What do we do...?

Question

Need to refi our home. Here's the short of it. Home value ($700k), 1st mortgage 30yr fixed ($422k $3500/mo), HELOC 14yrARM ($198 $1450/mo), CC debt ($65k). No late payments of any kind. FICO 680. Down to one income ($70k). Hanging on by a thread to try and get a refi. We need to lower payments in order to pay off the consumer debt but can't refi because of that debt. We waited too long and used credit the last year to pay for stuff (I KNOW, BIG MISTAKE) Our broker(s) cannot find a loan that will refi to even be enough to pay off the debt. The most we would save a month is $300-1000. We need to lower the 1st mortgage to about $1500 to even make something work. From asking questions on yahoo, sounds like we are on our way to either going bankrupt or foreclose. Any thoughts on this. NO WISE REMARKS, I KNOW WE NEEDED FINANCIAL HELP LONG AGO. NOT LIKE WE ARE ANY DIFFERENT THAN OTHERS WITH THIS PROBLEM BUT WE ARE STILL MAKING PAYMENTS ON TIME...FOR NOW. The HELOC was a scam

Consumer debt may be lower...not by much. I was going off a older credit report. Could be $50k.

Answer 1

Try a bank, rather than a mortgage broker. Your credit score isn't great, but it isn't bad either...kind of average for these days.

Your big problem now is debt to income ratio. I'm guessing it's about 97%, which means for every dollar you earn, 97 cents goes to pay consumer debt. Not good.

You need a loan officer who will pull a current credit report, figure out exactly which debt should be paid off. They look for the lowest balance with the highest payment, to get the biggest bang for the buck, so to speak. If they can get the dti down to say 50%, they might be able to get a loan for you.

If you have a good relationship with your regular bank, they may be able to cut you a little slack. Your current lender is another good route because they already have a stake in you. The lender does not want your house, and will frequently work with you if possible.

You're going to have to pay mortgage insurance unless you can find a consumer loan (Bank of America used to do consumer loans, I don't know if they still do) or a bank that portfolios (and I can't think of one that does this off the top of my head).

Another thing is the value. I don't know where you live, but your property may not value as high as you think. (A little more coal for your fire, sorry.) I've seen a lot of people caught in this kind of mess. Their ARMS are due to adjust, and they want to refinance but they owe more than the current value of the property.

Here's a website that can help you figure out what payments are for different rates and terms.

After all that, I have to say I think you're cooked and the only way to avoid really bad stuff is to sell.

If any of this sounded smart, I didn't mean it that way.

Answer 2

You have a lot of creative people giving you sound advice here. I would like to propose another way. Stop the madness. What are you going to have if you get financing for this place? A reprieve, and a short one at that. Your income is supportive of a $125,000 home IF you didn't have all of this credit card debt. Turn the home back to the bank, sign up at daveramsey.com and turn this thing around. You are so upside down it doesn't make sense to continue. Try to sell the house in the meantime and anything else that isn't nailed down, for that matter. It's time to let go and start over with some sane direction from the master of debt, Dave Ramsey.

Answer 3

Even if you do not count consumer debt, still the balances on your loans are too high to get a new mortgage with only $70,000 a year income. Your credit score is not great, it's OK, but your problem is not enough income. I know it's not what you want to hear, but it's a Catch-22 situation: you need much larger income to get a new loan, but if you had a much larger income, you'd not need to refinance.
The only thing you can do is to get a private loan (if you can find one, which is very hard) or talk to your existing lender and ask to restructure your loans (maybe defer some payments) until your income increases. Sorry about your situation.
And, PLEASE, do not fall for some online offers of loans you are going to get here.

Answer 4

There's simply no way you're going to get the monthly load on a $422,000 mortgage down to about $1500. Even if you could manage to get a 4% loan (unheard of) for forty years, your payment for P&I would be over $1750. Don't blame the HELOC folks for a scam. My guess is that you signed the papers authorizing the deal.

Answer 5

The only thing that's going to get a $400k loan down to $1500 per month is a negative amortization loan

Explanation here:
http://www.danmelson.com/2007/03/option_arm_and_pick_a_pay_nega.html

These are dangerous loans to do, as well as wasteful of money where it really counts (cost of interest). That said, if you're certain your income is going to go up again soon, you might actually be the one in a thousand that makes the loan work.

The only other thing that's is likely to help is selling the property. You owe $620k on it, as well as $50-65k in other debts. There isn't any magic wand that's going to change that, and the lowest rate I have on any rate sheet today is 5% (not available for loan amounts over $417k). Even at 5%, the payment on $422k would be $2265 per month, and I would not agree to that loan myself on a bet.