Re-fi out of FHA based on "inherited" equity?
My wife and I live in a house wholly owned by her ex-husband (bought in their divorce. we met, I moved in, and we married). He originally put $80k down on $360k purchase. He legally has to sell it to us within 7 years for the outstanding loan balance, not the home value. We want to purchase soon - the outstanding balance is currently $278k. We don't have a lot to put down so we're looking into an initial FHA loan for the $278k. We have good reason to believe the home is currently worth $350k, so that's $72k in equity. Given the considerable equity we will "inherit" after the purchase, could we then re-finance with a conventional, non-FHA loan and pay off the FHA loan early, therefore getting rid of the mortgage insurance? If so, how soon after the purchase could we use the value of the home as the basis of calculating the equity (I have seen reference to some FHA rules that look at loan amount, not home value, in re-fi situations)? And would this refinance out of the FHA loan be penalty-free? by mark_b from Herndon, Virginia. Jun 17th 2012
Brian Mayer (usdaloans)
#40 ranked lender in Maryland - 30 contributions
Yes you can refi into a Conventional and now would be the time to take advantage of the 3.5% rates. We can close it in two weeks once we get all the paperwork back from you. Call me 443-624-9398 or fill out an application on http://usdaloanhome.com to start the process.
Linda Wintersteen (Linda123)
#63 ranked lender in Arizona - 1,256 contributions
I have been a underwriter and a compliance officer.. If you are using a purchase contract, in order to use the higher value in equity, you need to wait , it depends on the lender, 4 to 6 months... Is your wife still on the loan?? if so, then you can do a refi, and remove him and add you ... linda
Michael DiMarzo (mdimarzo)
#6 ranked lender in Maryland - 21 contributions
Seems to me that you wouldn't need to Keep the current FHA Loan.....you just need to refinance the first into your Names as a Conventional type loan .....Give me a call I can help....we have great rates......my number is 877-791-4968.
William J Acres (William_Acres)
#74 ranked lender in Arizona - 8,728 contributions
Your going about it all wrong.. You should purchase / finance the home using conventional financing upfront.. you can be gifted the equity, and will need 5% of your own money as down payment, and the lender can pay your costs... it makes no sense to buy it now with FHA and refinance it later into a conventional. The best advice I can give you is to contact a LOCAL mortgage broker, not the local "Big" bank, and certainly not one of those 50 states internet lenders...By applying with your LOCAL Broker, you have an advantage because he's familiar with local customs and works with numerous lenders, seeking out the best loan terms for your particular scenario. Because he has lower overhead, he can offer you lower rates and lower fees than most of the larger lenders. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com
Thanks for your help, everybody. Some things to consider: I have no way of being gifted the equity - the relationship with the ex-husband is tepid at best and he's all about money. He would never agree to gift me anything, even if he was getting it back when his loan for our house was paid off. I have no family who can gift any amount of money, either.Neither my wife nor I are on the deed or anywhere on any paperwork on the original loan for the home. Based on that, plus the tepid relationship with the ex, I didn't think a re-fi on his current loan was even an option.Also, we're considering moving in 2 years, which has brought ARMs into the mix as what we'd re-fi to from the FHA. I just talked to another mortgage officer recommended by a friend and he recommended FHA upfront, re-fi to 5-1 ARM in 6 months, then get into 30-year fixed at the time of buying the new house.Remember, the whole goal is to get the best offer that a) minimizes upfront costs, preferably to $15k max for everything, and b) keeps the monthly payment to what I have now (2k) or less. My credit rating is excellent, my job is extremely secure, and our monthly income is more than enough to support our current spending. We just don't have a lot sitting around to spend on any one particular time.
Mark Simon (mark.simon)
#10 ranked lender in Delaware - 83 contributions
In light of your update the ARM idea is a serious consideration. Give me a call and we can review any final details and map a plan to give you clarity on the costs today. Mark 800-485-1387 extension 107
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