Refinance After Foreclosure

Jon Maddux

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Jan 17, 2010
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Carlsbad, CA
I talk to many people who have gone through foreclosure or short sale on a 2nd home or investment property and they don't think they can refinance their primary residence till 7 years after foreclosure. That is a general rule by Fannie Mae and Freddie Mac but there are some great portfolio loan programs that can help you lower that rate and payment even after foreclosure or short sale. The best one that I have seen is a 7/1 ARM loan that has a minimum loan amount requirement of at least $300,000. The current rates that I have seen on this program are around 4.75 percent (4.88 percent APR) with a good credit score. The 5/1 ARM is even lower! If you are looking to refinance after foreclosure or short sale you don't have to wait that long. I have done one recently that was 6 months after foreclosure. Contact us and see if you qualify!
 

TomEason

LoanSafe Guide
Jun 18, 2009
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SF Bay Area CA
Thanks for that informative post. I agree with you that there are some good portfolio loan programs out there. But I do have a question for you. How did your recent client get "a good credit score" just 6 months post FC?
 
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Jon Maddux

Call 1-800-779-4547
Jan 17, 2010
84
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0
Carlsbad, CA
TomEason,

You are welcome. I helped over 8,000 clients who went through either short sale or foreclosure. Many of these clients were strategic default. With that being said, the average hit to the credit score was around 100 points and we started to see after the 1st year the credit recover 50-80 points if they paid everything else on time and paid down their credit card debt. The majority of the credit damage was done in the first 3-6 months of missed mortgage payments. The "good credit" I was referring to is around 680+ credit score. So in this situation, the person had only 1 mortgage that they defaulted on and they originally had over 760 credit score and now they are at 684. Hope that helps.
 
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TomEason

LoanSafe Guide
Jun 18, 2009
12,390
84
48
SF Bay Area CA
TomEason, You are welcome. I was the CEO of YouWalkAway.com and we had over 8,000 clients who went through either short sale or foreclosure. Many of these clients were strategic default. With that being said, the average hit to the credit score was around 100 points and we started to see after the 1st year the credit recover 50-80 points if they paid everything else on time and paid down their credit card debt. The majority of the credit damage was done in the first 3-6 months of missed mortgage payments. The "good credit" I was referring to is around 680+ credit score. So in this situation, the person had only 1 mortgage that they defaulted on and they originally had over 760 credit score and now they are at 684. Hope that helps.
Thanks for that explanation.
 

dg0129

LoanSafe Member
Nov 23, 2010
88
1
8
Temecula, CA
Your only options is an ARM? No 15 year FRM or anything of the sort? On the credit score the day my DIL completed my FICO was already back above 700. That was with a 1st and 2nd. I believe the score actually improved after the DIL finished up because the mortgage accounts showed as closed. Shortly after I was easily able to qualify for the lowest rates on a car loan... just no mortgage so I had to go private.
 

dg0129

LoanSafe Member
Nov 23, 2010
88
1
8
Temecula, CA
I talk to many people who have gone through foreclosure or short sale on a 2nd home or investment property and they don't think they can refinance their primary residence till 7 years after foreclosure. That is a general rule by Fannie Mae and Freddie Mac but there are some great portfolio loan programs that can help you lower that rate and payment even after foreclosure or short sale. The best one that I have seen is a 7/1 ARM loan that has a minimum loan amount requirement of at least $300,000. The current rates that I have seen on this program are around 4.75% (4.88% APR) with a good credit score. The 5/1 ARM is even lower! If you are looking to refinance after foreclosure or short sale you don't have to wait that long. I have done one recently that was 6 months after foreclosure. Contact us and see if you qualify!

Your only options is an ARM? No 15 year FRM or anything of the sort? On the credit score the day my DIL completed my FICO was already back above 700. That was with a 1st and 2nd. I believe the score actually improved after the DIL finished up because the mortgage accounts showed as closed. Shortly after I was easily able to qualify for the lowest rates on a car loan... just no mortgage so I had to go private.
 

Jon Maddux

Call 1-800-779-4547
Jan 17, 2010
84
0
0
Carlsbad, CA
There are 30, 20 & 15 year fixed options available after 3 years for FHA and 2 years for VA. If it is right after foreclosure / short sale or DIL, the programs are more limited and only ARM programs are available. A 7 year fixed option is a pretty long term depending on if you plan to stay in the home forever or not.
 

RN009

LoanSafe Member
Oct 14, 2009
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First I want to say thank you for this thread. Now I have a few questions please help me to understand more about my situation:

My foreclosure day was on 8/25/2010. The loan was in my name only. Second loan was paid off before foreclosure. Therefore, only one loan when foreclosure.

In 2012, we bought a house, loan was under my wife's. At the time, she was only qualified 7/1 ARM - 5.5% (I am the main income in the house) with 35% down payment. Since then, we are making payments more into every month. Now, the principle is about 135 k on a 300 k value property.

Questions:

Is there a way I can refinance the house with my name on the loan? I am looking at 10 year fixed loan. Since it's been 3 years after foreclosure, there may be a chance? The reason I am doing this because I don't know what interested will be after 7 years. Though I keep paying more into the loan every month now.

My credit score now is above 700s.
 

