Q & A with Dottie Herman

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Q1 - My wife and I want to refinance, however, we are unsure if we should go to a broker or directly to a lender. Does it matter? Will one have a better rate?

A - Often it is best to check with your current lender and see if their rates and processes are best.  Many lenders do have expedited refi programs for their current customers.  As far as a Broker vs. a Direct lender?  Brokers have their place and many do a great service to their clients, but with all the new regulations and requirements a direct lender does have some advantages in the process.  Direct lenders are the decision makers and you deal with them directly from application to closing so I suggest a direct lender.

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Q2 - I have been in my house for 7 years- recently my husband and I have had some financial troubles, and we may be facing foreclosure as we have defaulted on a few payments. Our interest rate is very high, and being able to refinance may make our payments easier for us- would a bank consider letting us refinance even though we are in trouble?
 
A - Yes, but each borrower is considered on a case by case basis.  You should contact your lender, explain the situation and if you can show them that lower payments will allow you to make your mortgage payments each month then they may be enticed to work with you.  These are called loan modifications and are very common today.  The bank would much rather have you in the home and paying the mortgage than foreclosure and have to resell the property.  Again they will need to establish that if they modify your loan that you will be able to make the payment each month thereafter.  So contact your lender and inquire with them if a loan modification could help you.  Good luck.

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Q3 - Many years ago my wife and I went into foreclosure on a home and since then we have rented. We have no debt currently; however, we do not use many credit cards so we do not know what our credit score would be. Would we have a hard time securing a mortgage to purchase a condo due to our past? 

A - A home foreclosure on will stay on your record for as long as 20 years and will have a negative impact on your credit for at least two years. Having a foreclosure will not preclude you form buying a home with financing.  The first criteria is time and the longer between the foreclosure and the purchase of another home the better.  More important is that you re-establish your credit during this time. If the only thing issue with your credit was the foreclosure, you will see your credit score increase faster since you still have other positive factors in your favor. So if it has been, at the very least, 2 years and you have strong credit, a good down payment, and income you may be able to proceed.

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Q4 - My wife and I just sold our home; we are closing in just a few weeks. We had two mortgages and will not walk away with much money from the sale as most will go to the banks and credit card debt, etc. We were thinking of buying something small as we know renting is not a good investment and now is a good time to buy, however, we do not think we will get a loan due to our past history. Can we get a loan with debt? Is renting a better idea for us until we settle some of our loans that currently exist?   

A - Yes you can get a loan with debt and most people have some when they purchase a home.  Mortgage underwriting guidelines require that your mortgage payment including property taxes and insurance be no more than 30% of your gross income. In addition any other debt added to the payment cannot exceed 40% of your Gross monthly income. So the lower the mortgage payment relative to your income the more is available for other debt.  Utilities, auto insurance and the like are not considered in this debt, it is only items like credit cards, leases, installment loans, that are included.  It is best to contact a mortgage professional and ask to be pre-qualified. The lender will examine your finances and evaluate this for you.

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If you have a real estate question for Dottie, please send it to; Dottie@RealEstateChannel.com

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