Orange County Register

Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…

Ed in Yorba Linda asks:
Q. We have a 740 FICO credit score, more than ample reserves, no consumer debt, very good income-to-debt ratio, can qualify with full documentation and yet we own too many homes (more than 10) to qualify for a loan. We are not interested in hard money loans of short duration. We are long-term, buy-and-hold real estate investors. We can put a 30% down payment on the right property. Any ideas of where we can go for a non-owner-occupied loan?

A. The rule applies to Fannie Mae and Freddie Mac loans, but the entire rest of the mortgage world keys on what they do so it is not likely that you can find another lender who will swim upstream. Not only that, some lenders are still working off the four-property limit that was established early this year and later rescinded. My point is that you have to ask. Jumbo lenders don’t have that restriction, but it’s even worse. The ones I know about are only doing principal residence loans.

You might think about this strategy. The rule applies only to properties with loans on them. If you have 12 rental properties but only eight have loans on them, you can buy two more. If you have enough equity in one property, you can refinance the loan on it and have enough cash to pay off a loan on another property. That leaves you with an opportunity to buy one more. Once I did a big loan on a client’s home and we paid off loans on a half-dozen rental properties.

Mike in Mission Viejo asks:
Q. We bought a home in June 2008 for $400,000 in Mission Viejo. We put $80,000 down; the mortgage being $320,000 at 6% for 30 years, with monthly payments of $1,917. The balance is now $316,070. Although the lender, Wells Fargo, says in a form letter that we can reduce our payment by $142, when I spoke to their rep last month, he indicated that the costs involved wouldn’t make it practical to refinance at this time. My question is: Can we refinance at a lower rate that would reduce our monthly payment without having to pay up-front costs that negate the savings?

A. The answer is a qualified, “Yes.” It depends first on the value of your home. There has obviously been a further decline in the market since you purchased. That would mean you would have to pay mortgage insurance (PMI) because you would be over 80% loan-to-value. That would make it unattractive to refinance.

However both Fannie Mae and Freddie Mac have special programs that allow you to refinance with over 80% LTV without paying PMI. To see if Fannie Mae owns your loan, go HERE to and the Freddie Mac Web site is HERE.

Assuming you loan is owned by one of them, you can reduce the interest rate by over 1%. (Editor’s Note: Rates may have changed since Johnson answered this question.) That is an attractive opportunity because you would earn back your upfront costs in less than two years. That’s a great deal. Don’t rush in and take a no-point deal. It’s much more attractive to pay a point and buy down the rate even further.

That’s it. If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question. Johnson will answer up to three questions each week, so keep checking back for a response.

Read prior questions and answers by clicking on the headlines below…

• Readers debate paying off their mortgages
• Buy now, refinance later at your own risk
• Bank sends bill after foreclosure
• Forget downturn. Homeowner with equity wants to ‘cash out’
• Have your lender fund retirement
• Reader considers defaulting to get lender’s attention
• Reader discovers appraisal irregularity
• Time to ditch California for cheaper living?
• Reader debates paying mortgage after down payment evaporates
• Will ‘walking away’ from an investment property hurt you?
• Can a lender demand a second appraisal?
• Income windfall … save it or pay off mortgage?
• Can you get a mortgage with social-welfare income?
• Is it harder to get loan aid from some lenders?
• Think twice before using one mortgage to pay another
• Buying an investment property? Some loan tips…
• Is paying off a mortgage the best option?
• Loan help, or loan shark?
• Answers for first-time home buyers
• Time to double-down on housing?
• Refinance to survive a cash-flow crunch
• Rainy day fund vs. lower mortgage payment
• Is ‘walking away’ from a home justified?
• Real estate investors get no sympathy
• The case for buying a home now
• Bigger home loans coming to O.C.
• A complicated mortgage that could fund retirement
• Loan doors open for serial housing investors
• Forget dodging refinance fees
• No job, no refinancing
• Avoiding a rate hit on an investment property

Find out more about: MORTGAGE ANSWERS | MORTGAGE RATES | FORECLOSURES | HOME PRICES | INVENTORY | RENTS | FED |

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