Q & A with Dottie Herman

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Q1 - Is a loan modification only for people having trouble paying their mortgage? My rate is currently 5.25 for a 30 year fixed and I know we can get a rate in the high 3's and I am wondering if I have to go through the entire refinance process?

A - Bank's  differ on their policies for loan modifications, however, a modification SHOULD be possible if a borrower can provide documentation that they cannot manage the current mortgage payment based on their current income.  They often need to demonstrate the fact that the bank should not have given the mortgage in the first place, or there has been a change in the borrower's financial circumstances such that managing the payment as  is cannot work.

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Q2 - Can you refinance if you have debt? Some people say you need to have an amazing credit score to do a refi. Is that true? What do you need in order to qualify?

A - You can certainly refinance if you have debt.  The only thing to be aware of is that you need to qualify for the new mortgage with the debt you are carrying.  The way to look at it is as follows: take all of the monthly payments (for cars, student loans, or other things that may arise on credit) and minimum credit card payments, and figure in your current mortgage, real estate taxes and homeowner's insurance.  If that number added together is under 45% of your gross income, you can qualify and would likely be in a much better position after the fact with a lower mortgage payment.

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Q3 - My husband and I are trying to buy a home and were recently turned down by one bank for a loan. Does it pay for us to try other banks? Do they all have different rules and guidelines?

A - The short answer is yes.  While the overriding guidelines for mortgages are basically the same, all banks have the ability to add "overlays" to the guidelines which can make the qualifying needs more conservative for certain banks.  It really depends on the reason why the first bank said no.  It's certainly worth asking someone else. 

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Q4 - Does my house need to be re-appraised in order to refinance? The value of the homes where I live have gone down a bit since Hurricane Sandy. Do you think that will affect me in any way?

A - Barring some very narrow government refinance programs, your house would need to be appraised if you are refinancing.  Due to the storm, this is probably even more likely.  There is 1 FHA program and a couple of the refinance programs (HARP) that the government put in place following the financial meltdown that do not require appraisals.  In order to see if you are eligible for that, you either would need an FHA loan (which you should know off-hand) or, you would need to look up whether Fannie Mae or Freddie Mac owns your loan.  If they do, you MIGHT not need an appraisal if you do a HARP refinance.  It's not as simple as just Fannie or Freddie owning the loan; it needs to be in existence from before the program was announced in 2009. 

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