i recently qual'd for a first-time home loan (80-20) with 0 down. the interest rate on the 460,000 loan is 7.650,on the 20 loan it is 10.50. the motgage is 3940.00 per month. my first payment was on jan 01,2006 . it is VERY hard for me to pay the mortgage. the only reason i went into this was to finally be able to own a home. actually it is a duplex.is there a set percentage on the pre-payment penalty amount?

for the most part, a prepayment penalty is 6 months of interest. the prepayment penalty on your 1st alone is probably around $17,500 and some change.

it looks like your total loan is $575k, which means your 2nd is at $115k roughly. the prepayment on that would be around $6k if there is a prepayment on the 2nd.

i hate to tell you this, but it looks like you're stuck for now. even if you had adequate appreciation to be able to add possibly $21,000 to your loan AND lower your payments, would be crippled by your lack of property seasoning.

the most lenient requirement i have seen is 6 months seasoning for a rate and term refinance. that's not even mentioning that we're in a rising interest rate environment with a flat yield curve. lenders that do loans with prepayment penalties are having to tighten up due to the flat yield curve we're seeing now.

the loan officer in charge of your application should have steered you clear of a payment you and your family would be pressed to make. unfortunately, nowadays in this business, compassion for the borrower takes a distant second position behind commission to the loan officer.

In Ohio the prepayment penalty is one percent of the original loan amount. That is a state law to stop predatory lending. There are a few exeptions to that one being if you bought usung state bond money. Talk to a good mortgage broker and find out what your other options are.

Not to be harsh, but sounds like www.another****edborrower.com case study. Excuse the french, but that is the actual name of the website.

Your prepayment penalty will depend on the lender. it also depends if it is a hard or soft prepay. A hard prepay is there if you pay off the mortgage regardless of the circumstances. A soft prepay is only if you pay off the mortgage because of a refi and not if you sell the property.

It sounds like you are in a 2/28 or 3/27 type of loan with those rates. These loans usually have prepayment penalties because the lender knows people will try to refinance out of them as soon as possible when they qualify for conforming loan standards. As such, the prepayment penalty ensures the lender does not lose money on the deal.

It amazes how so many buyers are not honest with themselves regarding the affordability of the homes they are buying. I make everyone of my clients do a detailed budget. Lenders do not look at things like savings, eating out, utility bills, cell phone bills, etc. Many people think just because some lender will qualify them for a mortgage, they can "afford it".

This is going to get ugly...

GreedyBastard, you're 100% on the money. I work at the bank, so I see this kind of thing every day.

Unfortunately, the ideal purpose of sub prime loans, being that someone improves their credit and financial situation to get into a more conforming loan rarely works out.

I see too many times where a sub prime borrower is pulling out $40k in cash in order to pay off the mounds of credit card bills they have, only to go out and put a $40k vehicle loan in the place of the debt they just paid off.

Meanwhile, 98% of people's monthly income is gone by the end of the month (that is a real statistic i read somewhere) and the first time someone gets a traffic ticket, has to go to the doctor, or their car needs a tune up, it puts them in the red and they are late on their mortgage.

Rinse and repeat. Sub prime client for life.

Well, I may have a little good news for you. I don't know if it is a law or just a common trait, but if you have 2/28 with a 3yr pre-pay, the day after your 2 year mark you have a 90 day window to re-fi with no Pre-pay. Check with your lender, well actualy check in a few months after your loan is sold.

Well, I did not know that at all. Have you seen this happen more than once? That's pretty interesting.

the loan was sold about a week after it started to litton loans,in tx. so for the 460,000 loan, what might be the pre-payment penalty?

sc2dave, read my post above. i basically made a ballpark calculation for you.

What is the going rent for a similiar duplex in the area? You were aware what the payments would be so what has changed that is making it so stressful?

i think it might have been this:

i see it too much unfortunately. people realize the dream of home ownership is almost in their grasps, and they rationalize out in their head which areas they will cut the spending in. "i won't take the vacation this year, i won't drive a nice vehicle, i'll stop eating out so much, etc."

but then slowly the old spending habits come back into play, and then something has to give.

not saying this is what is happening with Dave, but this is the most common occurence.

just found out that the pre-pay p. for the 460 loan is 16,000,for the smaller loan ,is 4,000. i still want to refi,but i have talked to a few people and they say it's too early to refi,because it needs to appreciate some. what co. can do a refi for me? one that won't screw me again?

