Rental Mortgage Help

[Down]

Looking for some advice. My girlfriend bought a townhouse in Des Moines 7 years ago. A couple years after that, she moved to Iowa City for a promotion with her company. Her uncle moved into her townhouse in Des Moines and has been renting it from her ever since. My question is, is she able to refinance it or lock in a lower mortgage rate? We've asked a few friends and they have said since its used as a rental and not her primary residence (she lives with me) that she can't refinance it. Does that sound right? She currently has a variable rate mortgage on it, would it be possible to get into a fixed rate? She'd love to take advantage of the low rates right now, but we don't really know where to start or if its even possible. Hopefully some fellow CF'ers can help.

 

[Cyclonesince78]

Absolutely she can refinance. The only catch is you'll have to have 20% equity in the property if you're looking for a conventional mortgage. The reason is because there are no PMI companies that insure investment properties (which is what that property is), so as long as she has 20% equity she can absolutely refinance. The rates are a little higher on investment properties but still under 4% for a 30 year fixed rate, well worth it if you're going to keep the property for a while.

 

[Three4Cy]

Her # 1 concern is the appraised value at mentioned above since it has become an investment property, she needs the equity, and depending on the townhome, she could have issues. Since the DSM area was overbuilt on entry level townhomes, their value took a serious hit. A lot of people took big losses on them to sell them, or walked away from them and were foreclosed on.

She needs to talk to a realtor and have them do a competitive market analysis on her townhome. A good realtor can pull comps and give her a pretty decent idea of what her property would sell for and be appraised at in today's market. If after that she has the equity, she can refinance.

 

[SBMcDunk]

^not necessarily true, if she bought the townhome with a conventional loan and has PMI (i.e. she did not put a full 20% down but did not choose an FHA loan) on it already, she may be able to refinance with the HARP program with PMI. But you are correct the property will have to be classified as investment. Also, I work for Wells Fargo and I have not seen the rates on a 30 year loan go below 4% on an investment without the borrower buying the rate down with discount points.

 

[kilgore_trout]

maybe. maybe not.

does that help?

 

[Cyclonesince78]

^not necessarily true, if she bought the townhome with a conventional loan and has PMI (i.e. she did not put a full 20% down but did not choose an FHA loan) on it already, she may be able to refinance with the HARP program with PMI. But you are correct the property will have to be classified as investment. Also, I work for Wells Fargo and I have not seen the rates on a 30 year loan go below 4% on an investment without the borrower buying the rate down with discount points.

Also, I work for Wells Fargo and I have not seen the rates on a 30 year loan go below 4% on an investment without the borrower buying the rate down with discount points

I work for a small bank and we sell off our mortgages as a correspondent lender to Wells, and the rates based on today are 3.875% with 1 point (with over 25% equity) and 4% with 20% equity with 1 point.

 

[SBMcDunk]

^ on an investment property though? Wells fargo's rates today were 3.75% with 1 point, but that is for a primary residence or secondary residence. Meaning it can be your vacation home, but it cannot be anyone else's primary home.

 

[Cyclonesince78]

^ on an investment property though? Wells fargo's rates today were 3.75% with 1 point, but that is for a primary residence or secondary residence. Meaning it can be your vacation home, but it cannot be anyone else's primary home.

I can lock one in with Wells on a primary residicence at 3.5% with 1 point. (maybe even a little less than 1 point)

 

[Down]

^ on an investment property though? Wells fargo's rates today were 3.75% with 1 point, but that is for a primary residence or secondary residence. Meaning it can be your vacation home, but it cannot be anyone else's primary home.

Her mortgage is actually through Wells Fargo. She called them a couple years ago and they basically told her she was screwed. Is there someone special she would need to talk to at Wells to get this going? She has a pretty good chunk of it paid off, but it hasn't been appraised, so I can't say for sure if she has 20% or more equity in it. I'd like to verify with Wells that she can refinance if she has above 20% equity before we spend the money on a realtor/appraisor

Also, what is this HARP program you speak of? Is that something that can be done through Wells or where would we go to look into that?

Thanks for the help guys, we really appreciate it.

 

[Bobber]

Her mortgage is actually through Wells Fargo. She called them a couple years ago and they basically told her she was screwed. Is there someone special she would need to talk to at Wells to get this going? She has a pretty good chunk of it paid off, but it hasn't been appraised, so I can't say for sure if she has 20% or more equity in it. I'd like to verify with Wells that she can refinance if she has above 20% equity before we spend the money on a realtor/appraisor

Also, what is this HARP program you speak of? Is that something that can be done through Wells or where would we go to look into that?

Thanks for the help guys, we really appreciate it.

Shop around. They aren't the only bank in town. Last time I bought, went through a Credit Union and had very good results. Some of the smaller banks may also be more flexible.

 

[IceCyIce]

So who is going to know if it's your Primary or Secondary home? Get'er done.

 

[CycloneDaddy]

So who is going to know if it's your Primary or Secondary home? Get'er done.

Exactly ... since this would be the only mortgage on her credit report I would bet she could pull this off as her primary residence if she plays it right. As long as she doesn't mention that she is renting it out she should be fine. She will probably have to do a little song and dance about working in another city but she should be ok.

 

[hinschy1]

I am a home mortgage consultant for Wells. If she is in an FHA loan and it was taken out prior to May 31 st 2009, it would be in her best interests to do an FHA streamline loan. If she is in conventional she could be harp eligible if fannie mae or freddie mack own her loan. if not she can do a conventional refi but she will need an appraisal to give her at least 5% equity in the home. if you want you can email my work account her loan number and i can look into it when i get to work on monday. my work email is
[email protected] I'm always up for helping a fellow Cyclone!

 

[Cyclonesince78]

Exactly ... since this would be the only mortgage on her credit report I would bet she could pull this off as her primary residence if she plays it right. As long as she doesn't mention that she is renting it out she should be fine. She will probably have to do a little song and dance about working in another city but she should be ok.

If she wants to commit mortgage fraud she can try to call it her primary residence..but underwriters are not dumb.

Does she have rental income on her tax returns? Deductions for expenses on her returns?
Do her paystubs, bank statments and other financial documents have a different address on them?

Don't even try to slip this by as a primary residence because it won't work and could get you in a lot of trouble.