Jumbo Loan (Full Version)

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reach -> Jumbo Loan (5/2/2008 5:19:50 PM)

My husband and I own a house in CA.

The we have a jumbo loan and it is interst only right now. We have about 5 years before it balloons. I am really nervous, as I don't think 5 years is enough time for this econmoy to straighten it self out, so I want to re-fi to something fixed.

Well I had heard that there is a ecomonic stimulus, for people in certain counties, that would increase the traditional loan to 729,000 if you meet certain criterea, which our county does. So I went to look up details on re-fi ing out loan, and we can't do a traditional loan still, because the house value had dropped so much in the past year ($100K in value). So our loan to value would be 88%. We would have to come up with 40K to get the loan value down enough to not have PMI.

Are we stuck? Are there no other options? Should we take the other 40K as a 2nd? In reality, if we took out 50K, we would have a traditional loan for the first and a heafty 2nd.

The good I see is, we would have a fixed loan on the first, and then when we get "extra" money, we could pay the extra on the 2nd and maybe have it paid off in 7-10 years, and then we would just be left with the first.



GroupW -> RE: Jumbo Loan (5/2/2008 5:50:47 PM)

You have a couple of options, though I'm more conversant in commercial mortgages than residential. There are some mortgage brokers/realtors on this forum that have more up to date info than I do.

1) pay PMI
2) do a piggyback 2nd
3) ride for a little longer
4) start aggressively paying down principal and ride a bit longer

5 years is actually plenty of time for this mess to sort itself out, though I don't think I'd expect material increases in your home's value during that time. Historically, homes increase in price at the rate of inflation, maybe a touch more. Call it 2-4%. The last 20 years were anomalous in the rate of value increases we saw for a host of reasons.

I don't think there's a huge hurry to refi. You have some time, so don't panic yet.

(I have 7 years to go on my IO loan as well - I hope to have it substantially paid down by then)



reach -> RE: Jumbo Loan (5/2/2008 6:18:02 PM)

So you think if we ride it out, and pay extra on our current loan that things will be better in 5-7 years?

I am scared of that. :) My fear is that from what I have read that interest rates are going to have to go up to balance out all of the crazyness going on.

I just heard back from a new broker, and he is going to have his appraiser get a better comp of our property and then let us know what we can really do with our current loan.



GroupW -> RE: Jumbo Loan (5/2/2008 6:28:02 PM)

There's the risk of higher inflation for sure. In the end, we usually see higher inflation after periods of high money growth and we've got a negative real interest rate at the moment which typically leads to inflation.

There are a couple of things going on right now that point in opposite directions. We have a tremendous debt hangover that will take some time to work off. That will reduce GDP for a time and keep us somewhat below our normal inflation patterns, all else being equal. Offsetting that, higher oil prices and higher monetary growth are pointing toward higher interest rates.

I have no idea which effect dominates over a 5-7 year time horizon, but over the next 1-2 years I don't see a huge increase in inflation. Businesses remain healthy and able to increase productivity growth through investment - that's a good thing.

If the issue is paying down debt enough to refi in 5 years or so, yes I think the current debt crisis will have been long past at that point and mortgage availability for jumbo's should be substantially improved.

If the issue is refinancing at a lower rate, then I think there's some measure of downside risk for you there.

My crystal ball is pretty dusty right now. I wish I had more definitive information for you.



Random -> RE: Jumbo Loan (5/2/2008 7:17:19 PM)

I would say get a first for 80% and then a second for the balance. Focus on getting rid of the second as fast as you can.

Yes, the economy will be better in five years, but you have no idea what rates will be then. It's also impossible to predict if they will still have higher limits for conforming loans then, so it might turn back into a jumbo if you wait.

If you have the chance to do it now, and not take on new debt, I would do it.

Either pay the PMI (which is deductible now, at least temporarily) or do the piggyback.



reach -> RE: Jumbo Loan (5/2/2008 7:30:49 PM)

My thought was the same, but I did not know if people would agree with getting the 2nd.

