Refinancing: Stated Income and No Doc Home Loans

by Irene S.

Ask Kate about refinancing your home using stated income and no doc home loans: Non-traditional mortgages, referred to as designer loans during the real estate boom, still exist today. But as Irene discovered, they come at a cost. Higher interest rates. Higher fees. However, for borrowers with unusual circumstances surrounding their income, the loans might make sense.


But that doesn't mean you shouldn't be shopping for the best loan terms. Keep reading for ways that non-traditional borrowers can get their lowest mortgage rate... and don't forget to follow the links to further help on my website.

How Can I Refinance with Low Income and High Debt Ratios

By Irene
Refinancing Your Home with Stated Income and No Doc Home Loans

Kate,

I am 66 years old. I am sure you have heard this story many times.

I have been wanting to refinance my home that is valued at over $500,000 and has a loan balance of $78,000. My present interest rate is 6.65%.

I've wanted to refinance, as I explained, at a lower interest rate and to a 15 year loan. But because I am on Social Security, and even though I have assets and money in the bank and I have so much equity in my home, I cannot find anyone who I can just refinance at a lower interest rate.

I tried my current mortgage lender - Nationstar (used to have BOA) to see if I could use HARP 2. They said I could however they wanted to give me a 15 year loan with a 30 year interest rate, not a 15 year rate.

They also wanted to charge exorbitant closing costs. They wanted to charge me just about double or more in closing costs from the normal.

Do I just give up at this point or is there mortgage lender you would think that refinancing a home with so much equity isn't a risk? Yes, good credit score, never missed a payment, single family home, etc. Am I just wasting my time trying to find a lender who will refinance my home?

Your site is very informative.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: How to Refinance with Low Income and High Debt Ratios

Hi Irene,

My guess is that you are being offered a no documented type mortgage program to skirt the issue of social security income and high debt ratios. (More on non-traditional mortgage programs in a moment.)

These programs, once called designer loans before the bust, have higher interest rates and closing costs, especially if you want a fixed rate. This is because investors consider them high risk. (Go here to learn how to compare loan fees and understand Good Faith Estimates.)

Of course, in your case, it's pathetic of an underwriter to think you'd walk away from the mortgage payment with such a ridiculously low loan-to-value.
Loan-to-value (LTV) ratios are calculated by dividing the amount borrowed by the current appraised value. For example, if you borrow $80,000 and your home appraises for $500,000, your LTV is a mere 16%. In addition to credit, income, and assets, LTV (the lower the better) is a crucial factor in loan approval determination.
So how do you move forward? Personally, I would not give up shopping for a refinance because all mortgage lenders are DEFINITELY not created equal! But you need to proceed with caution because if you call around asking loan originators for their lowest rate, you set yourself up for unrealistic and unreliable quotes.

Best Mortgage Lender, Loan Program, Interest Rates, and Fees for YOU

Here are my suggestions for shopping for the best mortgage lender, loan program, interest rate, and closing costs for YOU...

Stated Income HARP Refinancing Guideline

Since you mentioned HARP refinancing, I have one more idea! The HARP loan program by Making Home Affordable has a guideline for borrowers who cannot verify their income. This may not apply to your situation but it would be wise to ask about when shopping for your refinance.

See Stated Income Home Loans for HARP Refinancing for more details.

However, I should mention that although this no income program was made available a couple of years ago, its track history has not been stellar due to lender overlays. Read about frustrating lender overlays and how to overcome them here.

Even so, as I mentioned, ask each lender if it would be worthwhile exploring as you shop for your refinance.

If you have more questions, please feel free to add it in the comment section for this page. (See link to commenting near the end of this page.)

Best wishes,

Ask Kate
P.S. Okay, I have one more thought! FHA is a federally backed loan program that traditionally is known for providing low down payment home buying and low equity refinancing opportunities.

However, you would be interested to know that it is also more accepting of high debt ratios compared to its conventional counterparts. Perhaps the FHA home loan could offer a solution to your financing dilemma.

Go here to read more... FHA Refinance Loan: 15 vs 30 Year Fixed Rate Mortgage.

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