Ask Me About Mortgages
Filed under: Ask WalletPop, Real Estate, Mortgage Confidential
Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. Leave your questions in the comment section of this post.
Reed is president of CD REED Mortgage Bankers in Austin, TX and author of Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You and Mortgages 101: Quick Answers to over 250 Critical Questions About Your Home Loan.
This column is designed to provide information about mortgage finance that will be relevant to a large group of readers. If you require legal service or other expert assistance, please seek the services of a competent professional.
This column is designed to provide information about mortgage finance that will be relevant to a large group of readers. If you require legal service or other expert assistance, please seek the services of a competent professional.
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Reader Comments (Page 1 of 3)
4-22-2008 @ 5:42PM
JIMBOSGUMBO said...
Unfortunately, I had no choice but to file Bankrupcy to save my home from foreclosure. Countrywide initially said they would modify my loan to bring it to a more reasonable rate, but then declined at the last moment.
Are banks working with people like myself who have had to file bankruptcy to modify home loans?
Thank you
Reply
4-24-2008 @ 10:43AM
eddie said...
if i have a 6.50 rate would it save me enough money to refaince, i bought the house new 3 years ago
Reply
4-24-2008 @ 11:34AM
David said...
It also depends on a lot of other things but perhaps the easiest way to determine whether or not it's a good idea is to take the difference you'd save each month due to the new lower rate and divide those savings into the closing costs you would incur in a typical refinance. Such closing fees would be thing such as appraisals, title insurance, escrow and closing fees.
Rates aren't a whole lot lower than 6.50% now and without knowing your loan amount it's hard to determine from this desk. But as long as you intend to keep the mortgage long enough to recover your closing costs, then I'd say take a good, hard look at refinancing.
4-24-2008 @ 1:00PM
Carl Mancuso said...
The Fed has reduced rates by 3 full percentage points since last September. I have been following long term mortgage rates for quite some time. 15 and 30 year fixed rate mortgages are only .25% lower than they were last September. No one I ask seems to know why mortgage rates are still so high and happen to be rising as I write this. The current yield on the 10 year bond is 3.83, up from 3.47 early last week. My question is this. Do you think we will see lower mortgage rates in the future?
Reply
4-24-2008 @ 1:52PM
Rob Alvarez said...
I have a 5/1 ARM mortgage loan. The five year fix rate ends this November 2008. the interest rate is 4.5%
I am afraid what is going to happen after Nov.
What can you recomend? Do I look for a fix rate now. or should I let it go the waty it is?
Reply
4-24-2008 @ 1:56PM
David said...
I'd refinance into a fixed rate now. Yes, rates are higher than 4.5% and fixed rates could go lower but the fact is that you don't know what the future holds. Rates could continue to march up and you'd be holding a still higher rate.
I like to put it this way: Imagine that whichever way you decide, you would have made the wrong decision. Now, which way would you rather be wrong, get today's rates in the low 6.00% range or watch rates approach 7.00%?
4-24-2008 @ 5:39PM
Mary Peterson said...
I have a Reverse Mortgage. The house was assessed at $180,000 a few years ago. I now owe about $157,000 on paper. If I die and the full amount has to be paid... but house prices have fallen and it would only bring about $160,000... what happens ? Would my esatate(Nil) be in debt for the remainder ?
Reply
4-24-2008 @ 5:45PM
David said...
You and your estate are just fine. A reverse mortgage loan can't come after you or your heirs for any negative equity. That's the risk the lender takes, not you, and you helped by paying a mortgage insurance premium upfront which is designed to offset such occurrences. That means that no matter what, you're never required to pay more than the value of your home when the reverse mortgage is retired.
4-24-2008 @ 7:28PM
TJ said...
I have an ARM, and I bought my home two years ago at $119,900 I currently have about $12,000.00 in equity. Because I want to refinance before my payments go up in September, and my two year wait time is up in July I needed to fix some things on the house. Last spring I installed new efficiency windows costing me $5000.00 I owe about $4000.00 on those, and I recently (this month) financed a $14,900 loan to tear down a raggedy screen in porch that wouldn't begin to pass FHA inspections to add a sunroom which will add square footage to my home. My question is, I've spent the passed 2 years increasing my FICO score to between 670-680, because I've made this recent finance choice will I still be able to refinance in July? If so, will I be able to include the amount owed on my recent finance and my windows into my home loan so that I can pay off those creditors which gave me high rates for the windows and room?
Numbers:
Purchase $119,900.00 recent sales on my street with comparable homes $130,000-139,000.
