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5 yr ARM Just at 2 yrs over, bank just lowered rate again

Seven years ago my husband and I refinanced our 30 year fixed mortgage (original loan in 2001 for $137k at 6.25%) and in 2004 got a 5/1 ARM w/ 5.25%. We are in our first home, were positive that we would be gone within that 5 years. Over those 5 years we made money pitfalls, as most of America it seems did... Our credit ratings took a hit, mine mostly... Which is probably ok considering I'm not the money maker. We do have a couple late pays on our mortgage, thats killer! Last year we got a letter telling us that our interest rate is being adjusted and our new rate was now 4.125%!!!!!! Then marital issues took the driver seat. But i will say that thankfully our finances are in good repair. My husband was even able to get a credit line for when we needed to replace a major appliance. June I remembered that we stood a good chance at having our payment go up, so I when i called the bank she told me to check the 12 month LIBOR for Sept, and that would affect out DEC payment. New LIBOR, new bank letter. Our interest is now 3%!!! So our payments are $970 now (started around $1275). We owe $128k Our house would most likely catch anywhere from $195-$180k. My question is... What do we do? We have outgrown our house. But now we dont know if we are stuck. I dont know if i gave enough info. But i really need some guidance.
  • October 22 2010 - Crown Pointe
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Answers (3)

Paynes & Ed,

US Bank decisions on the middle FICO Score of the Primary Wage Earner. 680 minimum score for primary and 650 minimum for co-borrower. They allow one rolling 30 day mortgage late in the past 12 months.

Happy funding, Rudi
  • October 23 2010
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1. How long ago was your last late mortgage payment?  Banks will typically want to see 12 months elapse since the last late payment.

2.  Most banks and lenders have upped the minimum credit scores to 640

3. If your credit score is below the minimum required it doesn't matter if your husband has an 800, the lender will use your middle score.  That said if your husband can qualify on his income alone you might think about having him apply for the loan solo.  This takes you off title and the loan, not sure how you'll feel about that.

4.  The September 2010 rate was 0.8044.  Look at your loan documents to see what your margin is: Margin of 2.25 + 0.8044 = Rate of 3.0544.

Also if your home doesn't give you the value to sell and get into a new home, look at the life cap (interest rate max), on your loan, also found in your loan documents.  Or you can call your lender to find out that information.  If your cap rate is higher than todays fixed rates, you might consider refinancing and locking in todays low fixed rates.

Where rates are going tomorrow, next week, month or year no one knows.  Submit a loan request through the Zillow Mortgage Market Place to have lenders quote you current rates.  Click the Mortgage tab above & then Get Custom Quotes under "Tools" on the right side of the drop down menu.
  • October 22 2010
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Three things you can do, and it will hardly cost you a cent.

Number one, talk to a real estate agent in your area. Ask them to do a Competitive Market Analysis of your home. They will do it for free as they are hoping you will list with them. This way you are not guesstimating the value of your home in todays market.

Number two, check your credit scores. You might discover your credit isn't as bad as you think. Most lenders are looking at 620 to 640 (optimum) before you could buy. If you have credit issues, pull your credit records from the three credit reporting services and look for errors. Take the time to fix your credit if there are issues with your credit that would end up costing you more on a loan.

Number three, think about it over the holidays and if you still want to sell, do it in the spring. I live in Minneapolis MN (often referred to as the 'cold Omaha') The market is slowing down for the winter and buyers will begin to reemerge around February - March. This would also give you a better inventory of homes from which to buy, as many homeowners pull their homes off the market for the coldest winter months.
  • October 22 2010
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