Jon Maddux

Call 1-800-779-4547
Jan 17, 2010
84
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0
Carlsbad, CA
Hello RN009,

Yes you are now eligible to refinance into a 10 year fixed FHA loan. Today's rates are in the low to mid 3 percent range. The only downside would be the mortgage insurance premium. However, it should be tax deductible in your case. Email me below for more info.
 

dg0129

LoanSafe Member
Nov 23, 2010
88
1
8
Temecula, CA
Long time between replies, but given the 10 percent transaction cost of buying and selling real estate I don't ever plan to move again unless I have no choice. I would like to own outright and retire at some point rather than paying $30,000 to $60,000 every 5 years to switch houses. I know about the FHA option which is coming fairly soon in my case, but I can't stand the idea that I have to pay insurance on a home I have a 65 percent equity stake in and I have perfect credit other than the DIL(740). I'm currently exploring to see if I can get around this with a HELOC to pay off my private lender. I'm terming it as debt restructuring in hopes that they don't look at it as a refi and apply standard conventional rules. I should know in a few days, but the guy I talked to at Wells Fargo seemed to think it was feasible.
 
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dg0129

LoanSafe Member
Nov 23, 2010
88
1
8
Temecula, CA
dg0129

Thanks for your post.

I recommend you contact at least two lenders / loan brokers. FYI, I wouldn't even consider using WF.
Do you have any particular recommendations. I wouldn't consider using BoA since they were my foreclosure bank. I'm only looking at Wells because I have banked with them for over 15 years so I thought maybe it would give me a leg up. It does appear that there is a good chance that I can pull this off. I know I've read of a few other people who financed through private lenders at high rates like myself so the HELOC is a nice way to get out of that and seems especially appealing to me because there are no fees unlike the $4000 I'd have to come up with(or roll into the loan) to do a $135k FHA refi.
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
84
48
SF Bay Area CA
dg0129

Thanks for your question.

Please know that I'm not a loan savant, but I do know that WF has a bad reputation as a lender.

Again, I recommend you contact at least two lenders / loan brokers; they'll be able to recommend a good lender.
 

Jon Maddux

Call 1-800-779-4547
Jan 17, 2010
84
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0
Carlsbad, CA
Hello Miked2023,

My portfolio loans do not require mortgage insurance. What is your situation?
 

miked2023

LoanSafe Member
Mar 15, 2009
153
2
18
Hello Miked2023,

My portfolio loans do not require mortgage insurance. What is your situation?
Thanks for your reply, Jon. Current situation is I'm six months out of a short sale but purchased a new home with private financing almost two years. Current Fico is 697 and I should have anywhere between 20-30% equity in the new home and definitely enough assets in 401K to reach to 30% requirement to qualify for the Portfolio loans you've mentioned in this forum.

The tough thing for me is deciding whether to attempt a refi now with a Portfolio loan with someone such as yourself, or just wait another 18 months and do a proper 30 year loan once my two year waiting period is up.

In the end, I think it's going to come down to dollars. If I can do the refi and save enough money with it over the next 18 months to justify to cost of the new loan (I have no idea what it will cost - my loan is around 470K) then I think I would maybe do it. But if the loan is basically going to cost me 10 grand say, and I only save 10 or so grand over that time period, it's just probably not worth it.

That said, I do like the idea of getting out of the private money loan ASAP. It's a five year (8%) and the lender would be pleased if we got out (he's my accountant). I also like the flexibility that would bring me leaving me with plenty of time to refi with a conventional after my two year waiting period is up.

What do you think?

THANKS!
 

Evan Bedard

Call 1-800-779-4547
Loan Safe Mortgage
Aug 26, 2007
18,837
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48
San Diego, California
www.LoanSafe.org
In the end, I think it's going to come down to dollars. If I can do the refi and save enough money with it over the next 18 months to justify to cost of the new loan (I have no idea what it will cost - my loan is around 470K) then I think I would maybe do it. But if the loan is basically going to cost me 10 grand say, and I only save 10 or so grand over that time period, it's just probably not worth it.
Just wanted to chime in here and give you my 2 cents. This is a sound plan and it would certainly be worth a shot to see how much you'll save monthly over the next 18 months. I know rates for this particular portfolio loan program range from 4-5% on a 5/1 ARM, which will likely save you approximately $1K a month on a $470K loan amount.
 

miked2023

LoanSafe Member
Mar 15, 2009
153
2
18
Thanks, Evan. I value your opinion and appreciate you taking the time to chime in. Dipping my toe in the refi world is a scary prospect since my negotiating power is limited. Have you ever heard of anyone getting a 30 year in a situation like mine? I had one lender saying he could submit for a 30 year and it's possible to get done and the underwriter would have to 'manually decision it'. I'm thinking he's pulling my leg just trying to get the paperwork going then say 'But I can get you in a 5/1 !' Any thoughts? THANKS!
 

Evan Bedard

Call 1-800-779-4547
Loan Safe Mortgage
Aug 26, 2007
18,837
48
48
San Diego, California
www.LoanSafe.org
Thanks for the kind words! Yes, it does sound like a ploy to get your financial information. Unless you're eligible for FHA Back to Work, (other than private financing or hard money) there are no fixed rate solutions available just 6 months after a short sale.
 

miked2023

LoanSafe Member
Mar 15, 2009
153
2
18
Thanks, Evan. That's what I thought as well. I don't think I can qualify for Back to Work because my understanding is that's for new purchases only. Is the two-year-wait thing an actual law? You'd think some lenders would say "We do one year waits" just to drum up business for themselves.