Hi,
I joined the blog after the initial part of this discussion. We have a ARM that matures in May. Can ya explain what my options are for reducing debt? I.e.: refinance with fixed rate (will do if I have to, hate the appraisal process- ill and house needs cleaning and fixing up, would have to hire someone- will do it if necess- but wondered what my other options are). What steps would I need to Take? Thanks for any help.

mortgage loanFYI, when you refinance, the cleanliness of a house is not an issue in the appraisal.. They are taking the location value, structural value into account. They are assuming that you will clean if you sell. So don’t worry about the appraisal.

If you are planning to stay in your home, I would Re-fi to a fixed rate mortgage. I would contact your current lender about your intentions and see if they have a reasonable low fee re-fi option. You may want to check how often your loan will adjust. With the lowering of interest rates by the Fed, it may not be a huge hardship when it does adjust. Is there a reason you went with an adjustable rate to begin with? Are you in a home you can’t afford? If that is the case, you may need to do those repairs needed and get out of the house.

As for the appraisal process, unless you have a huge hole in your roof, sagging gutters or a green swimming pool, I would not be too concerned about the appraisal. If your home is generally in the same condition it was when you purchased, it should appraise out fine. Appraisals are based on comparable home sales in your area, size of your home and upgrades lastly into the equation. I would clean up and fix up for your own satisfaction and piece of mind, not because you are having your house appraised. A lot of times on re-fis, lenders may only do a “drive by” appraisal and may not even come inside your home.

Your house should be suitably clean. Otherwise the appraiser might think you’ve ignored the needed repairs of your house that aren’t visible. As long as it doesn’t look like you’re the proud owner of a garbage dump, you should do just fine. Because housing prices are going way down, there is a possibility of your house appraising for less than you owe. I’m not sure of your situation, but if this is the case, you won’t be able to refinance, without putting up the difference. You can always call your bank and tell them your situation and maybe they will work with you. I have heard of some bank programs helping get people into more traditional loans in cases like these. So I would suggest just calling or meeting someone at your bank.

Also, I am a licensed Realtor and even though I don’t do appraisals, I am familiar with the process. They do not give your house a value based on any repairs that you need to make. Now if your house is falling apart and it’s very noticable, it may have an ill effect on the way they appraise it. But it is usually based on location, square footage, year built and size of lot.

I missed the original question here, but I am a RE Appraiser. And will offer any information I can. Right now the way most mortgage companies I am working with require appraisers to list any necessary repairs at the time of the inspection. Most maintenance items, minor items do not count. If there is damage (rotten wood, peeling paint, missing flooring, etc) these items are supposed to be listed with a cost to cure. From what I have seen, if the cost to cure is under 5% of the total value of the home, no adjustments are made and the mortgage company does not ‘require’ these things to be done – I’m sure each bank/lender has their own method.

The market I am working in is good, still increasing for the most part, but I work with some national companies and know the market is not the same else where. Yes appraisals are based on location/lot, price per square foot, age, amenities, etc. Also most mortgage companies require the comparables to be closed sales with the past 6 months (12 max) and under one mile in proximity (and that changes based on how populated the area is).

I would refinance to a fixed rate if you can. An arm that matures can double or go even higher in most cases. Its either that or have your payment skyrocket up…Can you afford a payment double the amount of what your paying now? Pretty much the only option you have is get a fixed loan or pay off the loan in cash.

which I doubt you can do. My suggestion if you pick a fixed rate and you can afford it is get a 15 year fixed if you can.. Good luck!! MIke

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