Home > Looking for Advice on Refi

Looking for Advice on Refi

March 7th, 2022 at 05:32 pm

I am rarely looking for advice when I post, so I want to be clear that this time, I am!  Ha.

The bank with whom I had submitted an application for my refinance unfortunately denied me, saying that my credit score doesn't meet portfolio guidelines (mildly annoying since I was open with the team's assistant about where I believed it was when I spoke to her prior to formally submitting - and I was in the right range for 2 of 3). 

However, on the next page of the denial letter, it's a bit more detailed, and goes bureau by bureau.  Scores are 645 EXP/632 TU/600 EQ, and the reasons given are "serious deliquency" (2/3), "serious delinquency and derogatory public record or collection filed" (1/3), "proportion of balance to high credit on revolving accounts" (3/3), "number of accounts with delinquency" (3/3), "length of time accounts have been established" (1/3), "time since delinquency is too recent or unknown" (2/3).  So basically, my utilization is too high, and all of the derogatories, while resolved, are too many/too recent for this loan.  Not worried about the length of time one, I know the average age of my credit went down as some of my older accounts got closed, and that's only one report.  

There are no current delinquencies on my report.  There are a lot of accounts that were settled for less than the balance due, and the timeframe ranges from late 2020 through Aug 2021.  I need to go through account by account again and double check that all reflect $0 balance, but I believe they do.  

I got in touch with the gentleman who did my current mortgage (at a national bank), and using the info I fed him (ie, he did not do a pull, just entered my credit score as I gave him, based on the ranges from the denial letter (I did not see the 600, as it's on another page lol - perhaps subconscious denial lolol), so I gave him a range of 630-645.  He was able to do a quick estimate but obviously nothing is certain.  He was able to estimate that it would be a rate of 4.75%, I'd have to buy points to get that rate for a cash out refi, my closing costs would be around $8k, and, assuming my value is $220k, I would receive $20-21k at closing, and have a new payment of $918.  For reference, my current monthly payment is $830, rate is 5%. 

If I can successfully refi, I will be using the proceeds for payoff of the personal loan I took out to pay off the settled credit cards (this feels full circle lol).  The current balance on that loan is about $16.5k.  Without any extra payments, it is scheduled to be paid off in April 2025.  I do pay extra twice a month.  Currently the payment on this loan is $349.07 semi-monthly ($698.14), plus an extra $150 semi-monthly - for a total of $998.14 a month.  The closing costs are high, but this frees up so much cash flow ($900 a month after accounting for the increase in my mortgage payment) that I can put towards the revolving debt, and then hopefully start saving for my next down payment. 

My line of thinking is....I think I gotta settle for another crappy move in order to clear out of here, but I also may be not seeing it from all angles.  By my math, if I take this offer, the closing costs will have have paid for themselves in 9 months, which is a full 2 years before the loan would be paid off otherwise.  Much harder to quantify the positive impact this would also have on my other debt and my overall financial picture...with the freed up cashflow, I can probably have the credits cards paid off completely before the end of the year as well, not including other cash already budgeted to do so, and snowflakes that come in throughout the year.  The closing costs are high and will cost me money, but less money than continuing the pay the insane interest on this loan and the credit cards.  In my mind. two questions are....

1.  Is this line of thinking sound, based on the context?  Even knowing that this is an expensive mortgage to undertake, based on points/closing costs, I do still feel that paying the money will be better off in the mid term and beyond.  But I am looking for external viewpoints.  I may not end up agreeing in the end lol but seeing an opposing opinion is always good.

2.  Based on the reasons for denial from the first bank, is it even reasonable to think I will get approved from another bank?  Is it worth taking the hit for the inquiry to see, and go from there?  If I get denied again, then I guess I have no choice but to wait a bit longer, and continue paying things as I am right now.   I have reached out to a mortgage officer at another national bank (who just did a refi for a friend), but have not heard back.  A broker nearby basically told me the closing costs were too high and he didn't recommend even trying then stopped responding to my emails <insert eye roll>.

10 Responses to “Looking for Advice on Refi”

  1. Another Reader Says:

    I haven't commented on your blog in the past, but with the 600 credit score and all the delinquencies and charge offs, no one will offer you a mortgage that is anything but predatory. In your shoes, I would tighten up on spending, pay off everything I could, and wait this out.

  2. james.hendrickson Says:

    I'm with Another Reader on this - I'd take 12 months and work on paying off your debts and building up your credit score. You'll get the same effect you want - that is, less debt and more cash.

  3. Lots of ideas Says:

    I am going to say something kind of harsh, but I do so only because I have followed your story and think it will help you.

    You are moving debt around and thinking it is progress rather than making very tough changes to your lifestyle to get yourself out of the hole you are in.

    Of course, we all need to make choices that feel good to us, but I suggest you go back over the blog entries you have posted and look at the discretionary spending you have done - especially where you added to debt. Look at the ways you have transferred debt from one vehicle to another - did you get the traction you thought you would?

    Activity - like refinancing - is not the same as progress.

    I am very opposed to using home equity like a bank account - yes, home prices are up, but they can go down. I see home ownership as a way to build wealth, not improve cash flow.

    As I said, this is harsh, but I wish the best for you so I am taking the risk of saying it.

  4. FocusedinmyForties Says:

    Thank you both! I guess the first question is moot if I am unable to get approved right now.

  5. FocusedinmyForties Says:

    LOI, I appreciate the input. I don't see it as harsh, just matter of fact. I am not a terribly sensitive person, and I'm from NY, so what some see as harsh, I just see as honest.

    With that said, I do think that moving debt around, while still only a step on the journey, IS progress, if it reduces an interest rate, and helps me pay off that debt faster. I will agree that the progress is lessened/derailed if the cash flow that I free up is not put to further good use.

  6. Petunia 100 Says:

    8k in fees for a 220k loan seems excessive. If it were me, I would wait for a better deal. In the meanwhile, your credit score will improve and your debts will go down. You're making good progress and you're getting there. Your position is only going to get stronger.

  7. Another Reader Says:

    Lots of Ideas is correct. Reading back through your blog, you really haven't made the necessary behavioral changes to succeed. You seem like someone that could benefit from the Dave Ramsey approach. Cut up all the credit cards, make a cash budget and stick to it. Otherwise you will keep making poor decisiona and never dig out of the hole.

  8. FocusedinmyForties Says:

    Thank you, Petunia. This is the type of feedback I was looking for. Thank you for answering the specific question at hand.

    Respectfully, AR, I disagree with you, and in order to not let this escalate further, will end my response to you there.

  9. mumof2 Says:

    Yes I think you should write down your debt and interest rate...and see if you can start paying off the smallest one first..and then start the snowball put some into savings each pay...even if it is $20...every bit helps..then live tight as you can for a year or 2 until a lot of the debt is gone, your credit score is up and see how you feel about it then wether you want to continue saving and paying down or to refinance to one payment....I'm not sure what your overall debt is, or if you have a lot of smaller debts etc...but I say keep plugging along, live tightly and reasses in 12 months and see how things are going...good luck

  10. LivingAlmostLarge Says:

    Very high fees for a refinance. I would focus on getting a 0% credit card and work on getting your credit card balances down. This would probably help with the refinance in another year?

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