Too "much" equity, unable to refinance

[David Hernandez]

Hello,

I started renting my house last year (as I moved back with my family) and I'm ready to purchase a second house. I saw a good deal, but the price is just a little bit too high for me to qualify (debt-to-income ratio).

Debts:     1) Car payment ($400)
              2) Mortgage ($807)

Income:   1) W-2 job (60k/yr)
              2) Rental ($1100)

I figured I could refinance my home to get a lower mortgage payment while lowering my interest rate (current rate=5%). The home is worth 200k and I only owe 35k, but banks tell me that is too low of an amount and I don't qualify for refinancing.

Can I pull out enough money from my equity on the mortgage and then refinance the whole debt? That would lower my payments and allow me to give a bigger down payment. I know that refinancing is a new mortgage under new terms, and that the lender pays the first mortgage off before giving me the new one. I'm confused as to where the money from my equity comes from. Is it a different loan than my mortgage? If it is can it be combined with my mortgage since I'd be borrowing from the same lender?

[Account Closed]

Originally posted by @David Hernandez:

Hello,

I started renting my house last year (as I moved back with my family) and I'm ready to purchase a second house. I saw a good deal, but the price is just a little bit too high for me to qualify (debt-to-income ratio).

Debts:     1) Car payment ($400)
              2) Mortgage ($807)

Income:   1) W-2 job (60k/yr)
              2) Rental ($1100)

I figured I could refinance my home to get a lower mortgage payment while lowering my interest rate (current rate=5%). The home is worth 200k and I only owe 35k, but banks tell me that is too low of an amount and I don't qualify for refinancing.

Can I pull out enough money from my equity on the mortgage and then refinance the whole debt? That would lower my payments and allow me to give a bigger down payment. I know that refinancing is a new mortgage under new terms, and that the lender pays the first mortgage off before giving me the new one. I'm confused as to where the money from my equity comes from. Is it a different loan than my mortgage? If it is can it be combined with my mortgage since I'd be borrowing from the same lender?

Refis with cash out are hard to find at the moment.  Normally, banks are looking for a Minimum amount of $50k to $75k for a loan. Their cost of doing the loan is such that anything less loses money. (They have people, processes, overhead) that costs them money. The fact that you are starting a new loan with the same lender generally is immaterial.They don't care. You may be a nice guy, but if you aren't making them money, you aren't THAT nice of a guy in their eyes. It's only business. The sooner you look at it the way the bank looks at it, the sooner you will understand and the sooner you will realize that you have to be strategic in your investing.

Oh, and I'd dump the car payment until you can pay cash. You are spending half of a monthly payment (of a house that appreciates) on a depreciating asset (a car), that's a bad move. Buy a car with cash ( a ford taurus) until you can buy the car you really want (a ferrari ), with cash. What do you care what the guys in the neighborhood think when you are on your way to becoming a millionaire and they are stuck with their sucking $12 an hour jobs?