Need advice re; Freddie Mac guidelines

carmen_grower_2007June 2, 2009

I want to refinance my $55,000 mortgage and am having a problem. Our credit scores are 803 and 745 and are currently paying 7.625% fixed. I would love to get a lower interest rate (no cash back) but it seems that Freddie Mac guidelines do not allow a mortgage on a house that is sitting on more than 5 acres. What is that all about???

Since the loan would have to stay in-house, I can't find a lender that gives me a rate under 6.5% which seems high at today's climate. Also, they all seem to charge points and fees at $2000-$4000 which seems excessive. Any ideas?

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dave_donhoff

Hi Carmen,

Since the loan would have to stay in-house, I can't find a lender that gives me a rate under 6.5% which seems high at today's climate.

Its ALL relative, right? "Seems high" compared to who else offering on an over-5 acre piece?

Gotta keep it "apples to apples" in expectations.

Also, they all seem to charge points and fees at $2000-$4000 which seems excessive. Any ideas?

"Seems excessive" compared to who else offering a $55k loan on an over-5 acre piece?

Don't mean to be a broken record...

The loan size is so small that there is no possiblity of getting the minimum service costs paid from a premium interest rate... and without the ability to sell the loan to teh secondary markets, a sub-7% rate is about as good as anyone is offering (that I am seeing.)

ONE ALTERNATIVE could be to look at a USDA Rural Development specializing broker. Won't get your fees any lower, but you may get into the mid-to-lower 5%s.

Luck!
Dave Donhoff
Leverage Planner

    Bookmark   June 2, 2009 at 9:17PM
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pamghatten

Hi Carmen,

I think you need to keep looking at Lender's. Are you shopping brokers or actual lenders? I looked at some rates just now and I see approx. 5.5% for that loan amount. There are other adjustments to pricing for other variables, but 6.5 seems high to me also.

And Freddie does lend on properties with more than 5 acres ... that's an old myth ... the appraiser would need to compare your property with acreage to other properties with similar acreage to establish the value.

Believe me, I know since I have 20 acres.

And unfortunately, $2000 to $4000 for fees and closing costs doesn't seem that excessive to me either. That's the cost of getting a mortgage.

Keep shopping.

    Bookmark   June 4, 2009 at 1:08PM
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bushleague

The problem is all of the 'carrot' rates offered on bankrate and zillow mortgage only fit a small percentage of people, then once hooked they reel you in "you fit over here" one lender told me. Reminds me of a scene from "The Jerk" with Steve Martin, "everything to the left of the Chiklets, everything in these three inches". First of all $55,000 doesn't qualify for a conventional mortgage, believe it or not, the amount is too small, conventionals start at $165,000, that's one. Lenders use the lower score which is 745, that's two. I would put your numbers in Zillow mortgage and see if someone picks it up, plenty of hungry brokers out there.

    Bookmark   June 5, 2009 at 9:29PM
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pamghatten

Sorry bushleague, but conventional mortgages are anywhere from $10,000 up to $417,000 ... anything above $417,000 is usually considered a jumbo mortgage.

Where did you get the $165,000 number? Some of us live in areas where the average house price is less than $165,000 ... we would have lots of problems getting any mortgage if the conventional limit was that high.

    Bookmark   June 8, 2009 at 12:53PM
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carmen_grower_2007

Agreed that it is very possible to get a mortgage for under $100,000. Still, I have not found a lender who agrees with 'pamghatten' that Freddie Mac guidelines allow for a single family mortgage on more than 5 acres.

Also, I have found that since the house is in my name only, my husband's credit score isn't taken into consideration. BTW, the value of the house is about $200,000 so there is plenty of equity. I still think $3,000 in fees is steep for a $55,000 mortgage.

    Bookmark   June 8, 2009 at 3:30PM
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lynn420

How about a real estate equity loan? Pay off the first mortgage since you have so much equity. We did this a few years ago, we got a 5% rate that a Credit Union was offering. Check with your local CU if possible, they haven't been hit as hard by this banking mess. Very easy process and hardly any fees if any. I haven't been paying attention to RE rates, so not sure what you could get.

    Bookmark   June 11, 2009 at 9:13AM
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pamghatten

Carmen, then the lenders you are dealing with are puttung their own restrictions on the amount of acreage they allow. This is from Freddie's guidelines:

Excess acreage

The appraiser must appraise the entire site for residential use, regardless of the amount of acreage. The site description must accurately describe the entire site and any improvements to include any outbuildings. The comparable sales should have similar acreage. When differences in acreage exist between the subject property and the comparable sales, any adjustments or lack of adjustments made to the comparable sales for significant differences must be explained in the comments area or on an attached addendum, and the appraiser must explain the effect these differences have on the subject property's value or marketability.

And that is correct, if your husband is not on the loan, his credit doesn't count.

How many acres do you have?

    Bookmark   June 11, 2009 at 12:50PM
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carmen_grower_2007

We have 58 acres. For the purpose of R.E. taxes, the house is considered sitting on one acre and the rest is taxed as farm land.

    Bookmark   June 11, 2009 at 1:52PM
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itsgoodtobeme

Do you have 2 parcel numbers? If you do your house is sitting on one acre and the other acreage would be irrelevant.

As far as closing costs are concerned, there are some costs that don't vary based on loan amount, the appraisal fee for example. So $3000 doesn't seem too high to me either.

    Bookmark   June 11, 2009 at 3:57PM
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