We are officially attempting the Mortgage REFI in CHP 13!

[MOMof3]

I will keep in you all informed of what actually happens, but we are attempting a refinace of our existing mortgage within the chapter 13---this is not a buy-out attempt, merely an attempt to get our ARM out the door and have a more decent payment. It will be FHA, per the one year of on time payments guidelines for chapter 13 folks. The broker was referred by our lawyer and we are looking at--gasp--6% FIXED!! I was shocked as I had low expectations to begin with!! We'll see if it actually goes through as planned--I've been through mortgage hell before--lol. He is sending our good faith estimate & other federal docs/loan docs today for us to complete. Our ARM adjusted to 10.5 in October 07 w/another .5 increase for March 08. IF the refi goes through, our attorney will amend our plan and lower it back to our confirmed payment amount. That is $340+/mo more in our pocket. Our unsecureds will most likely end up w/more too as this loan--as proposed--will be over $500/mo savings over all. We'll see?!?!?!

[CindyLou]

You should be able to get better than 6% right now. Don't settle for more than 5.75% on a FHA....and make sure you go through a direct lending so you don't have to pay a 1% origination fee......the 1% fee is a rip off. Remember the % rate does not go by credit.

The rates were 6% in Novemeber, but have gone down since then....you might even get low than 5.75. Don't let them tell you any different!

[holding on]

I've been trying to clarify this with research, but does everyone in a CH13 who has payed on time for a year, qualify for the FHA refinance? Or is there additional criteria like some sort of means test used?

[MOMof3]

Holding On: We were told that we needed to have paid for a year on time, no new debt or collections on our credit report. We are attempting to do an 85/15 loan--I don't know if there is a cut-off & someone told me that you cant have more than 29%-31% of your gross income going towards your payment.

CindyLynn: I will check the fine print! Thanks for the heads up. He did say 6% "or lower"---I was amazed at 6%, but I will be more sure to scrutinize now. Do you know if loan/value is a factor in determining interest rate? He is a broker, so I'm sure there will be a fee, but he is working closely with my attorney on this & I don't know if it's worth breaking up that teamwork & coordination---but, I will be going over documents closely.

[holding on]

Thanks MOMof3. I guess its a tad bit depressing that I have a better chance of a refi if I filed bk and did good for a year

[jgarton244]

We refinanced our mortgage while in chapter 13 plan. We had a baloon payment that was to become due right at the end of our plan, so we refinanced about 18 months into the plan. I called Bank of America mortgage department direct. Found number on Google search. We had no problems with the refinance, even though Bank of America was one of our unsecured creditors in our plan with a credit card. You may want to see what BOA offers by going direct. Our attorney was a big help, as once we were cleared by the bank, our last hurdle was to get permission from the trustee, in writing to allow the refinance. Our attorney wrote that the refinance would be in our best interest, as in your case, as it lowered our monthly payments, and eliminated the upcoming baloon payment. It took about 10 weeks. One advantage of using the mortgage broker is the accumulation of needed paperwork is usually done by the broker, and they can help guide you through the process. When we went direct, without a broker, there was a fair amount of paperwork and follow up we had to do. A mortgage even at 6% is a great rate compared to where you are now. You should not have any problems, as long as you keep all payments current through the process, and get trustee approval.

I hope all works out well for you.

[Flamingo]

You will probably have five years of PMI to pay with the FHA loan. We refinanced during our Chapter 13 (bought out though) and even though we refinanced for a low amount to pay off our Chapter 13 and get house repairs done, we still had large equity in our home. We question the PMI five year payments since we still had a large amount of equity in our home and found out that is what is done by the FHA as to risk mortgages. We pay almost $50 extra over P&I per month for that and since we took out the mortgage in 2006, we cannot deduct that PMI in this year's taxes as it applies only to mortgages taken out during 2007. That PMI will be removed after five years. The only way to get rid of it is to refinance again. They get you coming and going so be prepared to have that appear on your Truth in Lending when you get it. It will up your payment.

[jgarton244]

FHA mortgages require PMI insurance for all loans for a minimum of 5 years. It does add some upfront costs, and 1/2 percent to monthly payments. After 5 years, if you have at least 20% equity in your home, you can get the PMI dropped. However, you must initiate the request to discontinue the PMI, the bank will not automatically do this. You also need to start with HUD on a FHA mortgage, and make the request through HUD. HUD, if they agree, will then notify your lender that PMI is no longer needed.

OP is still better off in getting a FHA at 6%, and 1/2% additional in PMI compared to their ARM, which will move to 11% in March.

I would also consider a 15 year loan at 6.5% the monthly payments would be a tiny bit less then at 10% on a 30 year mortgage, which you have now. If you can swing this, you would be paying off your mortgage faster, and no additional monies would go to unsecured creditors. Your monthly payments to trustee and mortgage company would be about the same, but you cut your interest on your loan significantly, and complete in 15 years, not 30 years.

It just depends on how bad you need the additional $340. month extra if you refinance at 30 years.

[MOMof3]

Great idea on the 15 year fixed! I will definitely ask about that. Of course we could use the $340, but it would be tempting to see where that would put us, we might be able to swing it for a good cause like paying off our mortgage faster! As for the PMI, we are paying PMI now, so that is nothing new for us. I should get my packet of papers in the mail today! I'm excited to look through them.