Folks, If there are any mortgage professionals reading this post, hope you can give me some advice. I bought my home almost exactly 2 years ago; at that time, my credit was perfect, and my gross income was $70,000 per year. I work in IT industry. I was laid off, was on unemployment benefits for close to 6 months, and at the end, found another job, that pays significantly less -- $48,000 per year. In the mean time my credit has taken a slight ding -- not too bad, but 1x30-day late notations on 2 credit cards (Citibank and Peoples Bank). I never paid for actual FICO scores, but my TU-FAKO scores provided free with TU credit report were 880 in Jan 2001, and 720 in Jan 2003. My current principal balance is $170,000, and I currently have a 6.5% APR for 15 years (13 years more to go) from BofA. Paid 1 point ($1900) at that time to buy down rate. I want to take advantage of the low interest rates now, and refinance .... current 15 year rates run between 5.375% and 5.5% per year with 0 points. Am budgeting closing costs to about $3500. I live in NJ, if that's any relevant. I do have $3500 available on hand, but I also carry a balance of $2300 on my credit cards. My question is, should I refinance? or should I pay off credit cards? Including taxes and escrow, my current monthly payments are $2200 -- this is at 6.5% APR for 15 years. At 5.375%, it comes down to about $1800 per month (assuming that I qualify). Another wild card in this is that, every year, I had religiously contributed 15% to my 401(k) .... if I reduce it, or stop it altogether, will that help? [ I am thinking if the increase in take-home income will help some ratios that mortgage lenders look at ] Is it even advisable? Should I bother refinancing? Or is continuing with current mortgage a better option? Things are a bit tight with money, although I have been never late on the mortgage, will like some breathing room ..... Thanks for your advice, -- lakpr
Several options for you to look at. I would pay the credit cards off, get that out of there, as I assume they are probably a bit more than that of the interest rate on the home. So figure that is a saving on interest from credit cards of what.. Say $50.. apply that to your principle ammount of your mortgage per month, along with change the 15% currently put into your 401k to 5 percent, and adding that to the monthly principle on the mortgage as well. This will by far, lessen the ammount of interest paid on your current loan as it is. Couple questions you need to look into.. What is the yearly return on the 15% donation to your 401k going on average per year. Why pay up to 3500 inclosing costs, for a loan perhaps 1point lower than what your paying now.. If you simply applied that $3500 towards the principle amount that alone would lower the total interest to about 6% if not a bit lower on your current loan.. forgive me for not giving exact number I am in the office. Just some options.. hard to give very good advice, without knowing more numbers.. and your ultimate goal.. which sounds like less interest being paid on the loan..
all that crap written, and I double check, and your looking for a lower loan amount.. DAMN IT...lol I would look at refinancing at this point if I were you.. Or extend the loan, which I know is a bitter pill to swallow.. But when things straighten out with the job and so forth either double up on payments if interest rates are too high, or do another refi..
I am glad you have put alot fo thought into this. My only suggestion at this point would be.. Go and see what they will approve you for.. If it is 5.75.. Not really worth it.. But if they can get you in at the lowest.. then you can come back an torture yourself with all these questions... I would explain about the 401k to the loan officer, they will be able to advise you best about that.. Keep me updated... Bst of luck
