Refinance Mortgage on PhD Stipend
October 10, 2017 8:27 AM   Subscribe

I want to refinance my house but I'm a Ph.D student. Options? Mortgage companies say that they can't use my income.

Anyone know of lenders that will work with me? The underwriters say the debt/income ratio is just too high. They're right, if they don't count my stipend. What are possible options to fix this?
posted by MisantropicPainforest to Work & Money (8 answers total)
Where are you, what companies have you tried so far, and how have they asked for documentation of your income? (Basically have you talked to a human either in-person or on the phone, or have you just filled out forms?)

A local bank might be a good option, especially if you're in an area with a significant grad student population.
posted by mskyle at 8:35 AM on October 10

are you working with a broker or dealing individually w/ banks ?

In theory, a broker would know the right bank(s) that would be interested in the refi. Though it might be higher risk lenders (higher interest rates) that will bite, depending on your numbers (not just debt/income, but also equity in the house, etc).
posted by k5.user at 8:52 AM on October 10

What k5.user said about brokers. Including about higher rates (or more "points") for refis that ignore income.
posted by Obscure Reference at 8:57 AM on October 10

Dealt with a bank through costco. Got all the way to putting my (refunded now) deposit on the appraisal, but person at bank I was dealing with said that the underwriters said that they wouldn't go for it since they can't count my income.

Any suggestions for brokers?
posted by MisantropicPainforest at 8:58 AM on October 10

This is a huge problem that I have also experienced! There is basically no way to get a conventional fixed-rate mortgage that takes your income into account. Fannie and Freddie won't allow it. Local banks who hold portfolio loans MIGHT offer you something, but it will almost certainly be adjustable.

Our solution (which sucked) was to get a co-signer. Sorry. It's a really lousy situation, and I spent like 6 months being deeply outraged by it.
posted by juliapangolin at 9:55 AM on October 10 [1 favorite]

Doing a FHA with PMI is also an option since they are more lenient, but I'm not sure if PMI is worth it.
posted by MisantropicPainforest at 10:03 AM on October 10

You should definitely talk to a mortgage broker outside of Costco and see what your options are. There are some ways to pull it off without a Fannie/Freddie-backed loan (FHA will sometimes go for a 2nd mortgage to bring the 1st mortgage down to below 80% and not charge mortgage insurance on the 1st) but they'll take some creativity. FNMA guidelines don't automatically preclude income from a stipend but the stipend must be documented as continuing for at least three years from the date of the mortgage and can't be "conditional." Whether or not a stipend is "conditional" is up to the underwriter to decide.

What are you going for by refinancing? Just a lower rate or a lower payment by redoing the term or cash out or something else? If it's just a straight refi and the rate reduction is substantial (Say, 4.5 to 4.0 or 4.1 percent, minimum) and your mortgage is less-than or equal to 90% loan-to-value, FHA might be worth it because the FHA mortgage premiums are "only" due for 11 years, not for the life of the loan like >90% LTV loans.
posted by fireoyster at 2:38 PM on October 10

The lender should be able to tell you how much your PMI payment will be per month, and what the conditions are for getting the PMI removed. If you can estimate how long it will take you to meet the condition for getting PMI removed, you can then estimate if it's worth it.
posted by Former Congressional Representative Lenny Lemming at 5:30 PM on October 10

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