SUB-PRIME BORROWERS - There May Be a Way Out!
RE-FI MAY BE AN OPTION IF YOU DON'T SELL!
In Chicago, and across Illinois, when sub-prime lenders shut their doors, many borrowers with these loans are often left holding the bag. One way out, other than selling your property, may be to re-finance out of that loan. Last year, statewide, between 25 and 30 percent of sub-prime borrowers paid off their mortgage loan (data from First American CoreLogic of San Francisco CA). This compares to the 14% of non-sub-prime borrowers who refinanced their homes, or sold outright, last year.
David Berson, Chief Economist with The PMI Group, Inc., of Walnut Creek CA, and formerly with U.S. Government Mortgage Backer Fannie Mae, says that most borrowers with good credit and little delinquency can re-fi out of their current sub-prime mortgage. Indeed, underwriting standards for loans have been strengthened. But those with some home equity and improved credit since loan inception can usually take advantage of a refinance.
Many too-highly-leveraged homeowners, however, might find difficulty refinancing, as their loan amount may exceed current home value. This could be especially true of those who purchased their home within the last couple of years, with little or no money down mortgages.
Some borrowers who can't qualify for a new conventional mortgage may qualify for an FHA loan, federally-insured. Currently, the limit on new FHA loans in the Chicago metro area is $275,000, but pending legislation proposed in Congress may raise this limit.
Read more in today's Chicago Tribune, in an article by Marilyn Kennedy Melia.
DEAN MOSS & DEAN'S TEAM CHICAGO
