Question about refinancing

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Question about refinancing

Postby sasha055 » Tue Dec 01, 2009 4:06 pm

I cann't get a straight answer from agents so I thought I'd try here

I bought a house in august. It was a short-sale and I got it for less..
Similar houses are going in the area for 420-480K, I got it for 350K (I still don't know how come the bank accepted it)

I got an FHA loan at 5.5% with PMI

Is it possible to refinance to get rid of PMI? rates are lower today (5%)
Also how soon I can refinance it?

If anyone can help me it would be great!

Thanks
Sasha
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Re: Question about refinancing

Postby ira s » Tue Dec 01, 2009 4:40 pm

Sasha,
I'm an agent but I'll try to give you a straight answer.
You must have 20% or more equity in the house before you can get rid of PMI.
So if the lender ordered appraisal says your house is worth is worth 420, and you owe 350 , you don't have 20% equity and need to continue paying PMI.
If the house is judged to be worth 450 and you owe 350, your chances are much better of ridding yourself of PMI.
If Rhonda Porter or any other mortgage folks are reading this, they can probably explain with more certainty and clarity.
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Re: Question about refinancing

Postby mking » Wed Dec 02, 2009 1:19 pm

As Ira said its a function of how much the house is worth now versus how much you owe. The magic number is to have 20% equity (to have the debt be no more than 80% of the current value of the house). I refinanced a house in 2004, and brought $10,000 of cash into the deal, to reach that magic number. That saved me about $200 a month in interest and losing the PMI.

Good luck
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Re: Question about refinancing

Postby RhondaPorter » Thu Dec 03, 2009 9:54 am

Sasha,
As the others have mentioned in this thread, you will need to have your home appraise high enough to where there is at least 20% equity. Appraisals with refinances have been pretty challenging in our area as the appraised value is based on what other homes similar to yours have recently sold and closed for (less seller concessions). If you're planning on financing your closing costs, you'll need your home to appraise high enough to pay off your existing mortgage (which will be about one payment higher than your mortgage statement) plus the closing costs and prepaids/reserves for the new loan amount plus at least 20% home equity on top of that.

Assuming a minimum down payment and financed upfront mortgage insurance, your payoff may be close to your purchase price. Your home will probably need to appraise for around $450k or higher, as Ira mentions.

With conventional financing, if you're not taking cash out, you should be able to refinance now assuming your home does appraise. The appraiser will have to justify the higher value (when you purchased your home, if the appraisal came in with a significantly higher value than the sales price, this could be good documentation to support your case). Be prepared for the underwriters to completely pick the new appraisal apart.

You can take advantage of an FHA streamline refi which may reduce your rate however you will still have FHA mortgage insurance--guidelines recently tightened to where you will need to have a minimum of 6 months mortgaae payments and a portion of your upfront mortgage insurance premium (1.75% of the loan amount when you purchases) will be credited towards the new refinance. FHA loans may actually be a benefit right now since the rates are low and because they are assumable. When our rates increase in the future (due to inflation and the government no longer keeping them artificially low); when you sell your home, should mortgage rates be much higher, offering an assumable mortgage at 5.5 (or lower) may give you an advantage over other listings.

Appraisals are the "wild card" with refinancing...worse case, you could be out $500 for paying for a low appraisal...best case, you may wind up with a lower rate and no monthly mortgage insurance. The other factor with conventional financing is credit scores. Any mid-credit score under 740 has a price hit.

Good luck!
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