Home financing has never been easy but it is getting more difficult. In March I decided that with mortgage rates so low, I should refinance one of my rental properties that had a 7% loan. The rent I get is pretty much break even, I have a great credit score and about 40% of the property was paid off so I figured there wouldn’t be much of a problem. I played around with a couple of different mortgage brokers for three months and finally was told that they could not get me a loan because I owned more than 3 properties. I was shocked. The reality is that rates for loans are great, but qualifying for home financing is a lot harder than it used to be.
Finally a neighbor told me she got refinancing at a local bank. I got the name of her loan officer and he was also able to help me. As I was processing the papers he told me that his bank had never gone into risky lending and as a result they still had funds to lend and had not had to get government stimulus funds. If you want home financing and you qualify, the best places to apply are local credit unions, and banks.
Considering another scenario, if you are underwater on your own mortgage and you think a loan modification would work for you, checkout President Obama’s “Home Affordable Modification Plan”. It may be a good option for you. Basically there are four tests to see if you qualify. First, you must be the homeowner and live in the home, as your principal residence. Second, your present loan must be a Fannie Mae or Freddie Mac qualifying loan (basically that means that you cannot owe more than $417,000 on the loan in most of the US ($729,750 in certain high‑cost areas such as the Los Angeles and New York City areas.) Third, you also must have a good mortgage payment record (no more than 30 days late on a mortgage payment in the last 12 months), and you must be able to afford the new payments. This means that if your present mortgage payment requires more than 31% of your gross monthly income you probably qualify. Essentially, lenders will waive the 80% loan‑to‑value ratio commonly required for refinancing. Finally, you cannot owe more than 105% of the value of your home. Under the plan, you may qualify for home financing if you owe up to an amount that is 5% higher than what your home is worth. Real estate investors are eligible for this type of assistance on their principal residence only.
In these tough economic times, it pays to do the research and look at all the options available as the financial markets reset.