Amount Owed on loan: $107,900.00
Windows Loan: $4000.00
Sunroom Loan: $14,900.00
Square footage of my home after sunroom addition is almost 2000 sq. ft.
Thanks!
TJ
Reply
4-24-2008 @ 8:01PM
David said...
Your situation is predicated on your appraised value which would include the value of your improvements as it relates to current market value of your home. If your home improvements required that a mechanic's lien was placed on your property and indeed it was a home improvement loan and not simply a personal line of credit or placed on a credit card you might be able to accomplish what you want to accomplish, otherwise your refinance that would include these new loans could be considered a cash-out or equity loan.
Lenders will typically ask that a refinance be maxed-out at 90% of the appraised value of your property and even less for a cash out loan. But by all means take the first step and get the current value established.
4-25-2008 @ 10:27AM
Builder said...
Hi, please forward your best opinions on financing options for a small 6 lot subdivision?
I own the land, with 50k lien on the property.
Present land value is approx. 150K.
Land is presently one large buildable lot.
Subdivision will require small culdesac.
Each lot (6) will be worth approx. 70K to 75K.
Home will sell for approx. 195K to 210K.
Please forward numerous financing options with min. out of pocket.
May also decide to sell lots only.
Thanks
Reply
4-25-2008 @ 10:35AM
David said...
Broad question. There are both hard and soft costs for your project but I'm sure you're considering those. You've got equity in your property a bank would likely lend on, that would get you started. You could build a model, then pre-sell the rest. Or simply subdivide and sell the lots individually. But from this desk "little out of pocket" means tapping the equity you have in the land already....most any bank or credit union will do that for you.
4-25-2008 @ 2:17PM
Barbara said...
I am looking into a Reverse Mortgage. Do you know of any problems, scams, etc., out there on this type of mortgage? I don't want to lose my home but costs are rising faster than my pension.
Reply
4-25-2008 @ 2:25PM
David said...
Hi Barbara- You can't lose your home with a Reverse Mortgage. You simply get a portion of your home equity in advance, either in a lump sum or in installments and you don't make payments on a reverse mortgage. There are some restrictions with a reverse such as you have to be at least 62, have equity in the home, you must occupy the property and such but the reverse mortgage program in my opinion is a great option for those who fit the profile. First, visit www.aarp.org for lots of consumer information about reverse mortgages then contact your bank or credit union and ask for their reverse mortgage department.
4-25-2008 @ 6:58PM
Stevo said...
What are your thoughts on the feds likelihood of dropping the interests rates again. I'd like to buy a home during this period of lower home prices, and relatively low interest rates. Trying to judge the housing market and interest rates to get them at there best levels is tricky. When do you think it will be the best time to jump in to get the most for my money.
Thanks in advance, Steve
Reply
4-27-2008 @ 11:26PM
lloyd said...
I live in a house owned by my girlfriend. I would like to help with mortgage payments.
What are my options? What I need to do to build equity and how exactly my payments turn into equity.
I'd like to help her but at the same time obtain ownership. At this point I could make substantially larger payments than her, so loan will be repaid much sooner.
Do I need to apply for a new loan, or 'join' her loan? Do I need to go to title company and do something?
Thanks in advance
Reply
4-27-2008 @ 11:38PM
David said...
Hi Lloyd- Your girlfriend owns the house and also is responsible for the mortgage payments, and she also owns the equity. If you want to be a part of that, you would have to be on not just the mortgage but also be on title. That would require a refinance of the mortgage to produce a brand new note and may also include various state law requirements that you may need to meet. You need to consult an attorney but from a mortgage standpoint, there is nothing you can do to change the terms of original note.
4-29-2008 @ 11:22AM
Pam said...
I have just finished construction on a home with a approx value of $225,000. Construction was financed by the sale of my previous home.
I am 56 years old , currently my only income is alimony, which is taxable income.
Which would be the best way for a deduction on taxs and extra money for landscapeing etc. I am thinking of a 1st mortgage of $50,000. or a equity line of credit .
Which would be best and smartest.
Reply
4-29-2008 @ 11:26AM
David said...
Hi Pam...I'll leave the tax question to Tracy but when you take out a mortgage for $50,000 you begin paying on it immediately and the terms never change until the note is finally paid off after 10-15-30 years. If it were me, I would instead obtain a home equity line of credit and tap into it as needed and pay it off as you can.
5-01-2008 @ 8:52AM
Groovner said...
I have a 3-1 arm. Every 6 months the payment goes up. I need to refi and lock in lower payment but I now live in a "decreasing" neighborhood. My credit is excellent but nobody wants to refi me. I have no $$$ to bring to closing!!! H-E-L-P!!!!!!
Reply