What to Do When You Can’t Refinance Your San Diego Home

by | Sep 12, 2016

Being in this business, I get a wide variety of real estate questions coming in from stressed homeowners on a daily basis.  Lately, there’ve been a lot of calls from people wanting to know about refinancing.  Gina was one of them.

She told me she could no longer afford the mortgage on the San Diego home she bought in 2009 because she recently lost her job.  She tried to refinance, but got denied because she works two minimum wage part-time jobs—and the last thing she wanted was to go into foreclosure.

Fortunately, she had options with us, so I told her not to panic.  

No, we aren’t a bank, but there have been plenty of times we’ve helped out homeowners in situations like this.

Let’s Talk About Refinancing

People refinance their homes for a number of reasons. Sometimes it’s to get cash to pay off other debts, lower their monthly payment, or to take advantage of lower interest rates.  Whatever the reason, refinancing is an option for homeowners who want to replace their old loan with a new loan. But it can be hard to do.

The rules have somewhat tightened over the past few years regarding FHA loans. According to their own website, there are a few new policies in place that borrowers must satisfy in order to be considered for home refinance.

  • Borrowers are required to make at least 6 payments on the mortgage being refinanced.
  • At least 210 days must have passed from the closing date of the mortgage being refinanced.
  • Borrowers must be current on the mortgage being refinanced for the month due prior to the month in which they close the refinancing.

So you won’t be able to apply for refinancing if you’ve only made 5 mortgage payments, closed on your home within the last 7 months, or you’re behind on mortgage payments. Even providing that you meet those criteria, though, there are other hoops to jump through.

A Few More Reasons You Might Get Denied

Since this can be a complicated situation, we might as well talk about a few other reasons you might be denied a home refinance loan.  

  • Lack of equity:  

    If you have an interest-only loan (or option-arm) you may not have paid enough towards your principal.

  • Bad credit score:  

    Credit scores are important.  If you have a credit score below 620, there’s a good chance you won’t get approved for your refinance.

  • Not enough income:

     If you don’t make as much money now as you did when you got your first mortgage, the lender may see this as a deal-breaker.

  • Poor job history:  

    It’s almost impossible to get any kind of loan without proof of steady employment.  Typically they want to see at least 2 years in a row at the same place.

  • Insufficient assets:

    An underwriter will want to see that you have enough of an asset reserve to make your monthly mortgage payment.

  • You already tried to sell the home:  

    This might sound strange, but some lenders may see your attempt at trying to sell your home as a red flag. The lender could worry that you will sell the house soon and prepay your new loan.  There might also be a problem getting the house to appraise if it wasn’t selling at the price you were asking.

Refinance Denied? Sell Your House Fast with a Subject-To-Purchase Structure

Here’s something you may not have heard about: the subject-to-purchase deal.  We offer this to homeowners who are trying to avoid going into foreclosure or going through a short sale.  This is the deal we ultimately made with Gina, and she couldn’t have been happier.

Let me explain how it works because it might be the perfect option for you, too.

  • First, you share with us a copy of your most recent mortgage statement that shows your outstanding balance and any late payments owed.
  • We make an offer with the intent to assume that loan—in other words, to buy the home with the loan in place, with us taking over any back payments and future monthly payments.
  • If the offer works for you, you accept and we sign the contract.
  • At closing through escrow, we pay all back payments current and keep the existing loan in place.
  • The title is transferred into our name—we pay the future payments.
  • You sell the house and avoid the dangers of foreclosure.

This is a common way for homeowners who are behind on their mortgage to still maintain a good credit standing.  Plus, we routinely pay a little bit more in these situations, so you get to walk away from the house with some extra money in your pocket.  You could try to do a subject-to-purchase deal with other companies, but keep this in mind: if they don’t make the payments on time, it can really put you in a bind. It is very important to only work with a company that you can trust and that has a reputation in the community on the line—that is how you can feel good knowing they will honor their word.

So Let Sell Your House Direct Help You Out

At Sell Your House Direct, we pride ourselves on making this the easiest real estate transaction you will ever take on, which is why we’re one of the most trusted names in Southern California.  And if you’re unable to get refinancing, consider one of our subject-to-purchase deals so you can get out of your current situation and move on to a new chapter in your life.  Make sure you call us today and we can figure out how we can help!

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