Blown Mortgage

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Most of the emails I have been receiving lately have been from folks who have an adjustable rate mortgage that is going to adjust on them within the next few months.  The comments come from people with both subprime and prime loans; and the concern is the same: “I can afford the payments now; I won’t be able to when they change.”

I’ve put together this list of 5 things to do right now if you are in an adjustable rate mortgage so that you can better manage what needs to happen before your rate changes.  I recommend starting this process at least 75 days from your adjustment date; however, if you have credit issues I recommend starting right away - regardless of your reset date.

 1.  Determine your rate adjustment date. Find your loan documents, determine what type of adjustable rate mortgage you have and when it is set to adjust.  If you don’t know how to read your loan documents watch this video on understanding adjustable rate mortgage loan disclosures.  If you can’t locate your mortgage documents you can contact your mortgage company through their customer service number.

2. Determine what your new interest rate and monthly mortgage payment will be.  Here is a post on how to calculate your new mortgage payment after your ARM resets.  You can find the index values here; and the 6-month LIBOR is currently at 5.1325%.  If you need help with this calculation please drop me an email.

3. Determine your credit score.  You can do this by running a credit report at myFICO.com which will give you your scores.  Please note that Blown Mortgage is a myFICO.com affiliate and I will get a small commission if you choose this service through this site.  I have been using myFICO.com for years and have been recommending it well before I received any compensation for doing so.  Please read this entire series on why credit is so important to your ability to get out of your adjustable rate mortgage.

4. Determine your home value.  You can do this in a variety of ways.  The easiest (and least accurate) way is to look up your home on zillow.com.  Another way to do it is to ask any of your friends in real estate to run a property profile search through their title company.  This will get you good information.  If you know any Realtors you can contact them and ask them if they would be willing to provide a broker price comparison for your house.  This is probably the best information.

5.  Pull together your income, asset and credit information.  You’ll want to consider refinancing options if your rate is going to adjust and the best way to begin that process is to have everything together before you start talking to people.  You’ll want to get your documentation together first and I’ll go in to that in a future post.  In addition read this post here on the refinance process as a primer.

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