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Question For The Experts


retmar
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We just bought our house. We took possession last of April, 2004. We went through Countrywide and got a 6.125. We made our first payment on June 1. During June, Countrywide sold or transferred us to CitiMortgage. Countrywide invited us back after 1 year of paying to obtain a LOC for whatever we could get or less. Since we have been here, many offers have come in the mail offering up to $50,000.00 with no equity, you know the drill. The house was a rental for quite a while and could stand new Carpet (existing is Jute backing), Linoleum, and could stand for a new Kitchen (beautiful Birch cabinets painted White). Since both Baths have carpeted floors, they will need to be done if carpeting removed. Roof, Water Heater, All Plumbing (Copper) less than 3 years old. Outside paint last February. Garbage Disposal last January. Dish Washer and Range/Microwave less than 2 years old. Overall, home is very sound with no problems. We have 3 CC's with about 70% utilization, Car payment, 1 Medical bill for less than a Thousand. Our plan is to get this loan for the most we can get. We would pay off the excess debt, complete the remodel, and stash the balance where it will do the most good. Total output for all mentioned is around $15,000.00. If we were able to get $35,000.00, that leaves $20,000.00 to stash. The monthly payment is not a problem due to our income. Since I am rated 100% SC with the VA, we get a $100,000.00 exemption on Property Tax. This may result in our paying Zero taxes each year. Also, we do not have to file any Federal or State Taxes due to our income as it is VA Comp, SS Disability, and Social Security.

I talked to one of them to get some numbers, etc. Was told they could not do this unless they pulled our CR and sent everything to the Underwriter to see exactly what could be offered and what the costs, etc. would be. I accepted their excuse as the man seemed fairly honest as the way he explained the program, it does make sense.

My question to the experts is: Would it be a wise choice getting a loan now or wait until the year has past? The remodel could be completed at either time as it is causing no problems, including appearance. The real benefit if done now would be the interest saved on the CC's and Car, along with any interest earned after money is placed. And, if, by chance, something happened, such as the Forced Air took a dump, we would have the funds readily available. I would really appreciate some honest opinions, no matter your thoughts.

Also, as of this date, neither has entered a TL on our reports. For this reason, I can only assume that if they hit this month, our scores are going to take a hit which may cause a snag if we did pursue this as described. Our scores at purchase were: Self, 655, 655, 614, and DW was 622, 622, 641. True, there were some lingering negatives deleted during research (8 between us) after this pull, but, my concern is if a new inquiry hits just as the new TL is reported, we may lose any "lower" rate.

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If I we're going to borrow any money associated with a mortgage, I would do it now. I listened to Allen Greenspan for about an hour last night on CSPAN, and he was very clear that mortgage rates will most likely rise.

Are you planning on staying in this house forever? If not, I would be reluctant to putting 15K into "redecorating". If the money was spent on a pool, or new central, or and additon, I'd feel alot better. These types of improvements most always help the house to appraise for more when you do decide to sell. Most of the time "cosmetic" improvements made to a property will not increase a homes value much.

This is just my .02 cents. I am in no way an expert.

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Thanks for the comment as I will respect any and all.

To give you an idea of our area, the homes are climbing like you can't believe. This is also a sellers market here. Getting good discounts are low. About the only thing a buyer can really gain is getting the seller to assist in closing costs. Our neighbor, 3 doors down, purchased his 4 years ago at a third of what we paid. Also, we live in a Senior Community of over 500 homes with more conveniences than one who lives at a Country Club. A home with the same amenities as ours in a "regular" neighborhood runs from $20,000 to $50,000 more than where we are. And that includes the ones less than a city block from our home as we live on the edge of the community. There are also a minimum of 9 seperate new tracts being built as we speak within a 5 mile radius of us. This does not include the ones being built farther out. Their range is mid to high 100's to high 200's with footage of 2000 to 4000 square feet. Some are built on top of each other (10' between) while others have a fair distance (up to 20') between homes.

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If I we're going to borrow any money associated with a mortgage, I would do it now.

True in most instances, EXCEPT a HELOC. HELOC's are always going to increase everytime the Prime interest rate increases.

Retmar,

My Countrywide rep was just in and well, until there is twelve months seasoning (meaning you have owned the property for twelve months), they will only let you have a HELOC based on original purchase price. Not to say there are not others that do not require seasoning :shock:

Also, with a 659 credit score, you would be looking at cutiing off at 90% loan to value, with an interest rate of Prime +3.00%. Essentially that would be 7.25% current.

And I do say current. Natural does have it right, with the Greenspan testimony. One of his comments was that the pricing has already discounted to a 2.25% Fed funds rate. this would translate into a 1% increase in Prime interest rate, which would affect any rates tied to prime.

P.S. Fixed mortgage rates are not tied to prime interest rate specifically, not even the 10 year treasury, which at least 75% of the mortgage professional population would suggest.

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I must admit I have no idea what a HELOC is or means. It was not any part of my question, but, you did convince me to never pursue one, and I thank you for that. My question pertained only to taking this as offered in the letters, and considering the different programs the underwriters came up with in their work.

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I was just sitting watching the tube when it dawned on me what a HELOC is. I cannot believe I was that dense. Unfortunately, before I could stop from making myself look "Dumb", someone caught it and explained. Oh well, we all live and learn. About the only excuse I can give is this is the first Morgtgage we have ever had. Our two others were contracts, so the homes never got reported, nor were any lenders involved, and no Escrow companies were involved. We signed the papers at the Title company each time, and the County sent the Taxes directly to us to pay annually.

As to the comment regarding the scores, my thoughts are if we wait until the year has passed, our CC's will be Zero as we are starting a payoff program this month, then paying balance each month. Therefore, with some time on the Mortgage reporting, the CC's at Zero or near Zero, depending on date of reporting and payment posted, and the Car loan way over the third year, our scores should be approaching the mid 700's at the least. If we are to believe the estimated scoring in the other section, we are in the 690-710 range now, including the Mortgage and high CC's. Then, if the rates hold, we have a fair chance of getting a lower rate than now. This is where my "Gray Matter" is hanging at this time. In short, it all depends on what you experts say as to whether we do it now or wait until next year.

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RETMAR...May the force be with you.

You have your finger on the "pulse" of your community, and by now you've taken your 40 wacks on your credit, and have become more business savvy. If you and your wife feel comfortable then go for it.

In closing I will say this....With the lower interest rates alot of folks are buying and building houses they couldn't even dream about building 3-5 years ago. 15 years ago it wasn't even plausible. This all translates into this: lower interest rates=people buying "more" of a house......higher interest rates= people buying "less expensive" property. Just because the market is "golden" right now, doesn't mean it will be in 5 years.

How long are you planning on living there? Any answer under 10 years, and I wouldn't do a HELOC.

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Something I should add so all are aware. My DW is 1/2 Native American though you would never know. She is a Natural Blonde with Blue Eyes. Even though she has been registered since 1946 and has a Roll Number, she never really was declared a member of the Tribe. She did receive her checks when they were passed out. At the present time, she and her Brothers are in the process of being accepted into the Tribe. This means she will get a designated amount of land free. Then, when the Tribe builds their Casino, she will get the monthly check as a member of the Tribe. An example for those who are unaware, the local Tribe where we live now each get a check for $10,000 a month average. The sad part is they drive new SUV's, but, still live in homes with Cardboard in the Windows. Go figure.

Either way, this is another reason we were considering the loan now as we are still up in the air as to if we must live on the property, or, can we build and rent out, or ??. It will be near the Coast in Northern California. Truthfully, we do not want to live there as we like it here better, yet, we are not against having a "Getaway". Big decision for us.

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