Debt Consolidation Refinance Getting (Even More) Difficult

A lot of people used to use their homes as ATM machines, cashing out every so often to consolidate the debt that they used to finance their lifestyles – which demanded more money than their incomes provided.

Those days, thankfully, are over. Yet, I am meeting a lot of people around Atlanta who, for whatever reason, have credit card and other debt that is holding them back from getting ahead. They want to move forward and start saving, but the minimum payments due are not allowing them. So, they look to consolidate that consumer debt into a new, low interest mortgage to help the household cash-flow.

Deadline: March 31

Conforming loans have been more and more difficult to do high Loan-to-Value debt consolidation loans. First, because the days of adding a Home Equity Line of Credit (HELOC) were over. Then, because Fannie Mae and Freddie Mac cut back debt consolidation mortgage loans to 85% of the appraised value of the property. Then, because Mortgage Insurance Companies (read: PMI) refused to insure those loans in markets they considered “declining markets”.

So, for the average homeowner around Atlanta, the only option for a debt consolidation refinance was and FHA Mortgage Loan. FHA would go to 95% of the appraised value of the home in a cash-out refinance. But even FHA got tougher. If you were to exceed 85% of your property’s value, then you would now need two appraisals.

And now, things are getting even more difficult. For mortgage applications taken on or after April 1, 2009, the max cash-out refinance for even FHA mortgages will be limited to 85% of the home’s value – and then only if you have owned the home for 12+ months.

So, if you have been considering a cash-out refinance, and you will need a high loan-to-value, act this week to make sure that we can do it for you. Call me if you have been considering an FHA debt consolidation refinance, and your home is in Georgia.