No way to refinance... really?

Question

My girlfriend really needs to refinance her house/residence.  She's paying a staggering 6.25%.

1) Her income has dropped to about 1/2 of what it was when she made the orig mortgage

2) The loan-to-value is very close (Balance of mortgage: $207k,  House value: $235k) About 11% Equity

3) She's not missed any payments

I know there are government backed refinance programs out there that would help, but her bank says she doesn't qualify.  They say that her loan is non-complying because the mortgage is a portfolio loan and there is not enough equity for a conventional loan.

Are they blowing smoke to keep that 6.25% note, or is there an option for her somewhere?

Thanks!

Raymond B. · Answer

@Renita Lathrop and @Dan Heuschele,

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Dan H. · Answer

I agree with the sentiment of @Mark Elliott but you can save some effort by using a mortgage broker.  Their job is to find the best loan.  They of coarse get paid for their effort but they have a knowledge that would allow them to find financing in likely much less time than going to every bank or even calling every bank.

I am not from Connecticut area so I have no mortgage broker from that area to recommend but I suspect if you asked for some recommendations for mortgage brokers in Connecticut on Bigger Pockets you would get some.

I have used Casa Financial Services in So Cal (mailto:BrettMills@CFSonline.biz) but do not know if they can help in Connecticut.

Mark Elliott · Answer

hi bob. here is what i see going on. banks are in the market to make money, simple as that. when you open an account at a bank, they are federal regulated to keep only 3% of that account balance in cash actually at the bank. the other 97%, they can loan out at rates higher than what they are paying you on your savings account. hence, they are making money from you. so, that being said, what they have here is a producing loan at a rate 3% higher than the average lending rate right now. they are guaranteed payment, based on the fact that she has never missed a payment, and they are collecting more in interest than they would if they refinanced for her. from their point of view, why would they want to refinance for her????

here is my advice, try another bank, go into every open door and ask what they can do for her. just because one bank says no, doesn't mean all of them will

Bob C. · Answer

Thanks for the answers so far.

Thought I would add that she lives in Connecticut.

Lynn McGeein · Answer

Just researched SoFi, which says if she has a degree from their list of colleges, they are more flexible with DTI and equity and provide low-cost loans, supposedly a new alternative in lending.  Worth checking out if she has a degree.

Nnabuenyi Anigbogu · Answer

The equity aspect should not be an issue since there are conventional loan refinances that can go to 90% LTV and she can also refinance into an FHA loan that allows higher LTV. The only issue with this is that it would add or increase her PMI which will then affect her DTI.

Unfortunately as Brie said she still has to qualify income wise which i assume will not be possible since her salary is half of what it was when she originally got the loan. If it is going to be a lot of trouble paying the monthly payment i would suggest she look into other avenues of either raising her income or selling the house.

She could also rent out rooms in the house to help pay the monthly payments.

Brie Schmidt · Answer

No options that I see.  She still needs to qualify for the loan with her income and DTI ratio, even if it is a refi and a lower rate.