My husband and I would like to refinance our condo. We thought we’d have moved by now, but we’re no longer in a position to do so. We’d like to finish our unfinished basement so we’d be happier sticking it out here. So we not only want to take advantage of lower interest rates, we’d also like to get some cash for the improvements.
Here is the kicker. Our financial situation has changed considerably since we bought our condo. We have far fewer assets (we’ve been living off savings from my husband’s buyout, which has spent down those accounts, obviously) and I’m now working part time instead of full-time while I try to finish my thesis. Mr. Cranky is getting sporadic work. Getting work hasn’t been an issue, really, since we’ve been living on savings these past 2-3 years. But the savings is dwindling, and this year (the year for which we don’t have W-2 yet) he’s actually earning some real cashola. But he’s self-employed.
We’ve never had trouble making a mortgage payment, but on paper we look like paupers. We don’t look like the usual dual-income couple. I feel like if we ask to refinance, not only will the bank laugh, it might even decide it was an idiot to give us the first mortgage and fire the poor sap who made that decision four years ago!
My question is this, I guess: How hard is a bank gonna laugh? Could it negatively impact our future credit status to apply for a loan or refinancing and get turned down? How serious is that sort of thing? And if we get turned down, should we give up, or try another bank who might weigh our risks differently?
Fretting about this has made me put off applying for some time. But interest rates are getting very attractive.
Don’t go straight to a bank. Call a mortgage broker and ask them. They shop your loan around to different banks and get you the best rate. Depending on the area where you live, in the recent (now over and reversing itself) economic boom, housing prices in many areas went through the roof. That said, you may be able to get into that equity.
My experience has been that without the W-2 you will be screwed. When we bought our house, I was the primary breadwinner, but I was an independent consultant working full time and earning good money. But with only a 1099 to show for it, the banks all laughed me off. It has something to do with the fact that without a W-2, the bank can’t resell your loan to the government (Fannie Mae and Freddie Mac I believe). I was able to get a loan, of course, just not at the low rate everyone else was getting. So I waited, got hired on full time, re-financed, and laughed at the dumbass bank that screwed me with the first loan. It’s amazing too, just how friendly they become when YOU are dumping THEM!
There is a fairly new program available called a “no doc” loan. These do not require you to submit proof of income. As long as your property appraises well and your credit report is good, you’re stylin’. If you decide against the deal, an inquiry on your credit report isn’t that big a deal. 10 inquiries on your credit report might raise an eyebrow, but one or two? Feh.
Changing banks won’t make a hell of a lot of difference. FNMA and FHLMC program guidelines are kind of the controlling factor; while one mortgage lender may offer a more attractive rate than another, they’re probably using the same program guidelines.
I don’t know how long ago you applied, Yarster, but it’s gotten a bit easier for self-employed folks due to these rule changes in the past 12-24 months.
Warning, though - if you have no equity or a lousy credit report you may not be able to apply for no-doc or low-doc loans. Well, you can apply, but it’s a big fat waste of everyone’s time.
This may be only tangential to the OP, but http://www.hsh.com has a wealth of information on managing your mortgage. It may help.