Bank cuts 11k off the appraisal through an "appraisal review" , which makes us have to now pay PMI. Ok. @#$%, but can we just close on the loan. Still a savings because its a good rate. Fast Forward SIX weeks: Our broker tells us that the bank REFUSES to close the loan because we have not owned that investment property for one year, so our DTI (debt to income) ratio is all of sudden too high. It is ONE PERCENT HIGHER than their underwriting guidelines will allow. (They will not count our rent that we collect from it as income, just the mortgage as a new debt.) The first underwriter "missed" this which allowed the loan to continue to flow. Mind you that property is THEIR loan, and we have a renter in it whose rent is paid PROMPTLY courtesy of her US Army stipend and there is a positive cash flow of $600 a month. I am just beside myself!! WHY weren't we told this in the beginning so we are not out of $350 ?! @#$%! Do I have any recourse?? Anyone out there experience anything similar??

[Daddys///M3]

Unfortunately you have no recourse. Your broker should have known that the investment property mortgage was going to count against your debt to income ratios and that you would not be able to use the rent as income. Has your broker tried any other lenders? A one percent differencee in the DTI does not seem like a big deal unless it is killing it in the automated underwriting system, or unless you are exceeding the MI companies max DTI ratio guideline (more likely the MI company's guidelines).

[a3593]

Now broker says if we come to the settlement table with about 2,500 that we can close because the loan to value will be lower. If we close the montly payment drops about $180. Should I do this?

[Daddys///M3]

The loan to value will be lower or the DTI ratio will be lower due to the lower loan amount? Will the $2500 put you at or below 80% loan to value, eliminating the need for MI? Are you rolling any other closing costs into the loan amount?

[a3593]

Thanks for responding Daddys///M3. There are about $9000 in closing costs rolled in; 329k loan amount. The broker is saying it will lower the loan to value. It will eliminate MI.

[Daddys///M3]

Assuming that the costs are $9000 total, and the $2500 needed to bring the loan to value down to 80% brings the actual rolled in costs to $6500, your break even point with a monthly savings of $180 a month is 50 months. That means it will take 4 years and 2 months for the monthly savings to equal the costs of the refinance. If there are $9000 in costs rolled in PLUS $2500 cash to close the break even point is 64 months. Your decision should take these break even points into consideration (as I am not sure which is accurate) and weighted against your plans and goals with regard to subject property and personal finances over said time frame.