I'm helping a family member with really bad credit, scores in the low 500's refinance their house in order to get money to pay off credit cards. They tried to refinance through a bank but no bank wanted to do anything for them due to their credit scores. One of the banks recommended that they speak to a mortgage broker that sometimes is willing to work with people that banks aren't. Well they went to the mortgage broker and they were told that they could help they refinance. The terms that the broker initially quoted were pretty good considering their scores. Now they are at the point where they are ready to close but the papers that were sent to the title lawyer have somewhat different terms. The interest rate is the same but it was supposed to be a 30 Year Fixed lone that they could refinance in as soon as a year as long as they cleaned up their credit. The new terms are fixed for 15 years and then variable and if they refinance before 3 years they could have to pay taxed of up to $7000.00. I know that for someone with god credit these are really bad terms but Iâ??m not sure what they should do in their situation. Right now they are trying to stall while they figure out what to do. If they stall too long I think that the lender might withdraw the offer all together and if they are unable to find another lender they might have to file bankruptcy. Please can some of the experts on the board help? I apologize for any misspellings or grammatical errors; I'm trying to quickly write this at work.
Re: Help Needed Quickly with Refina First of all, something sketchy is going on if the terms change right before they close. I would wait if I were them and have them do a bit of work on their credit and then apply to refinance. There is nothing worse than getting trapped in something for 3 years, that isn't a good deal to begin with. We should know...uuuhhhh, we got screwed into a three year pre-pay loan and it ties yours hands of making a change. It would take an unrealistic, low interest rate to make up the $7K penalty they would be liable for. It's just not worth it.
Re: Help Needed Quickly with Refina The problem is that they really can't wait and work on their credit, that's what got them in this situation in the first place. If they had refinanced while they were still current on their bills they might have been ok. But the way it is now some bills aren't getting paid every month so their scores are just going to keep getting worse. If they don't refinance now they are probably going to have to declare BK. If they refinance now they will get enough money to pay off all their credit cards and the monthly payment on the new mortgage will be within their means.
Re: Help Needed Quickly with Refina What about their other living, day to day expenses? Will they be able to cover all of those and the new mortgage - or will they have to run-up credit card balances again? Also you might do a quick internet search to see what the homestead exemption is in their state for bankruptcy - just so they have all the facts before making a decision. Another thought....if they have bills going unpaid and it has affected their credit scores severely, its probably going to take them at *least* a year to get their credit scores back up, and likely longer. Peace of mind might be worth going through with it. But you don't say what interest rate/point combination they've been offered.....
Re: Help Needed Quickly with Refina I think you're right...since they are in such a bad situation to begin with, a crappy deal may be worth it to get them above water. And they need to get rid of their credit cards and get back on track...make them chant "CASH IN 2002 & 2003"!!! Maybe into 2004! it's going to take some time to change spending habits.
Re: Help Needed Quickly with Refina The whole idea of putting credit card unsecured debt into a secured loan, jeopardizing their HOME is a CRAPPY idea. Pick up your local newspaper and see all the foreclosures that are published -- people who tried to "pay off" credit cards with refinancing, and wound up losing their homes. Their are PLENTY of alternatves to BK. How old are these CC debts?,what State are you in? They may be much better off letting the cc charge off, or even go to judgment,depending on their other assets.
Re: Help Needed Quickly with Refina yes, it is risky but if you can change your spending behavior, then using the equity in your home is a good alternative.
Re: Help Needed Quickly with Refina A lot of thought has gone into this and basically we decided that the refinance with the original terms were the way to go. After the refinance there would be enough to pay all the living expenses including the new mortgage and still have a little leftover. The only reason the credit cards were racked up in the first place was because of an unexpected job loss and the new job doesn't pay as much as before. Once their house is refinanced things should be under control. The only problem is the lender changing the terms at the last minute. This seems a little slimy to me and Iâ??m not sure if their being taken advantage of or not. The lender says that the reason for the change in terms is that their scores have fallen some more since they first looked at it. What should I tell them to do?
Re: Help Needed Quickly with Refina how much did their scores change from the time they locked in the rate until now?
Re: Help Needed Quickly with Refina I'm flying with WhyChat, Crappy! Know you are exchanging unsecured debt for secured. I'd not go down that path again if I could re-do a few things. There's lots of information on this thread: http://consumers.creditnet.com/straighttalk/board/showthread.php?threadid=33025 Sassy
Re: Help Needed Quickly with Refina You missed my point. They did not PLAN on losing a job,no one PLANS to go into debt and default. Are you in possession of some magic crystal ball tat says they will have no other unfortunate losses? No illness, no "new" job layoff, no hot water heater or roof repair emergency?. Next time, they will LOSE their home.
Re: Help Needed Quickly with Refina I found out the lender is Option One. Any opinions or experiences? The quoted rate is 7.65 and there is also 2 points. How does this sound?
Re: Help Needed Quickly with Refina The 7.65 is not a bad rate with weak credit, the 3 year prepayment part does lower the interest rate a little, most people dont keep a house over 10 years per the mortgage people.
Re: Help Needed Quickly with Refina I've also seen the 3 year prepayment thing when the mortgage company is paying a lot of the closing cost.
Re: Help Needed Quickly with Refina They dont happen to have a FHA loan do they?? If they do, they can do what is called a FHA Streamline Refinance that does not recheck the credit file. I just did it and I close on the 25th. I dropped 1.25% interest rate and lowered my payment by $100. I went through my same lender.
Re: Help Needed Quickly with Refina IF the lender can show them the pre-approved credit scores and then the credit scores that resulted in the increased interest rate then that sounds like a reasonable reason for a change in terms. I also found this website http://www.oomc.com/broker/broker_home.html which is the Option One wholesale lending site - it has current rate sheets for various scores so you can see how much the broker is making off this loan. There might be room to negotiate down those points as they are likely going straight into broker's pocket - in addition to the application fee/doc prep fee/ and whatever other junk closing fees that are included.
Re: Help Needed Quickly with Refina Did you just contact your current lender and ask about this???? How does the process work?? I would love to do the streamline while the rates are low
Re: Help Needed Quickly with Refina If they keep pulling their credit report, of course their scores are going to drop! I would find out exactly how much their scores have dropped and how many times this company has pulled their report. I also did the unsecured to secured thing and I regret it. I lost my home! I had to sell way below the value to get rid of it or have the bank sell it. I lost money on my home in a community that had huge real estate values. There are too many unknowns in the future to put yourself in such a situation. This mortgage company appears to be taking advantage of them. Certainly they know the situation they're in and are using that to make themselves more money. They have pulled their credit report enough to lower the scores to the point of having made them more of a credit risk? I would report them to the BBB, FTC, and the AG in your state. There are too many companies out there that prey on people in such situations as your friends. What a pity. Whatever happens, keep the outlook from a business perspective and not emotional. Good luck!
