Refinance possible? (loan, California, approved, credit)

[rkarun]

My wife and I bought a home in Dec 2004 for $680,000 in Brentwood, Northern California that is now worth $450,000. We purchased with no money down. The 1st mortgage is a 5/1 LIBOR Int Only ARM for $544,799 at 5.75%, the 2nd is a FRHEL w/15 Yr ballon for $128,021.82 at 7.125%. The payments are $2610 and $918 respectively. We have no issue making the current payments and my wife and I both have FICOs above 800, but we are scared because the 1st mortgage will adjust at the end of the year to God knows what monthly payments.

I'm curious as to what our refinance options are since we have no equity in the home. Is it possible to refi and have the lender write off the difference between the old purchase price and current market value (probably not but have to ask)? We would gladly put down 20% if that is the case. Has anyone been able to do this? What do lenders typically do in this case? Would really appreciate hearing from others who are in our situation and have successfully refinanced.

Thanks,
Curious in Cali

[renriq02]

i would call the lender to do a loan modification

[aneftp]

Originally Posted by renriq02

i would call the lender to do a loan modification

I'm not sure the lender would even do a loan modification in this case.

The problem with loan mods is that the people need to show signs of distress. The original poster has paid every month on time and still is sitting on loads of cash. Lenders want to see how poor you are. If the OP is still sitting on 100K cash, they would want the OP to apply that 100K in cash to the principal before even considering a loan modification.

The OP needs to pay for his own appraisal. (It will cost between $300-500 in most cases). Brentwood is in the East Bay and I believe the conforming loan limits in that area is about 625k this year.

Depending on what the appraisal comes back, the OP than needs to consider his/her options.

If the appraisal comes back at 500K, than they need to consider whether to come up with at least 180K cash downpayment most lenders will want.

I highly doubt lenders will do a "cram down" on the mortgage....even if the OP is in bankruptcy.

To the OP, I would not be too concerned with the ARM readjustment right now. The Libor rate is currently is around 2%. I doubt think this rate is going up anytime soon. You ARMs adjusts to this rate (plus addition points or whatever the terms of your mortgage is).

This is not going to be a lecture why not to get an interest only, no downpayment jumbo loan. But I ask you, what did you down with the "extra" money you were saving? Because you mentioned you have quite a sizable amount of cash still left.

So get that appraisal and than go to the banks to see what can be done. If you can still handle the house notes, than its up to you whether you can tolerate monthly increases (if not approved for a loan modification) or just walk away and ruin your credit.

[renriq02]

there are loans that lenders have been modding due to the house being upside down

Originally Posted by aneftp

I'm not sure the lender would even do a loan modification in this case.

The problem with loan mods is that the people need to show signs of distress. The original poster has paid every month on time and still is sitting on loads of cash. Lenders want to see how poor you are. If the OP is still sitting on 100K cash, they would want the OP to apply that 100K in cash to the principal before even considering a loan modification.

The OP needs to pay for his own appraisal. (It will cost between $300-500 in most cases). Brentwood is in the East Bay and I believe the conforming loan limits in that area is about 625k this year.

Depending on what the appraisal comes back, the OP than needs to consider his/her options.

If the appraisal comes back at 500K, than they need to consider whether to come up with at least 180K cash downpayment most lenders will want.

I highly doubt lenders will do a "cram down" on the mortgage....even if the OP is in bankruptcy.

To the OP, I would not be too concerned with the ARM readjustment right now. The Libor rate is currently is around 2%. I doubt think this rate is going up anytime soon. You ARMs adjusts to this rate (plus addition points or whatever the terms of your mortgage is).

This is not going to be a lecture why not to get an interest only, no downpayment jumbo loan. But I ask you, what did you down with the "extra" money you were saving? Because you mentioned you have quite a sizable amount of cash still left.

So get that appraisal and than go to the banks to see what can be done. If you can still handle the house notes, than its up to you whether you can tolerate monthly increases (if not approved for a loan modification) or just walk away and ruin your credit.

[Daddys///M3]

Originally Posted by rkarun

My wife and I bought a home in Dec 2004 for $680,000 in Brentwood, Northern California that is now worth $450,000. We purchased with no money down. The 1st mortgage is a 5/1 LIBOR Int Only ARM for $544,799 at 5.75%, the 2nd is a FRHEL w/15 Yr ballon for $128,021.82 at 7.125%. The payments are $2610 and $918 respectively. We have no issue making the current payments and my wife and I both have FICOs above 800, but we are scared because the 1st mortgage will adjust at the end of the year to God knows what monthly payments.

I'm curious as to what our refinance options are since we have no equity in the home. Is it possible to refi and have the lender write off the difference between the old purchase price and current market value (probably not but have to ask)? We would gladly put down 20% if that is the case. Has anyone been able to do this? What do lenders typically do in this case? Would really appreciate hearing from others who are in our situation and have successfully refinanced.

Thanks,
Curious in Cali

I have heard of short payoff refinances being done but do not have any first hand experience or proof that lenders are accepting short payoffs on refinances. Other than that your options for refinance are basically none. As was said before a modification may be an option, be diligent when choosing a company to go with. Apparently sheisters have invaded that line of work.

The good news is that based on the current 1 year LIBOR rate (1.98%), plus your likely margin which is 2.25% most times, your fully indexed rate were your loan to adjust today would be 4.23%. I don't see London Interbank raising their rates anytime soon.

[rkarun]

Thanks for all the replies guys. To answer a question about why we did not put any money down, well at the time my wife and I had little to no money to put down. The money we have now is what we have accumulated in the last 4 years -- we have worked hard and saved a lot

Well we will approach Citimortgage later in the year and see what they have to say in the way of a loan modification.

[HappyTexan]

Originally Posted by rkarun

Thanks for all the replies guys. To answer a question about why we did not put any money down, well at the time my wife and I had little to no money to put down. The money we have now is what we have accumulated in the last 4 years -- we have worked hard and saved a lot

Well we will approach Citimortgage later in the year and see what they have to say in the way of a loan modification.

You should approach them now and not later in the year. If they don't go for a loan modification/refinance then you will need to explore other options.