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What do you do when the value of your house decreases and you want to refinance?

  • August 25 2009 - Romeoville
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Answers (6)

chacha99

If you want the lowest rate and you are above 80% LTV on a conventional loan, most loan programs will require escrows.  I don't understand the issue of not being able to make the payments with the escrows.  The money going into the escrow account is 1/12 of the taxes and insurance each month.  The amount collected for the escrow account is based on the last tax and insurance bills.  You pay the same amount with or without escrows.  The "cushion" is two months taxes and insurance at the low point of the account.  The only difference is when you pay it.  If you don't have the money to make the escrow payment, there is a good chance you won't have the money to pay the tax or insurance bills when they come due becasue the way the escrow payments are calculated, the amount in the account is more likely to be short than excessive when it is time to pay the taxes and insurance.
  • August 28 2009
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If you are over a 90% Loan to Value, most, if not all lenders will require escrow for the taxes and insurance for conventional loans.  FHA too at any LTV...

"escrows are required on all FHA loans."
Handbook 4155.1 rev. 5
  • August 28 2009
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Profile picture for chacha99
My loan is not held by Fannie or Freddie. I'm not on the verge of foreclosure, I just want to refinance at a lower rate, currently I pay my own Taxes and insurance. I've been told if I refinance I will have to escrow the taxes & insurance because the value of my house has decreased, if I agree to that the payment will be affordable for a while, then I know in about a year the mortgage will go up just to create a cushion for the taxes, then I won't be able to afford the payments. So should I just wait until my house value goes up or is there a program available for my situation - I don't want to escrow the taxes, thanks
  • August 28 2009
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Do you know what your current value is versus your current loan balance?  Without knowing this, any advice you receive here will be limited.  What interest rate do you currently have, etc?

If your loan is owned by Fannie Mae or Freddie Mac you might be able to refinance up to 105%LTV of the homes current value.  But if your current LTV is say around 70% and you are concerned because it used to 65%, the current value will be the least of your worries. 

You can check your eligibility for yourself for free here, good luck!
http://makinghomeaffordable.gov/eligibility.html
  • August 25 2009
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You contact a lender that can discuss FHA, and Fannie refi-plus programs.
  • August 25 2009
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There are new programs that will allow a borrower to refinance up to 125% loan to value.. Or look into modifying your loan
  • August 25 2009
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