Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I am frustrated that the current procedures prevent me from refinancing my mortgage and am looking for ideas. I am an excellent risk but with today's practices I get declined.
Retired living on savings, not yet drawing SS (waiting until 70).
My situation: Credit - 810+; Assets - 1M+ in brokerage/IRA accounts; Debt - zero except for 350K mortgage.
Income documentation is limited as I have been speeding already taxed money at the rate of 75-120K a year, while tax returns show <60K a year mostly conversions to Roth accounts (trying to keep taxes low).
The house was purchased (unfortunately) at the top of the market in 2006 for $460K, appraised at $425K at the end of 2009, and now been appraised (incorrectly in my opinion) at a low-ball $345K. Is a well maintained and attractive property in a good development.
Current mortgage is $350K at 4.75% on a 30yr fixed as a result of a refinance 1/2010.
Loan desired: 15 year fixed. Will bring cash to closing to insure 80% LTV (this will require me to sink another $50K - $70K wired from retirement accounts).
Denials say my income will not support the mortgage even though I can make my income whatever I want to give them a acceptable ratio.
I have already spent too much time and money on this with well meaning loan officers and underwriters that are not paid to evaluate but just to fill in boxes and report the result. Where can I go to have an intellegent conversation about a simple financial deal?
(In the past I carried my own mortgage by borrowing against my investments on a margin account but those kind of arranagements are no longer practical or I would do it again).
You occupy a space that has been dealt a harsh over-correction.
Traditional financing conduits no longer allow for assets-based approval, or even bank statements and other Financials.
Any non-traditional lender, IMO, that might get you done, will likely not offer sufficiently attractive terms to make it worthwhile.
You might already know this, and it is not your desired solution: what if you make a Principal Reduction to kill the mortgage insurance, then simply double down on your payments to retire the debt faster?
If I could offer you a solution, I would have a substantially larger client base. I apologize.
Odds are slim (really non-existant ) that you can do better that what have UNLESS your "investments" are in a special class. I will explain why, but first I think it is helpful to understand why interest rates on mortgages are still so low.
The combination of diminished demand for loans and the efforts of the Federal Reserve to smoother returns on fixed rate investments are part of the reason, but the other is that lenders and investors in mortgage backed securities have not lost faith in the credit bureaus that "score" consumer lending risk and the underwriting standards have come up. This means that funky things like stated income loans have pretty vanished. It also means that borrowers understand why they let the collapse happen in 2008...
Ok, clear?
I know of one asset class that is still useful for creating your asset based borrowing situation -- treasury bonds and notes. If you have a sufficiently large portfolio of these that are sufficiently old that they carry a rate higher than what you'd pay to the lender most larger banks with "high net worth client groups" would gladly accept those as collateral on loan. The reason that you can no longer margin other "assets" is that the experince of markedly increased volatility that was experienced around the time of the failure of Lehman Bros is still present (any shares of say Apple part of your holdings?). If Uncle Sam does void out t-bills then banks won't matter anyway...
I sort doubt that you have $350k worth of t-bills paying more than current mortgages becuase it was long time ago that such rates were available, but if you do and you are ok with the risk it is probably is the only way that you can really say "I have all the assets I need". Bankers are not stupid, if you say "I can make my income whatever I want" they will know you are not being honest -- income that you get by liquidating shares from you holdings are one time income events and that is not at all like the stream of income one gets from guaranteed fixed rate government bonds....
Thanks for the intelligent comments. With many calls I have found experienced mortgage producers that have given me the same input, and a few leads that are in line with your comments.
I have found a couple of institutions that will do asset based underwriting but make it clear they will have to carry the note and ask a higher rate to do that or protect themselves with a modest rate hike an a ARM offering. Neither are very attractive alternatives.
My current options look like this:
A) Another try at mainstream lender with 2012 tax returns which may give a slightly better ratio (bigger Roth conversion last year), but still a marginal case with the way they look at income.
B) Go with a 7/1 ARM at 3.65 approved with an asset based review (and find a way to accelerate principle payments).
C) Stay with my current 4.75 and pay principle as rapidly as I can stand the tax hits for IRA withdrawals.
