Q: I got a kiddie condo loan with my son almost 10 years ago. He has moved out and my daughter now lives in the home while she attends law school. The home is underwater. I would love to refinance it but don't know if I can. My son no longer lives there and my daughter's credit won't qualify. My husband and I have excellent credit and have always made all the payments on this home.
A: If the home is underwater, there is really only one possible refinance avenue to explore: the Home Affordable Refinance Program (HARP).
However, the key item is that the loan must be owned or backed by Fannie Mae or Freddie Mac and originated prior to June 1, 2009. Without these, your loan cannot be considered for the program.
Looking up your loan
To start with, see if you can look up your loan with either Fannie Mae or Freddie Mac. If it is there, you'll want to proceed by getting in touch with your servicer (the number or website should be on the mortgage statement or bill). Second homes and investment properties are eligible for the program, so your kiddie condo should be, regardless of current occupancy.
Your daughter's credit does come into play, but she could be eligible for a refinance even if her score is as low as FICO 620. However, a weak credit score will drive up the cost of the loan--whether via a higher rate or fees or both--and may diminish the value of the refinance.
If the loan is eligible, you'll want to talk to your servicer about terms and fees. If your servicer does not participate in HARP, you are free to go shop the open market for a deal.
A 25-year expert observer of the mortgage and consumer debt markets, Keith Gumbinger has been cited in thousands of articles covering a wide range of consumer finance and economic topics in outlets ranging from the Wall Street Journal to the Bottom Line newsletters. He has been a featured guest on national broadcasts for CNN, CNBC, ABC, CBS and NBC television networks and has been heard on NPR and other national and local radio programs. Keith is the primary researcher and writer for HSH.com's MarketTrends newsletter and has authored or co-authored a number of consumer guides on mortgages, home equity, refinancing and more.