Dave pull out your mortgage note for each and within that document it explains your pre-payment penalty.

Dave did you show your income or state your income?

1% or 6 months interest is typical.

In most situations there is no PPP on the 20% second and that is a fixed interest rate. It is one of these 3 in most cases: 30 yr, 15 yr, or 30/15 balloon.

Dave makes no comment about his credit record.

Dave if you have good credit chances are seasoning is not an issue. You can use full appraised value and there are a few lenders if your credit is not so great whom will use full appraised value as well.

I ask my customer what they pay now. If they are saving money currently. If they feel comfortable with there payment now. And even know the statement might hurt I advise them if I feel they should consider things further.

If you are struggling here is what I advise.

Call your mortgage company and ask them to reduce your rate without any costs.

If there are costs then shop for a mortgage. I would be more than happy to look at things for you free of charge and give you advice tailored to your needs. As the moderator I do not suggest listening to any other loan officers in this forum until I can see a trend of honesty, integrity, knowledge and proven "quality" members within the board express.

I know I have the knowledge and a sound mind to consider my customers financial needs first and foremost and treat them like I were doing my own loan.

I have plenty of agents who can support my statement within this board. I have 9 years closing mortgages but I admit I still learn every day. YOu must. I even know realty and several other items. I study all the time.

I checked and CA has this law:

76. (1) A borrower is entitled to pay the full outstanding balance under a credit agreement at any time without any prepayment charge or penalty. 2002, c. 30, Sched. A, s. 76 (1).

No PPP allowed so look at things and check your options.

Are both sides rented or do you occupy 1 and rent the other?

i went stated income.my credit score was around 660 right before the mortgage.if i call my mortgage co., will they lower the apr? i've never heard of that.i still have to pay a ppp,if it was stated in the contract,right? or is that not enforcable? i heard that a ppp can be written off on my taxes,because it is interest? i occupy one ,the other is rented.

i don't know where Greg Phillips found that law, but in CA, the prepayment penalty is very real and is enforced. i look at so many deals from so many loan officers all over the place, and when there is a prepayment penalty, the borrower has to pay it.

the only exception is if you did your loan through a portfolio lender and they will agree to waive your prepay and put another one in its place. however, even in this situation, when this happens, the margin usually cannot be lowered.

wouldn't hurt to call and ask.

For an 80/20 loan with your score that rate is not bad.

What's bad is you say you can hardly make the payment.

Usually the 80 percent is interest only and the 20 percent is principal and interest so you can have the lowest price possible.

In hindsight you probabaly should have bought outside the area to get more affordable housing.

If you switch to a conventional loan you will get hit with mortgage insurance which you are not paying now with the 80/20,you will have to have 20 percent down to not pay the mortgage insurance.

The first five years of a loan you are paying out alot of interest whether conventional or interest only,so i usually advise get an 80/20 for the lowest possible payment and get it fixed for 3 to 5 years,at that time when your credit is better you can refi or sell your home.

The bottom is coming in cali and when people can no longer refi to get cash to make payments on houses they can't afford you will see massive foreclosures,people walking away from there houses,and values deflating in the area due to people purchasing foreclosures over newer home developments that are priced higher.

I would like to say i am not a mortgage person but i am an re agent and investor and this is just my opinion on things.

imho i think you should have bought something more affordable in a different area.Yes fha loan is lower at 5.75 percent overall but when you get hit witht he mortgage insurance it comes out to be about the same or more if you don't have 20 percent down.

good luck

Yeah that was why I encouraged him to read the note. Deffinately must have been a misunderstanding of what I found.

sc2dave,

I'm not sure if you went Stated or Full Doc but normally with that score... you should've been able to avoid the PPP.

Also, if you are considering refinancing for a better rate/term... I know many lenders that will do it without seasoning. If you're looking to refinance for cashout... then you're basically looking at the typical 6 months seasoning.

