Profile picture for zuser20140619082152467

Refinancing after a foreclosure - is it really 7 years?

Are there any exceptions to the 7 year wait period in order to qualify for a conventional loan after a foreclosure? I am looking to refinance my FHA loan (which commenced after the new 6/13 law that MIP has to be paid for a minimum of 11 years). Home is worth $350,000. Loan is currently $270,000. Will have $200,000 to pay down so only looking for a mortgage of $70,000. How can I get a conventional loan and not FHA? Are there any other alternatives?

  • June 19 - Estero
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (6)

I would hesitate to comment on your $200000 because to my understanding, this is not your question, and apparently, you made decision about it, and may be saw a financial adviser already.

There is a conventional, 5 years Fixed ARM program for self-employed with our company. Under this program you can refinance your FHA loan after 1 year out from foreclosure. The minimum loan amount for this program is $100,000, so instead of $200,000 you will have to put down only $170,000. The rates start at 5%, with APR 3.371%. This is an adjustable rate mortgage, with initial 5% interest rate fixed for the first five years, and after that the rate will be changing according to index on the loan. Because of your low loan–to-value ratio you would not have any mortgage insurance at all.

 

The second option is FHA stream-line refinance to 15 yr fixed with lower MI premium vs. 30 yr fixed with higher premium. Advantages of the second option are probably lower monthly payments, including MI, because of the loan amount of $70,000 instead of $100,000, and mainly stability of the fixed rate for 15 or 30 years. In addition you can refinance with Zero Points, paying the rest closing costs at very competitive rate.

 

The third option is to contribute your $200,000 to your existing principal, your monthly MIP will be prorated on the new loan amount, will be much smaller and you will pay your mortgage much faster. Your monthly payments will be slightly lower because of MIP and you would not pay any closing costs.

 

  • June 19
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for CA Direct Lending
You can refinance now with no waiting period with just 30% equity in your home. 
  • June 19
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

FHA monthly mortgage insurance is recalculated annually based on a very complex formula which simplified takes an average of what the principal balance was over the preceding 12 months. If you already have a good interest rate on your FHA loan and are comfortable with the monthly payment, then you likely don't need to refinance.

You can just pay your 200,000 into the balance and then over the next 12-24 months depending on when your next recalcuation is, you'll only be charged monthly insurance based on the 70,000 remaining balance which will end up being only a small monthly charge.    This might be the best way to accomplish your goal of reducing the expensive insurance and you avoid refinance closing costs (not to mention new loan would likely be a higher rate due to the foreclosure).

One other option if you want your payment reduced as well is you could do FHA Streamline into a 15 year loan and bring the 200,000 into closing, this would recalculate your mortgage insurance immediately on the lower balance, and the rate of insurance on FHA 15 year is about 1/3rd of what the rate is on 30 year.   A 70,000 15 Year FHA Loan would have monthly insurance of only ~$26 per month.  
  • June 19
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for zuser20140619104159424
Sinking 200K into your house is dumb. You can do better investing that money, If you want to put 20% down to drop MIP that may be worthwhile, but have a lender run the numbers for you. PS the FHA wait period is not 7 years, it was changed. 
  • June 19
  • 3Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I would be cautious about dropping $200k of liquid cash to pay down this mortgage as well.  Work closely with a trusted financial adviser (one paid by the hour, not by the transaction) to look at all of your options before going down this road.  Cash is king in my book.........
  • June 19
  • 2Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Hello there,

My first question would be this: have you spoken with a financial advisor? It doesn't seem like a good idea to me to drop $200k into paying down a house, especially in today's financial market. That would be a good first step.

To answer your question, there are some different options that are available to you if you have a foreclosure. For a conventional loan, the waiting period requirement is 7 years. For FHA loans, however, the waiting period can be as little as 3 years. It all depends on your individual situation. I would encourage you to talk to a lender in order to see what programs you might qualify for. Hope this helps.
  • June 19
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.