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Mortgage advice....
skitten and I are planning on approaching our credit union to try to get a home equity line of credit to eliminate (almost) all of our existing consumer debt, leaving just student loans and one credit card she wants to pay off herself.

By my calculations, based on the current interest rates the CU is quoting and the amounts we are supposed to be paying (but aren't, necessarily), the amount we would save per month would be roughly the same as her current mortgage payment, and our non-housing/total debt loads would drop from 27/34 to 6/20 or so. Unfortunately, those calculations don't count her student loans, which are currently deferred because of her disability.

Our situation: I have 2 outstanding judgements (which would be satisfied by this refinance), I've been employed for a year after a period of 3 years of severe underemployment (which lead to the 2 judgements and other bad credit issues), skitten is disabled and is receiving SSDI, the house is in her name, and we aren't married.

How hard do you think it would be for the two of us to get the loan? What tips would you recommend for selling this to the bank?

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I'd talk to a loan officer or two. Many people do not understand that it is the loan officer's job to try to get people loans (from which banks make money via loan origination fees and such). They have pretty good knowledge of what loans are likely to be approved, and how to arrange the documents and information for best presentation. (It's amazing the stuff you can pick up when sitting on a jury in a mortgage loan case.)

I would be very surprised if the credit union would be willing to approve a loan for you, even a secured loan. Things are not good for borrowers these days, especially those with credit issues.
Have you called any of the debt-counseling services out there? Most of them can manage to get your interest rates on outstanding stuff reduced to a minimum, and will go to great lengths to help you out. That would be the first thing I would try.

I second this one. I've been in this position and it did work for me. it helps in two ways - 1) you make 1 payment to the credit counselors and no one else, 2) you get to tell the annoying callers - "I'm in credit counseling, don't call me, call so&so at xyz and leave me alone.

You be surprised as to how liberating that is.

The other problem is that you two aren't married. you have no legal obligation to each other from the bank's POV. The asset is Kaaren's, the Income is yours. unless you are married, you can't legally apply one to the other. The only way you could POSSIBLY do so would be for you to sign some sort of lease that Kaaren could show as rental income.

which could screw up other things like her disability.

go credit counselling first.

Thank you, I was just going to say that. His income need not be counted, and thus his credit. If his credit was stonger then it could help but not in this case.


see my more in depth analysis below.


after some more thought.

1) you should go to credit counseling. you do not have the credit to apply for any loan for at least another year, possibly as much as 5 or 6. Credit counseling will speed that break up but forcing you to make regular payments. Creditors love regular payments. it also shows that you are cognizant of your issues and are taking responsibility for them. We used Genus credit counseling, however I don't know what their name is now. Make sure whoever you use deducts their payment electronically the day after your paycheck is deposited. that way you don't see it so you don't spend it. I say the day after because holidays & other issues can fake out direct deposits and if your paycheck doesn't hit, you can call the counselors and push back the debit 24 hours.

Yes, I've done this.

2) Kaaren should see if she can get some sort of streamline re-fi to either lower her mortgage rate and pull a small amount of cash to do renovations. Do NOT go FOR "extra credit" on top of what you already have.

This should be done separately because any attempt to include YOUR income on HER applications could screw over 1) her SSDI, 2) her medical insurance and any other benefits derived from disability.

NOW - if you happen to have "extra" funds available, you can either opt to have the credit counseling folks pull an extra payment OR pay extra money against the principal of the mortgage.

and for the record - a home equity line is NOT a re-fi. It is a SECOND mortgage.

also, do NOT let anyone talk her in to an interest only mortgage OR an adjustable rate of any kind. Both types of mortgage may seem attractive because of "low payments" NOW but they are just borrowing trouble. Fixed rate. ONLY.

1) My debts can be divided into 3 categories: student loans, consumer debt, and Bank of Kinne, the last of which doesn't show up on a credit report. My total student debt is about 7 months pay. My total consumer debt is about 3 months pay. My Bank of Kinne debt is about 2 months pay. In other words, my entire debt is less than 1 years pay. My consumer debt is pretty much with one creditor, and since they started garnishing my wages, I have been paying them regularly and on time. The bulk of my consumer debt is an auto loan I got when I was young(er) and stupid(er).

2) Kaaren's debt, on the other hand, is much worse. Her student debt is about thrice mine, her consumer debt is about my consumer debt and my Bank of Kinne debt combined, plus she has her mortgage. Her income is about 22% of mine.

The goals of this project are (a) to deal with some immediate, time-sensitive housing issues regarding back property taxes, (b) to lower the total monthly amount we are paying in debt repayment, (c) to lower the interest rates we are paying on debt, and (d) to shift the burden and legal responsibility of paying the debt from her to me.

Over all, my income is better, my debt load is better, and as such I'm a much more attractive credit customer than she is.

When getting interest rate quotes, I was looking at 15-year fixed rate HELOC interest rates, and using an amortization calculator to compute monthly payments. I'm not stupid enough to go for an "interest only mortgage" (isn't that called a "loan shark"?). If we have to do it as a re-fi, the figures look even better since the mortgage rates are about 0.2% lower than HELOC and the delta between our current payments and the new payment would be less. However, the existing mortgage is about 2% lower.

I'm going to send an email, with actual numbers, to the mortgage officer at the CU and get his/her opinion.

and unless she's selling the house to you, the CU will laugh, point & mock. Politely, I admit but still I'm 90% sure the answer will be "No."

you cannot combine your income legally with her debt unless you are legally responsible for her debts.

You are only responsible for her debts if she is your dependent. Therefore you can either marry her or adopt her. EITHER will cause more hassle than it's worth.

and if Kaaren's debt is that bad, SHE should go talk to credit counselors. They will have the clout (especially with the disability as leverage) to hold off the creditors and make payment arrangements.

There is a thing about permanent disability and student loans but I dont remeber what it is.

home equity line is NOT a re-fi. It is a SECOND mortgage.

Sorta A HELOC is more like a credit card ( revolving credit ) where the rates are lower because the house is the coll...

Yeah what she said.

As far as ARM or interest only's I TOTALLY SCREAMING AGREE, I can say that if I took that route and it was tempting, really really temping to play some games. I WOULD BE having a problem IN 4 MONTHS from now. ME MAKING NYC RN MONEY being in deep trouble.

I have many people I know that say flat out I have X years left before I need to move out of this [condo|house] because they have a 7 or 10 year I/O ARM and there is no way short of winning the lottery that they are going to be able to afford it after the rate reset.

But item 1 is right lets see what they say, it may be in your best interests to keep the mortgage you have since once you have the note they are stuck with you.

>Yeah what she said.


*high-fives page_of_swords*

Do you know your credit scores? I note that you are calculating savings based on he bank's published prime rates. If your credit score is less than stellar, the bank wouldn't give you those rates even if they did approve the loan. They'd crank up the rate based on your credit score. If they gave you a rate similar to the debt you are trying to refinance, you're net savings would trend to zero. Make sense?

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