Well, after much discussion and back and forth we finally applied to refinance our mortgage! We have a rate of 3.875% locked in and we have submitted all our paperwork so now we wait and see what they have to say.
We first looked into refinancing back in October. At that time they told us we didn’t qualify for a loan because out debt to income was too high. I find that hilarious. They wouldn’t lower our payment because our payments were to high. Go figure that one out. We had to pay off our car loan OR show income from our rental property.
We have done both.
So now we qualify. Our mortgage is owned by Fannie Mae so we qualify for some government program called DU refinance plus. We don’t happen to be underwater on our home but we also don’t have enough equity to qualify for a traditional refinance so these kinds of programs are actually perfect for us. You can refinance under this program if you owe between 80% and 105% of your home’s value. We owe 92.5%. Smack dab, yo mama, right in between.
Another benefit of this program is that we can avoid an appraisal. This saves us money, time, and the risk of what the appraiser has to say. I’m using recent sales to get an idea of what our home is worth. An appraiser might look at my stained carpet and think my house is worth less than I do. Let’s not risk it.
Lastly, we might not have to pay PMI although our mortgage guy isn’t 100% sure. I’ve done some research and according to Fannie Mae which says I won’t have to pay PMI since my current mortgage doesn’t have it. One bad thing about the rules changing so fast all the time is that it might take a bit for those in the mortgage industry to figure things out. Then once they are figured out the rules change again. But it looks like we are in the clear on PMI which I could not be happier about.
Assuming all goes well with the mortgage our payments will drop by $330 per month. Of course that isn’t all from a drop in the rate. We are extending the length of the loan by 11 years. We have 19 years left on the current mortgage (we pay extra every month) and we are getting a shiny new 30 year mortgage. BUT I have every intention to pay it off early. Why didn’t we just get a 15 year loan? Because we don’t qualify for one. Again, I guess we can’t afford the payment we’ve made on time every month for the last 7 years.
One thing that is so annoying to me when applying for a mortgage is all the restrictions they put on what they will allow us to show as income. We can’t show any of my income since it’s self employment income. They won’t take my husband’s overtime into account unless we get a letter from his employer that he expects the overtime to continue for at least a year. What boss is going to put that in writing? They won’t count our child support since it’s not court ordered and they don’t want to fool with our rental income since that is going to open a can of worms. So with all that we have to qualify for a loan on nothing but my husband’s base pay. But I’m not complaining… I’m just glad we qualify, so far. We can open the rental income can of worms if we have to.