On my trip to Boston a couple of weeks ago, I met up with a couple of my best friends from college. One is probably more into personal finance than me - but he's just not the blogging type. He can dazzle with Excel and Quicken and probably could tell you exactly how much money he has to the penny with a single click. The other friend is a lawyer specializing in real estate. When I closed on my condo purchase, he was the guy I went to and it was smooth sailing.
Somehow, we got onto topics of the economy. We gabbed about the sub-prime crisis. They thought that the mortgage holders were to blame because it's their responsibility to know what they can afford and not get sucked in a mortgage lender/salesman. I took a different view and thought it was the mortgage lender, because they are expert trying to explain a topic that most people are unfamiliar with (mortgages) and pushing them into more complex vehicles with escalating interest rates. The answer is that it's probably a combination of the the two. It's almost like a homerun in baseball, sometimes the hitter does a tremendous job of hitting a good pitch and sometimes the pitcher does a lousy job of pitching the ball making the hitter's job easy... and there's a lot of homeruns that fall in between those extremes.
We also got on the topic of mortgage rates. They are historically extremely low right now. I lamented that I couldn't take advantage of the low rates. I had lost a lot of the equity on my home and if I tried to refinance I wouldn't have the 20% down that mortgage lenders like to see - especially in this market. I am also self-employed (with a less than impressive income) which probably doesn't make them light up with joy. Lastly, since I moved to California and now rent the Boston condo, it's not owner-occupied - yet another thing that banks would like to see. That's three pretty decent strikes against me if I'm looking to lower my rate from 5.875% to some of the 4.875% rates available today.
My lawyer/real estate guru friend told me the solution was simple. He asked me if I came up as self-employed or unemployed on credit reports (I admit that I don't know this). He said that if I showed up as unemployed, it would be very easy to get a lower rate. I could simply call up the lender and tell them that the ecomony is bad and ask if they could lower the rate - no refinance or paperwork necessary. The theory is that lenders would rather give you a lower rate than risk not getting paid and having to deal yet another foreclosure.
What do you think? I think it sounds plausible and my source is rock solid. Still something sounds almost a little too good be true. Is this possible? Has anyone out there been in a similar situation and tried it?
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