Q: My husband, kids and I live near the beach. We’ve owned our home since 1999. At the end of 2011, my husband shut his company. We tried to keep our heads above water while he searched for another job.
Our house did go into foreclosure at one point, but we borrowed from family and got it out, but of course ended up accruing lots of fees on top of our regular mortgage, which we were already struggling to pay. I tried twice to get a loan modification, but was denied because our bank says the owner of our deed only allows HARP (Home Affordable Refinance Program), no other programs. We also have a lot of equity in our home. We’re cash poor but house rich and trying hard to get out of our financial struggles.
We’ve had our house for sale for nine months. The longer it’s on the market, the more we keep trying to figure out how we can keep it. My husband got a new job and I work while kids are in school. My questions to you: How can we just lower our interest rate so we can keep our home? Loan mod is out of question. How long does it take to build FICO score back up and to refinance? Can we get a co- signer to refinance? Can you give us some pointers how to show the bank we are responsible and hard-working and just need a break on our interest rate?
A: First of all, I’m glad that you were able to borrow money from a family member because allowing a house to go to foreclosure when there’s a lot of equity is a big no-no. If there’s anyone out there in this situation, sell the house if you can’t borrow the money to get you current. Your equity is there to allow you to get out without going through the nightmare of a foreclosure. Besides, it can cost you tens of thousands of dollars in high interest rates because of the length of time it affects your credit.
Once the bank tells you that your investor doesn’t allow for a modification (I would call again and double check that you get the same answer), then your options become pretty limited. You have equity so you can sell, you can’t do a mod, you shouldn’t allow it to be foreclosed on, and you can’t refinance because your credit has taken a hit. Your options, in my opinion, are that you can sell or take out a “hard money loan” to cover the amount of money you’ll need to be able to get a conventional loan again.
Selling your home would be pretty straightforward so I’m going to focus on the hard-money loan. Keep in mind that hard-money loans won’t give you low rates, they can be in the 10 to 15 percent range. You’ll have to keep in mind, however, that it’s a loan that’s designed to help people who don’t otherwise qualify for one. Is staying in your house, with a loan like that for the short term, more valuable to you than moving? Because you’ve been current on your mortgage since November of 2011, you have another 18 or so months that you would want your hard-money loan to help you cover your mortgage bill. So, figure out what you can pay to your mortgage. Next, you should subtract that from how much your payment actually is, then figure out how much the hard money loan payment would be. Add those two together and multiply it by the number of months you need until you can qualify for a conventional loan.
Example: If your payment is $4,000 but you can afford $2,500, you need $1,500 per month. If your hard-money loan gives you the money you need but costs you $1,000 per month to get it, you would need a total of $2,500 per month from the loan.
Now I’m giving one line answers to your remaining questions: There is no program, other than a loan modification, where a lender would just go lower your rate.
It doesn’t take long to build your FICO scores back up. Pay on time. Keep a couple of credit lines open, use them responsibly and you should have no problems. I don’t known of any co-signor products when you’ve had a Notice of Trustee sale filed.
The bank isn’t the one that can just change terms, most of the time; it usually has to be submitted to the investor.