The problem with option A is I bet another $600 on appraisal and credit reports and anticipate what the rate will be in 45 days (can't get far on taxes until after 2/15 brokerage reports). The issue on B is spending the money for another refinance with a rate and term less than great, and of course option C surely costs me more.
It is frustrating that the government/industry got us unto this fix and are creating new problems as a result that make it harder to recover. Every banker noted that bank statement loans are missed and there is demand to get them back but don't expect to see changes soon.
After two months of working on this I am (no surprise) underwhelmed with the government and industry solutions.
I got a mortgage last year (May) and went with a 10/1 ARM at 3.25%. I would have preferred a 30-year fixed (on which I would pay extra to turn it into a 15-year loan), but those rates were quite a bit higher. I am making extra principle payments every month so that the balance will be manageable in 10 years and hopefully I will be able to pay it off altogether within 15 years of purchase.
Don't know if a 10/1 ARM is available in your area (you likely would have mentioned it if it were). Option B sounds to me like your best bet except it sounds like you may have trouble paying it off early, and who knows what interest rates will be in 7 years. (And taking $100-120k out on a 1M+ account sounds like it will be depleted rapidly unless the + means it is really WAY over 1M).
Just an update on my plans hoping that anyone that sees problems will chime in.
Will setup monthly disbursement from one IRA to a taxable account so there is a taxable income stream that can be documented. I have been told that once it has been established and at least one payment has been made it will count as income in the calculations and get me over the DTI hurdle.
If this works I will probably cancel the disbursement after the mortgage is closed and go back to managing my accounts the way I have up until now.
If there is a bank that allows just one payment that sounds good. Too good to be true to me.
I've been burned like this several times. We had to prove (as close as possible to) a previous 2 years of REGULAR, IDENTICAL MONTHLY PAYMENTS to yourself from the annuity,or account, whatever it is, AND a remaining balance in the account to where 60% of it would allow for 3 more years of monthly payments.
If there is a bank that allows just one payment that sounds good. Too good to be true to me.
I've been burned like this several times. We had to prove (as close as possible to) a previous 2 years of REGULAR, IDENTICAL MONTHLY PAYMENTS to yourself from the annuity,or account, whatever it is, AND a remaining balance in the account to where 60% of it would allow for 3 more years of monthly payments.
Exactly my concern since I had been told from two months to two years payment history and three years reserves are required in previous underwriting discussions. But then they also said the SS statement counts for nothing until you take one month and then it counts as an income stream even though it could be changed after close.
I have sent in the paperwork to get the auto withdrawals from IRA started thinking it is a no risk move. So the risk continuing with this firm is funding another appraisal/credit check and killing thirty more days.
I sure wish I had some indication regarding this and other evolving retirement issues before before settling into a financial plan that has not always worked for me. Mainstream consensus and advice is not always sound.
Will post results and maybe help someone else watch for similar potholes.
I am happy to report that I finally have a mortgage approval after over four months, dozens of conversations, three applications, many dollars, and revamping some of my finances. If you don't have W2 wages or a documented income stream (pension award, etc.) the process is much more arduous than in the past. It is clear the low rates are for loans that can be sold so they must meet government guidelines.
Had to begin automatic IRA withdrawals, move some funds, change the amount of the mortgage (low ball appraisals), but I did get a 15 year conventional at 2.625.
My advice is to be more informed that the 'loan officer' as far as what is being done in the industry so you can question exactly what kind of loan and documentation they want. Be prepared to jump through some hoops and conform (at least temporarily) to what they want.
Just an update on my plans hoping that anyone that sees problems will chime in.
Will setup monthly disbursement from one IRA to a taxable account so there is a taxable income stream that can be documented. I have been told that once it has been established and at least one payment has been made it will count as income in the calculations and get me over the DTI hurdle.
If this works I will probably cancel the disbursement after the mortgage is closed and go back to managing my accounts the way I have up until now.
This is pretty standard for anyone that delivers directly to Fannie Mae - no investor overlays and it certainly sounds like 3 year continuance is present. At least you were of the age you could draw.
But my question is this: did your experience move you to contact any of your elected officials?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
