need advice on re-finance

farminmomNovember 26, 2008

We purchased our home 9/2006, with the intention of breeding racing stock thoroughbreds. We have 5 acres with a barn and two paddocks. This was our first time buying a house, and unfortunately we were ignorant/naive and subsequently wound up with mortgage we will not be able to keep up with.

I started working two jobs and my husband increased his hours at his present employer, in an effort to meet our mortgage obligation. We have not missed or been late on any payments - but consequently - our income looks high and we don't qualify for most loan programs.

We own 3 thoroughbred broodmares, two of which will produce commercial foals, and generate a substantial income. Is there a program out there for a small business, perhaps, that does not have a max on income?

Our original mortgage is a 1st at 6.5 and a 2nd at 9.5 and payments over $3K each month. We need our monthly payment reduced substantially, if we are to be successful. We barely make our payment now, and can't afford to breed our mares.

Additional info. if needed:

Purchase price of our farm = 374K

Current balance = 360K (we have paid 45K in interest over this 2 year period)

Credit score = 366

We carry a large amount of credit card debt, at 15% - 19% which cont. to increase secondary to the financial constraints of our mortgage.

I met with a banker in an effort to re-finance. He is offering a 30 yr conventional fixed at 5.875 with .5 percent origination fee, PMI 323/mos, resulting in new loan amount = 370K and minimal change in our current mortgage payment.

I would appreciate any insight/advice you can offer.

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Hi Farminmom,

There are USDA and Farm/Rural loan programs designed specifically for you. You need to find and work with a broker (who has many resources, not just a single banker with only their inhouse programs) who understands and is aware of these niche programs.

Rates just "dropped off the edge of the table" yesterday with the Fed's announcement that they are going to directly buy (and thus guarantee the strength) of mortgage-backed bonds... which, in plain English, means that the financial markets are currently feeling much better about dropping interest rates.

It looks like plain vanilla 30 FRMs are dropping into the 4%'s today. (NOT guaranteeing that is what YOU would qualify for... but it DOES mean the environmnet is in your favor.)

If there's more I can tell you, just ask.

Dave Donhoff
Leverage Planner

    Bookmark   November 26, 2008 at 2:13PM
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Many banks here, especially local in state ones deal with farmers all the time and are trained to handle loans that others are not familar with.
Can you cut back on the credit cards? Are you dealing with people who understand your situation? 3 horses are not much because they may or may not produce prize winning colts/babies. Have you talked to others who have horses? Associations?\
Sounds like you are over your head and may have to really cut back for awhile.

    Bookmark   November 26, 2008 at 5:28PM
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My income excludes me from the usda and rural loan programs. I may however, qualify for the usda business loan. Dave, how do I choose a broker that will look out for my best interest?
Mariend, you make a good point. I am definitely paying down my cc debt, it is taking a long time, secondary to the finance charges. Two of my mares will produce "commercial" foals - meaning - they will sell as weanlings at the Keeneland auction, or I will race them myself.

    Bookmark   November 29, 2008 at 11:16AM
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Credit score = 366

Seriously? You don't have the numbers mixed up? It's not 663, or 633?

    Bookmark   November 29, 2008 at 11:33AM
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Oops! Should read 663. Thanks for catching that. My credit score is low, secondary to my large cc debt. No bad credit history.

    Bookmark   November 29, 2008 at 12:47PM
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Good, that's much better. I can't imagine anyone giving you a loan with a 366 score!

    Bookmark   November 29, 2008 at 10:12PM
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