Only think is we will go down to the 417 amount to get the best interest rate on a 30 year fixed and then get the 2nd on the balance. This will make the mail loan a little more than 80%, but we will get a better deal on the interest rate. We will also be agressive on paying down the 2nd, but I do think it will take 7-10 years to pay it off, because we have things to do to fix the house up too, so our income tax return goes to that.

Thanks,

Just wanted to know that my thinking is sound. I am not good with the money stuff.



BlueAdept -> RE: Jumbo Loan (5/5/2008 6:34:01 PM)

I guess my question is more along the lines of what has the Lord told you to do? We have our hunches as to where the economy is headed in the next 5-10 years, several people are thinking it is going to get better.

I don't know that I have any answer. I would make a point of getting into a better loan, anything to get out of the IO loan. In 5-7 years interest could be in the 10-14% or it could be lower than it is now. I really don't know, my guess is it will be higher, but that is sheer speculation. But then I also expect that the overall economy is going to be in worse shape than it is today.

My reason is we have people in congress, that are not willing to let us suffer through a minor down turn while they are in office. So they are doing everything they can to keep that from happening. At some point the "bill" has to be paid, better a little pain today then what is likely to happen if we keep putting it off.

Per Fox News - "Bernanke Warns of Dangers Posed by Surging Home Foreclosures, Urges Congress to Act"



Row1 -> RE: Jumbo Loan (5/7/2008 9:29:28 AM)

you are in a home you nearly can't afford.
and things are not moving in the right direction.

you have a good five years to make a plan and get out.

frankly, unless you have family in ca, or have some job that absolutely could not be done elsewhere (i.e., movie editor, comedy writer), i would geto out of this expensive area and find a decent, affordable part of the country.

Median housing cost, 4th quarter 2007
http://www.realtor.org/research/research/metroprice

Nyc area (nj suburbs, etc) 450k
LA 600k
Chicago 275k
Houston 152k
Philly 235
Phoenix 260
San Antonio 153k
San diego 590
Dallas/metroplex 150
San jose 840
Detroit 140k

"how far will my money go in another city?"

http://cgi.money.cnn.com/tools/costofliving/costofliving.html



APZR -> RE: Jumbo Loan (5/7/2008 10:32:14 AM)

quote:

I just heard back from a new broker, and he is going to have his appraiser get a better comp of our property and then let us know what we can really do with our current loan.


As an appraiser... that statement from the broker scares the $%! outta me. What he just said, a respectful appraiser would hang up on him... appraising to a pre-determined value or expected mark is illegal.

Lately, I've been making a tremendous living from REO and foreclosures because when people were in a hole, they didn't quit digging. Loan brokers call me every day wanting to know if I can make their deal work, hit the number, or "help these good people out". All of the above are unethical and illegal... so I don't do much work for brokers, only direct lenders.



reach -> RE: Jumbo Loan (5/7/2008 11:33:38 AM)

We are in a loan that can be paid by only my husband. We don't use my income for the house bills.

We also don't have any other debt but the house, so I don't think we are that over extended, but I think we could be moving forward if we had a better loan. No matter what, we are going to be paying down the principal soon.

We just got married and he makes enough to make the interest only payment on the loan. That does not count my income. I don't want to set up a loan based on my income because if we have kids, and we decide I should stay home, I don't want to be over extended.

I am not interested in living somewhere where we can buy a bigger house for less money and then having to live there. We like were we live and he has a great job, and will be promoted to manager in the next few years, and he could not get that somewhere else.

I have no desire to live some place just because the housing is cheap.

If our house payment does end up too high, then we can sell the house and buy a cheaper house, but really in our market, the house is not going to get any cheaper.

I don't know the legaility of what the person said. How is doing an appraisal different than getting a comp on the internet? Don't you need an appraisal to find out what you qualify for?



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