Jim & Natalie almost lose their home!

Recently Jim & Natalie came to me for advice. I had helped them get into a house a few years earlier when a large national lender changed the game on them at the last minute and asked for a larger down payment. I won’t name names but….. it was Bank of America, shhhh. I got them an FHA loan with a 3% down payment (currently you need 3.5% down) and we closed the loan fairly quickly and they were able to move into their new home and everyone was happy.

Today they were stressing out because they had been trying to refinance with the lender who currently had their home loan (I guess they misplaced my number) and they had been getting nothing but a lot of grief and running around and ending up with no refinance after months of trying. They were down to one income and they needed to get a lower payment to be able to afford to stay in their home. The lender who shall remain nameless…..ok, it’s Wells Fargo, had been supposedly working on their loan for months and then turned them down because their debt ratios were too high to qualify. First of all, when you take a loan application, you gather information such as let’s say INCOME! These guys should have known that the debt ratio was too high to qualify the moment that they finished taking the loan application and spared these guys months of agony. Jim & Natalie went on to tell me that since they have had less income, some bills had recently been paid late, also I knew that the value of the home had gone down since they bought it and there was not much equity to begin with (not good). I told them that I had the same criteria as the big bad bank but wait a minute….

I had gotten these guys an FHA loan and we can do an FHA streamline refinance with no income qualifying, no appraisal and looser credit guidelines. All we need to do to get someone a better rate on their FHA or VA loan is to make sure that they have paid the mortgage on time for 12 months and make sure they are getting a better rate or better terms. There was still one issue to deal with and that was the fact that we could not raise the loan amount higher than the original loan balance and so they may need to come in with some cash to close the loan. Actually, just as we were getting prepared to do this loan for them, FHA made the rules a little tighter and that meant that these guys would need to come up with even more cash than my original estimate and they just plain did not have it. They told me that they were just going to quit paying and stay until the bank took the house back. They had given it their best shot and they were just done.

I could not figure out what to do for these guys, I had cut my fees as much as I could and still make a profit. I looked at the numbers one more time and realized that if I made absolutely nothing then the numbers worked and so I did it. I am not tooting my own horn or offering free loans, what I want to share is how good it felt knowing that I am the small local lender who can do that sort of thing and truly make a difference. It was a good way to end a hard year and I look forward to a profitable 2010 for everyone.

Please email or call me with any real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.