Been getting mortgage ‘prequalification’ letters in the mail

10 Replies

So ive been getting a lot of pre qualified mailers and offering lower monthly payments, rates and a cash back. But when i look at the total loan they offer, i would still owe them the whole amount with the cash i got. Although they are offering new lower monthly payments, i’m actually trying to consider it. Only thought is, is it reliable and real? I feel like it is too good to be true.

To get into more details,

I have a town home in san diego that i bought for 415k with 0 down using VA.

Ive had the property for almost 2 years now and my current balance is 406k. Zillow is estimating it for 430 now.

My current monthly is 2500 plus a 350 HOA fee which i think is too high so whenever i would get a mail offering a 1600-1900 payment and lower rates, it attracts me but then i don't know if i can trust it.

Should i go to the bank, get it appraised and refi it? (I haven’t done any major updates on the home) or should i contact these people i got the offer from and make a deal with them?

Has anyone dealt with them? If so, what are your thoughts?

@Sarah Jane Eugenio A few questions before offering some thoughts:

1) Are you active military? I ask because I'm curious if there is a chance you'll have to move eslewhere. See question 2.

2) Do you intend on living in the property for a long time as your primary residence, or do you plan on moving and keeping it as a rental?

3) If the answer to #2 is that you intend on keeping it as a rental, have you run the numbers to see if it even makes sense to keep it (ie, how much can you rent it for and does that even give you a profit after paying all expenses)? 

It doesn't look like you have a ton of equity in it at this point; a refinance will cost you money up front. Answering these questions may lead you to a different path altogether.  

@Sarah Jane Eugenio  

I would look to see if you can lower your interest rate with your VA loan. Rates have really dropped over the past few weeks. I wouldn't go based on mailers or what you see advertised. A loan officer is going to be able to give you a free quote based on your credit, DTI's, loan amount, etc.

@Stuart Grazier i am active duty military and i'm actually currently living here in Kitsap WA and just closed on a house that i'm going to house hack. When we go back to San diego, i'm planning to rent my place here in WA and refinance my SD property from VA to conventional, (hopefully get a lower monthly) rent it and get another place and use my VA and house hack.

@Sarah Jane Eugenio if you're looking for a refi to lower your monthly payments then look into local banks. They be able to offer you a VA IRRRL (Interest Rate Reduction Refinance Loan) which may lower your monthly payment. Also look into a mortgage broker that may be able to help with that as well and do the shopping around for you. I would never follow through with mailers unless I was extremely desperate and didn't have bigger pockets to have this community check over my decisions/ sanity check me. Hope this helps a little!

@Kyle Falkenstein it does help!!! Thank you so much! I just don’t know how other people take these mailers. It really does look like it’s very targeted and unreliable.

Now i’m just gonna look into refinancing it to get my payments at least lowered.

@Sarah Jane Eugenio I'm curious what the numbers look like. What do you rent your house for n San Diego? Do you have positive cash flow after all expenses (mortgage, insurance, taxes, maintenance, cap ex, vacancy, property management)? I ask because most houses in San Diego don't have positive cash flow as a rental because the purchase price to rent ratios don't line up and an investment property (ie, too expensive). My point is that it may make more sense to sell it and take the equity and put it somewhere in another market where you will get a better return on investment. San Diego isn't a cash flowing market. I speak from experience; I owned in San Diego and had negative cash flow every month until I was able to sell it. 

But, if you intend on moving back into the house, that changes things a bit. If you are refinancing into a conventional loan, they'll probably only refinance at 75% of ARV and by looks of the numbers you gave, you don't have that in equity so you'll have to bring some cash to the closing table, which may not make sense for you.

The other option is just trying to reduce your interest rate and keep the VA loan like @Kyle Falkenstein and @Jerry Padilla  mentioned; however, this will still probably cost you some money for closing costs, but that may very well be worth it in the long run if you intend on keeping it and living in it for a long time. 

Originally posted by @Sarah Jane Eugenio :

 Only thought is, is it reliable and real? I feel like it is too good to be true.

To get into more details,

I have a town home in san diego that i bought for 415k with 0 down using VA.

Ive had the property for almost 2 years now and my current balance is 406k. Zillow is estimating it for 430 now.

My current monthly is 2500 plus a 350 HOA fee which i think is too high so whenever i would get a mail offering a 1600-1900 payment and lower rates, it attracts me but then i don't know if i can trust it.

Has anyone dealt with them? If so, what are your thoughts?

You can't trust the $1600-$1900 figures, no. I'm personally in a VA loan so I get the same high volume of junk mail, invariably they just put the P&I payment, not the full PITIA. You would have to manually add your property taxes, insurance, and HOA, to find your accurate new monthly liability. And then a zillion dollars in junk fees is buried in the small print.

Rates are low, so it's not crazy to look at a VA IRRRL. Just don't fall into the trap of doing it over and over again, see Wall Street Journal article about that (you might see a familiar name in there :). 

@Sarah Jane Eugenio I would ignore it. If you want to refinance just reach out to a lender yourself. Its probably not a total lie, they are just trying to lure you in. It might be close to $1,900/month for principal and interest but they are not account for your property tax which I would guess is in the range of $400-$450/month or your insurance which may be $100/month ish and your HOA. Once you add all that you may have an apple to apples savings of $50-$100 which isn't crazy since rates have come down over the last few weeks or so.

Best of luck!

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