So the Feds Are Bailing Out the Banks

[rolanni]

As you know, Bob, the Federal Government is working like a lunatic thing to shore up the mortgage industry. You may have asked yourself, as I have, where they're coming up with the money in these lean times, having already spent every dime in the treasury.

Well.

Let me tell you a story.

Eighteen years ago, Steve and I "bought a house" as the saying goes. What we actually did, of course, was Acquire a Mortgage. Because we live 'way out in the country, we got ours with what was then called the Rural Housing Service of the federal government.

This mortgage has many idiosyncracies, as you might expect from a government program. For instance, payments are tied directly to income-before-expenses, reviewed annually. Every year, I get to educate a new "counselor" on the realities of freelance incomes. Also, because of the income-before-expenses side of things, it's a little hard to, how shall I say this, save money. But, hey, it's our mortgage, and no one else was stoopid enough to take on a couple of freelancers, so we love it for the ugly child it is.

Yesterday, we got a letter in the mail from Rural Housing, which now sports some highfalutin alphabetsoup name. We have...

...wait for it...

We have...

90 days (from the date of the letter) to refinance our house

Yes! On top of everydamnotherthing we have to do before June 1, now we have to figure out how to refinance an elderly raised ranch located in the heart of Central Maine in the middle of a housing slump.

Because, yanno, the government needs money. NOW.


...if you want me for any little thing, I'll be hiding under the bed.

Comments

[zola.livejournal.com]

You have several advantages here that may be a big help. I am undoubtedly telling you some stuff you already know, but better too much information than not enough. We bought our very first house two years ago, so my info is quite up-to-date and hopefully it will save you some time. :)

You've told us you have lived in the same house for 18 years. That means you have a certain amount of equity in it, even if the current value is less than what you paid for it, itmeans that you are known to your general community, and it also means you have a payment history.

These are very big advantages! This kind of solid history can be what tips the scale for a loan approval.

The very first thing to do is to gather your documentation, which shouldn't be too terrible since it's tax-filing time. I would go to your regular bank to start. Just go in--you don't need to make an appointment, generally, you can speak to one of your customer service people, show them the letter from your current mortgage holder and ask them what you need.

Make copies of every form you fill out. If your loan is turned down by your current bank, you will have to apply at other banks, so copying the forms means that you only have to think about it once--you can just copy the information from one form to the next without having to invest a great deal of mental effort. ;)

Unless you are missing information, they usually won't mess around with giving a yes or no, so make sure to write down what documents they are asking for. If your regular bank turns you down, then try some of your smaller local banks next.

While the types of loans out there can be headache-inducing, do bear in mind that a limited ARM (Adjustable Rate Mortgage) isn't a bad thing--if a regular bank offers you an ARM that is capped, that gives more flexibilty in what is required of you to qualify.

The key word you are looking for is "capped" or "limited"--that's language that says "the interest rate isn't going to go up by more than "X" a year, and it will not go up by more than "X" amount over the life of the loan.

Since you've already been paying for 18 years, you can also probably also get a shorter term mortgage, say one for fifteen years or twenty, and that also opens up more options.

I don't think you are going to have much of a problem. 18 years ago, houses weren't all THAT expensive, at least compared to now, so I would be very surprised if you are going to need a loan of more than 20k to 30k. In this day and age, that's not a huge amount of money.

The biggest thing is not to give in to the temptation to cash in any equity unless there's a real need--like if you have a couple of credit cards to pay off and you want to get a little more money to pay them in full, that's fine, just CUT UP THE CARDS if you do. Or if you know you need to fix the roof or whatever it is.

As far as having no savings go... I had a boss who used to say "Money to money and none to the dummy".

What he taught me, that I finally started using when I hit my thirties, is that you can ALWAYS save. It doesn't have to be a lot, either--even five bucks a week makes a difference.

Pay yourself first. Decide on an amount for every source of income. Like 10 a week from the job, 20 bucks every time you transfer your PayPal money, 1% out of every royalty check you get and so forth. Just put it in your savings account like you were paying a bill that was due and forget about it.

You would be amazed at how quickly you build up a solid reserve. Seriously. I whined on Steve's blog about having to replace the transmission on our van, quickly followed by two more major repairs, but you know, I had the cash to pay for it, I didn't have to put it on a credit card or cut back on normal expenditures to do it--and all because I just keep socking away that small amount of money.

Naturally, I've upped my regular savings rate to repay it, but you know, it's a lot nicer to be paying myself back for free rather than paying some usurious interest rate to a credit card company.

I wish you the best of luck, and one silver lining to all this?

Once you get your mortgage, you will no longer have to spend the time every year explaining the nature of freelance income to a counselor. :)