Refinancing with a co-signer? Not working.
December 8, 2010 5:32 PM Subscribe
Refinancing help/ideas please. I can't seem to refinance even with a stellar co-signer.
I've been trying to refinance my house, and not getting anywhere.
Details:
- I am a small business owner, and my credit is (recently) garbage due to a slowdown in income. No idea of the actual credit score. I'm certain it is bad. Lots of late pays on credit cards, one late mortgage payment, one late HELOC payment.
- Income shown on tax returns is in no way high enough to finance this house. Real income is quite a bit higher, thanks to a great tax person and all the benefits of owning a business.
- I really could pay for the mortgage if I could get it refinanced, no problem. I do have plenty of cash flow for that, but not so much that I can continue to afford the $1000+ difference that refinancing would make.
- My parents are willing to co-sign, and have incredible credit. They own seven houses and two commercial properties. However, as retirees also taking advantage of tax loopholes, their 1040 income is quite low.
- I have a money-judgement against me as part of the divorce, where I pay off my ex-wife's equity to the tune of $1000/month for the next year or two. For the last four months, I've been unable to pay her, luckily she is being patient and has yet to call the dogs on me, since she knows I am am trying to remove her from the mortgage in a refinance.
- This is in Portland, Oregon.
- My current lender is Aurora Loan Services.
- This is not an FHA loan.
- I'd prefer not to do a loan modification, because I'd like to remove my ex from the mortgage (and so would she!). However, I'll try it if that's my only option.
I'm being told by my friend-the-mortgage-broker after a couple months of effort that the laws/rules about refinancing have changed, and that my co-signer doesn't really count for much. I find that incredibly hard to believe/understand, since my parents' credit is so great, and they have plenty of assets that could get seized were I to default.
Any ideas? Any more details that would help? I'm against a wall, and worried about losing my home.
I'm not willing to sell the house, if that's your only suggestion, please refrain from posting.
I've been trying to refinance my house, and not getting anywhere.
Details:
- I am a small business owner, and my credit is (recently) garbage due to a slowdown in income. No idea of the actual credit score. I'm certain it is bad. Lots of late pays on credit cards, one late mortgage payment, one late HELOC payment.
- Income shown on tax returns is in no way high enough to finance this house. Real income is quite a bit higher, thanks to a great tax person and all the benefits of owning a business.
- I really could pay for the mortgage if I could get it refinanced, no problem. I do have plenty of cash flow for that, but not so much that I can continue to afford the $1000+ difference that refinancing would make.
- My parents are willing to co-sign, and have incredible credit. They own seven houses and two commercial properties. However, as retirees also taking advantage of tax loopholes, their 1040 income is quite low.
- I have a money-judgement against me as part of the divorce, where I pay off my ex-wife's equity to the tune of $1000/month for the next year or two. For the last four months, I've been unable to pay her, luckily she is being patient and has yet to call the dogs on me, since she knows I am am trying to remove her from the mortgage in a refinance.
- This is in Portland, Oregon.
- My current lender is Aurora Loan Services.
- This is not an FHA loan.
- I'd prefer not to do a loan modification, because I'd like to remove my ex from the mortgage (and so would she!). However, I'll try it if that's my only option.
I'm being told by my friend-the-mortgage-broker after a couple months of effort that the laws/rules about refinancing have changed, and that my co-signer doesn't really count for much. I find that incredibly hard to believe/understand, since my parents' credit is so great, and they have plenty of assets that could get seized were I to default.
Any ideas? Any more details that would help? I'm against a wall, and worried about losing my home.
I'm not willing to sell the house, if that's your only suggestion, please refrain from posting.
you need to do a loan mod. or not refi. sorry, that's sort of the tradeoff for not reporting all of your income. You might, might have been able to do something if you had good credit or a reasonable DTI based on your 1040 income. (the non-human part of me wants me to tell you that lending to people on stated incomes w/ mediocre credit scores is part of what got us into this problem). How much equity do you have in the house?
The problem with the the co-signors is that its a personal guarantee - not a lien so its not secured the way you are thinking it is. Its more like credit card debt. Your parents would need to find a way to cash out some of their equity and then use that to essentially buy your house, and you'd pay them rent = mortgage payment.
posted by JPD at 5:55 PM on December 8, 2010
The problem with the the co-signors is that its a personal guarantee - not a lien so its not secured the way you are thinking it is. Its more like credit card debt. Your parents would need to find a way to cash out some of their equity and then use that to essentially buy your house, and you'd pay them rent = mortgage payment.
posted by JPD at 5:55 PM on December 8, 2010
Response by poster: Thanks for the responses so far. FWIW, I am not opposed to selling to my parents, that's a better option than losing the house, but I'm reserving that option for last-minute-desperation. They'd probably do it, but I'd be losing a ton of (paper) money.
The house is easily worth $150K more than I owe on it, even in the down economy. No way could I get my parents to pay what it is worth in a mortgage and then rent to me. They are great, but not that great!
At the worst I suppose I could have them buy me out and will it to me.
posted by Invoke at 6:03 PM on December 8, 2010
The house is easily worth $150K more than I owe on it, even in the down economy. No way could I get my parents to pay what it is worth in a mortgage and then rent to me. They are great, but not that great!
At the worst I suppose I could have them buy me out and will it to me.
posted by Invoke at 6:03 PM on December 8, 2010
Don't worry about the paper loss. As long as you aren't upside down on it (let's say the house is worth $300k and the loan is $175k), all you have to do is sell it to them for $175k and have an agreement that you can buy it back from them for that amount (plus their loan costs, etc, of course). At that time you recoup any paper (or real) equity gains.
If you are upside down, you have bigger problems than this.
posted by Forktine at 7:09 PM on December 8, 2010
If you are upside down, you have bigger problems than this.
posted by Forktine at 7:09 PM on December 8, 2010
This thread is closed to new comments.
Second thing-your income. Sounds like it's not there on paper. This alone may be a deal killer for you. Aurora was a low doc lender in the past but nowadays since banks have burned themselves on the low doc/no doc loans, they go by what you report. Since you do not have W2 income, they use your tax returns. Self employed borrowers can choose to report all their income and pay taxes on it or write off like mad and pay less taxes, but the latter will cost you when getting a loan; even if your credit was good, this might be enough for them not to refinance you. According to what you are reporting as your income, you cannot afford this home.
Other ideas----I know you said you didn't want to sell but what about to your folks? Would your parents be willing to purchase the house from you, get a loan on it as a rental, and rent it back to you? This would get your ex off the mortgage, enable you to refi it and cut the payments, and give you a couple years to rebuild your credit (and maybe report some bigger numbers to the IRS) so that you can buy it back from them.
Other than that, I think a loan mod is the way to go-which is not ideal given your ex's position. I can see how you'd want to fix that. But check with your current lender. I have seen some lenders do some pretty great things lately, they might be willing to work with you on this. I had a friend in a similar situation with a divorce and the bank did a mod that got the other spouse off-which really surprised me. But she had great credit, so don't know if they'd go for it. Wish I had more alternatives to offer you, but you're definitely between a rock and a hard place.
posted by supercapitalist at 5:52 PM on December 8, 2010 [1 favorite]