Trying to Refi-Home after my own Short Sale

11 Replies

I purchased a rental investment property with two friends (partners) prior to the market crashing. Down the road, one of the partners separated from his wife and asks to move into the investment property (bad move); said he would take over the mortgage as his rent; we allowed him too; to help him out. He then failed to make payments for 9 months. We ended up Short Selling the property; we were in deep. This happened 3 years ago this April.

Since this, I have been unable to refinance my own home, where I have plenty of equity; and am at a 6.1% rate. I was told I had to wait two years; but then in August of 2014, the banks or Fed changed the rules to 4 years. Does anyone know a way around this? I hate to spend one more year at a 6.1% rate when that money could be better used elsewhere. Painful lesson!

What is the amount of the outstanding mortgage? The difference in payments at 4% vs. 6%over a couple of years, factoring in refi costs, may not be as large as you think.

I don't think there is anything I can do, other than to wait another year. Wasn't sure if someone knew anything wasn't aware of. A two point spread would over $1k back in my pocket each month. With two sons in college, that adds up.

Have you tried a mortgage broker?  Even if you won't qualify for traditional financing, they may be able to find something that is better than 6%.

If you are married and your spouse could qualify for the mortgage that maybe an option.

What would rates look like on a HELOC? You could do one for 100K and use it to pay off part of your mortgage if the rate is better.

Originally posted by @Bill Wallace :

I don't think there is anything I can do, other than to wait another year. Wasn't sure if someone knew anything wasn't aware of. A two point spread would over $1k back in my pocket each month. With two sons in college, that adds up.

 Are you paying cash for college?  What is the rate on loans?  You might re-direct cash currently going towards college and get loans if they have better rates.  You can then pay off the loans when you refinance.  There are a couple complications for this strategy one is you might be limited to 100K since that is the limit for deductibility of cash-out refis.  Also you want to make sure that you will be able to qualify for a refi with additional debt.

I have spoke to several banks, they first said two years, but now say four. I haven't looked into the HELOC; I'll check that out, thanks.

Originally posted by @Bill Wallace :

I don't think there is anything I can do, other than to wait another year. Wasn't sure if someone knew anything wasn't aware of. A two point spread would over $1k back in my pocket each month. With two sons in college, that adds up.

Although a new mortgage payment may be significantly lower.  It isn't quite that bad in terms of interest in after-tax terms.  Your interest spread is $6800/year.  Which is 566.67/month.  After taxes(25% fed+ 6% state) it is $391/month.

@Bill Wallace  

FHA will allow you to refinance your home after 3 years of a short sale. Even though there will be some mortgage insurance this should help you save money and take some cash out. Or just do a rate and term refinance. FHA rates are as low as 3.375% + MI or .85% at the most you'd be looking at 4.225% as a blended rate if you have good equity and decent fico scores.

I hope this helps and have a great day. 

Keep looking and you should find someone out there that might be able to help. The key is to find a portfolio lender that doesn't need to satisfy Fannie/Freddie requirements. Credit unions and small banks that keep the loans on their books instead of selling them on the secondary market are the institutions that can be more flexible with their underwriting. A good mortgage broker should be able to help you out or you can do an internet search of"portfolio lender" and talk to direct lenders. Good luck!

I appreciate everyone's feedback; I'm going to look into some of these items and see what happens. Very helpful insight.

Thank you All!

Bill

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