Given this information, is it even possible to refinance my house?

In My Humble Opinion
1

So, we’ve been looking into refinancing for months now, have called several banks, and either can’t get what we are looking for, or more likely, told they can’t help.

The info:
Both of our credit scores are in the 805-810 range. Home is worth about $145k (per Zillow). First mortgage balance is around $111k at 6.25% interest for 30 years (22 years left, originally $127k) (FHA loan), and a second mortgage is around $38k (originally $46k), at 12.375% for 15 years (9.5 years left).

Ideally, we would like to combine both at a much lower interest rate, but since both balances combined are slightly underwater, that’s probably not an option. However, only one bank has offered to even consider refinancing either, and they could only do a brand new 30-year loan for the first mortgage, due to FHA rules.

We have never had a late or missed payment for the entire 8 years. This fact, combined with the loan not being Fannie Mae or Freddie Mac, seems to eliminate any government assistance, which is fine, we don’t want any. We’re not really sure what kind of loan-to-value ratio we need to re-finance, but our second mortgage holder said they could combine both once the ratio reaches 97% (seems to be around 103% now). Most other places seem to be holding out for 80%.

So, are we just relegated to just continuing to wait? Or does anyone know if there is anything else out there?

Many thanks in advance!

2

If you can, pay down the principal a bit until you get the ratios more in line with what the bank will accept. Might take you six months or more, but at least it’s a strategy. Also, double-check the valuation. Zillow is not the most authoritative source.

3

We recently did a similar refi of the mortgage and a home equity line of credit. Our credit union required the 80% ratio, which, fortunately, we met. We had tried a year earlier and we were turned down because of the ratio. I suspect that due to the recent spate of bad mortgages, lending institutions are more conservative. Looks like you need to target 80% - good luck!

4

IMO, in your financial situation my goal would be to get rid of the second mortgage any way I could - 12+% is obscene in this interest rate environment. Is there any way you can convert it to unsecured debt ? By which I mean, any way you can come up with the 38k ? Do you own any cars outright that you could get a car loan on ? Can you get some/most of the balance via savings, a personal loan, credit cards convenience checks that you then keep balance transfering for a low rate, or on LendingClub.com ? If any of those can beat 12% by a significant amount, you could combine some or all of them to get to your 38k to clear the second mortgage, and then probably as a bonus be able to refinance the first mortgage to something a percent plus lower.