Either case, if you're going to pay for PPP... it's best to weigh it out. Ask yourself "How long are you planning to stay in the house?" If you can break even before that length of time and possibly walk out with benefits then 'maybe' a refi makes sense.

hmmmm...litton huh? greg should know about them. better yet, go to ripoff report and do some research.....DO NOT CALL LITTON!!!!! i think i read you went stated...first problem.

some of you might know me from another forum(RIBBIT)..BOTTOM LINE IS A STATED LOAN IS A LIAR LOAN.PERIOD. been sayin it for years. if your loan defaults or dosent perform, you can but your broker is in for a call from there FRAUD dept. they might start looking to verify income. AGAIN A STATED LOAN DOSENT MEAN YOU LIE ON THE APPLICATION.....look at your original application, look at page 2...what income was stated??? was it close to what you make??? im thinkin not even close since you some VERY uncomfortable already. keep in mind, if you lie on an application...you have commited wire fraud, a broker from our competition was just taken away in cuffs(not the fuzzy kind for this same reason. now it was probably more dramtic then what you have here...but all in all. i suggest you call your mortgage broker, have a sit down..and see WHAT THEY WILL DO.

im just sayin

---------------------------------
James Keely
Director Of Operations
Florida Mutual Mortgage
http://www.zerodownflorida.com

a couple of more options.....wait a couple of more months, if you can go full doc...and do this loan throught FANNIE with LPMI(lender paid mortgage insurance) yes the rate will be higher than if you went with traditional MI...but, should still be alot lower.

i have done these with Washenaw and Irwin. Irwins conforming unit is up for sale, soooooo i would tend to look at Washenaw.

---------------------------------
James Keely
Director Of Operations
Florida Mutual Mortgage
http://www.zerodownflorida.com

I like that post about fuzzy handcuffs.

Yes Litton has a very bad servicing reputation. I frequently see loans sold to them in which people are treated unfairly.

Washtenaw? I heard something about them I have yet to confirm. A big lawsuit about inflating appraisals I beleive. I do not use them so I never looked it up.

Basically you have options. I would check the 1003 in your loan documents. Look at section V and see what the income was like James said.

i haven't been able to find someone to refi,because of the ppp,and because i bought the house at appraised value. is there someone out there that will?

sc2dave, It is possible to only redo the second as a Home equity line of credit(HELOC), and eat that pre-pay with that refi. If the equity in you home can cover it? A local bank such as Bank of America or where I am at in TN I use someone like 5th3rd bank to do Helocs for my cutomers. However your score will need some improvment, but if you take the current second which is I think
$155K @10.5% on 30 year term = 1417.85 pmt
VS
$155K @ 7.25% interst only= 936.45 pmt

I am not saying that going to the Interest Only is the best possible option, but it may allow you some breathing room while you wait for the 1st mortgage pre-pay to expire

if he did a HELOC, his credit score would get a whole lot worse a whole lot faster.

sc2dave, you should keep this in mind before taking TN's advice. are you willing to take the FICO hit?

I am not sure what else besides selling the property will bring him some monthly payment relief quickly.

personally i think he should cut his losses and sell. it's unfortunate that someone put him into the home in the first place, but at least it's not a whole lot worse.

there might be some solutions out there, but lowering his credit score would definately not help.

the problem with selling is that he has hard pre-payment penaltys on both mortgages. So the poor guy is going to have to pay around $20,000 to sell plus realtor fees and those types of items. He may be upside down and end up owing just to sell. On the bright side he is In SoCal and property values seem to go up about $100,000 a day. So hopefully he will have some form of equity. That being said SC2Dave you need to get some renters in there ASAP and maybe that will cure the problem.

as far as property appreciation goes in CA, if this were 2003, 2004, or even early 2005, then dave would be in a completely different situation.

i actually heard today that one of my client's clients bought a house in November and now he got it appraised again and the value has dropped $15,000 since then. times are changing. appreciation is slowing way down and homes aren't flying off the market anymore. the MLS is full of homes, and there aren't many takers.

as far as rentals go, the rent price in Southern CA has stayed the same over the last 4-5 years while in some places property value has doubled. you can hardly even come out good as far as an immediate cash flow situation by renting an SFR.

let's say he rented it. i would be willing to bet the ranch that there would still be some mortgage payment left over afterwards. so now he pays the remaining mortgage balance AND he pays rent somewhere so his family can live.

i only see him coming out in the negative.

people make mistakes. sometimes we lose money. i myself have lost a lot of money making mistakes and i've learned from those mistakes. there isn't always a clean "get out with no losses" answer in real estate, even though loan officers and real estate agents like to think so.

sometimes you take a loss. the key is not to repeat it. learn the lesson and move on.