Posted by Tim Fierro (Tacoma, WA) on October 11, 2002 at 15:01:42:
1st of $155k, 2nd of $55k, Cash To her is $20k; for a total of $230k. That means the loan broker is raking in about $10k for all closing docs and his profit.
She gets $20k, lower monthly, more debt, some things fixed.
Single Mom w/ 3 kids needs advice - Posted by Teresa
Posted by Teresa on October 10, 2002 at 22:28:31:
I found a lender who will refinance my house at 7.33%. My ex-husband filed bankruptcy (discharged 03/01) last year just before our divorce and our credit was obviously ruined. However, a lender in our area (ACA Mortgage) specializes in getting mortgages for folks with bad creidt. Anyway, I want to know if we are getting a good deal. Here is what we were offered:
Home value: Approx. $300,000
Existing Mortgages: $155,000 @ 7.25%/$55,000 @ 12%
Total Monthly Payment w/ taxes: $2,100
ACA will refinance $240,000 at 7.33% (fixed for 2 years while my credit rebuilds) They say I can refinance to a FANNIE MAE afterwards if my credit stays good.
ACA will charge me 1.75 points up front and with loan fees and app. fees, etc. I will clear about $20,000 in cash from refinancing to improve the property. Payments, less taxes, will be around $1,650/mo. Taxes are $1,740/yr.
Here are my questions:
Thank you in advance for helping me.
Re: Single Mom w/ 3 kids needs advice - Posted by daveh
Posted by daveh on October 11, 2002 at 13:16:51:
Wait a minute! You owe $155 on the existing, will refi for $240 and will only clear $20 at closing?? 240-155 = $85k in my math. Where’s the rest of the money going? Is the difference going to your ex? Am I missing something?
Also, can you reasonably afford the higher payments. Having divorced myself a few years ago I can tell you that money is very tight for the first couple years. You simply cannot go from one set of overhead costs to two sets and not miss a financial beat. Will your ex be able to handle ALL the child support he’s been ordered to pay? Sounds like he’s having money problems which means you have money problems too.
Most of the repairs you’ve listed DO NOT seem essential. Believe me, I am not a big fan of dead equity tied up in a house. I’ve refinanced a couple times to put on a new roof and add money to my emergency fund. My floors have needed refinishing since I moved in but I like my cash more than shiney floors. I would seriously ask myself if this new loan will simply add more debt to the fire.
Re: Single Mom w/ 3 kids needs advice - Posted by Gerald-DC
Posted by Gerald-DC on October 11, 2002 at 24:50:23:
What does your rate adjust to after two years? What if you cannot refinacne due to factors beyond your control two years from now? I would be a lot more comfortable if your proposed mortgage was a 30 year fixed rate as opposed to a 2 year fixed. Read the proposal cafefully because while it may sound like a sweetheart deal, “The devil is in the DETAILS.”
Best regards,
GCS
Re: Single Mom w/ 3 kids needs advice - Posted by JT-IN
Posted by JT-IN on October 10, 2002 at 23:32:26:
Mom:
As far as the financing is concerned, you are getting a “Whale of a Deal”. The lender is really doing you justice in this deal.
As to should you borrow more…? Or what type repairs you should do with the money, you ahve not given enough info for anyone to answer those questions for you. Much of that depends upon what you plan to do from the refi forward. CAn you afford the payment… long term…? If you can, then you may want to consider borrowing more, and do some of the other improvements. jUst be sure that you don’t overextend yourself financially here.
JT-IN
Re: Single Mom w/ 3 kids needs advice - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on October 10, 2002 at 23:26:16:
Teresa---------------
I can’t comment on the loan terms. The thing to do, I think, is to get quotes from about 4 or 5 lenders. Get referrals from some real estate sales people if you can.
Whatever money you put into fixing up the property will not return anything to you. At least, it will not make the property more valuable than the amount spent. In general, remodeling type projects add less value to a property than they cost.
Now, what do you you mean by “return” the most for your investment? Are you thinking of selling the house? If so, you will probably get the most money out with the least cost if you sell it “as is.”
Now, there are some markets where what I am saying is not true. But, you mention a high-priced house, compared to the nationwide median home price. Thus, the new homeowner-occupant is the person who will pay you the most for the property. If the market is at all vigorous, they will overpay for a “fixer” property, as they will unestimate the cost, will do a lot of the work themselves, and they will spread it out over time. People will be eager to buy a fixer. They feel they are getting in cheap and they feel they are getting more house for their money. The exception will be in lower-priced markets where people are not desperate to buy. There the market may demand squeaky-clean properties. Lower-priced markets means weaker demand compared to supply of houses for sale.
Here in the San Fran Bay Area, the prices are very high and the demand is extreme. Looking at the multiple listing services or realtor.com shows very few houses for sale, relative to the population. Compared to the midwest or OK, where I invest, the number is ridiculously low here. There are many hundreds of houses for sale in many metropolitan areas across the country, while most mls services in CA have fewer than a 100 houses listed.
“My home needs: new cabinets in kitchen, hardwood floors resurfaced, shower installed in master bath, new windows, painting, reseal crack in basement wall, driveway cracks repaired, finish off the basement, and work on back yard.” The only thing you list that I would think might be required, especially if you stay in the house, is resealing the crack in the basement wall. If the shower in the bedroom is bad, that might make sense to fix. The windows might be necessary if they are really deteriorated. You’d be amazed how long you can live with poor windows. Most of the other stuff would not need to be fixed up until you are sure you are in a good place financially and you are going to continue to live in the house.
Not knowing your financial situation, it is hard to give you advice on that. If you plan to sell the house soon, I’d suggest you not bother to refinance. Just do minor clean up and sell “as is.” This avoids the cost of the refinancing. The mortgage broker might be happyt to recommend you refinance, but that person makes money from you if you do. I have no stake so am only trying to give you advice which will most benefit you.
Now, to test my suggestions about not doing fixup, I suggest that you invite in about 6 to 9 real estate agents and ask their advice about selling the property as is or fixing it up. They know your market, I don’t–I don’t even know where you are.
If you were to stay rather than sell soon, I’d be inclined toward advising just refinancing the amount that you owe now, rather than taking on more debt. And thus, probably not do much fixing up. Quite a few of the items you mention do not have to be done. If you have the financial strength to fix them up for your own living situation, fine, spend the money. If your financial outlook is uncertain, however, I’d conserve cash and not do much of the work.
Good Investing**********Ron Starr**************
Re: Single Mom w/ 3 kids needs advice - Posted by Nate(DC)
Posted by Nate(DC) on October 10, 2002 at 22:59:15:
Try the financing forum on this site…your question will probably get a better response there