Property Value And Type
Determing to Refinance
Where to Start!

The property value and its type when refinancing with bad credit play a major role is the success of fulfilling your main objective, obtaining that mortgage. Unlink a purchase transaction, there is no sales contract that provides the market indication of what the property value is, so a residential appraisal report must be done. A refinance transaction is similar to a purchase transaction, the main difference is no title changes hands. The most critical aspect to refinancing, that a bad credit mortgage lender looks at, is to correctly calculate the difference in payments and terms ; weighed against the costs of the transaction, measured against the time in the home.

Another consideration that bad credit mortgage lenders look at when deterring property value and when you try to refinance, is something called seasoning, how long the home has been owned. A property owner who purchased at a price below market value might attempt to refinance immediately after the purchase in order to leverage it. Mortgage lenders will not usually accept this refinance transaction unless ownership has been seasoned for at least 1or more years. Seasoning also is taken into consideration in "No Cash Out" transactions, where a borrower is refinancing the property value with a first or second mortgage, any extensions of credit in the last twelve months is considered "Cash Out".

Property Types

Property takes numerous types and forms, each market has its own unique structure of real estate property types which can provide a pivotal turning point when refinancing, is weighed against income or equity growth or both.

Planned Unit Development (PUD)
A property that is comprised of Single Family Homes, Town Homes or Condominiums. The individual homes and land are privately owned, but common elements such as roads, recreational facilities and open areas are owned and maintained by a mandatory Homeowner's Association. Owners in PUDs are required to be members in and pay for the Homeowners Association.

Condominium
A condominium is created out of vertical space. Instead of owning a parcel of land, you purchase a subdivided piece of space contained within a condominium regime, which may also be referred to as an apartment or a townhouse. The walls, common elements and all improvements are owned and maintained by the condominium.

Cooperative
A corporation that owns real estate is referred to as a cooperative. To purchase a cooperative unit the owner actually purchases a pro rata share of the corporation stock. The corporation is responsible for paying real estate taxes, underlying mortgages, and all common elements maintenance.

Leasehold
A long-term ground lease is a leasehold estate. Renting land out for unencumbered use instead of selling creates a ground lease. The land is returned at the end of the lease term, in it's improved state, to the landlord.

Fee Simple
Single Family Detached (SFD) properties are referred to as Fee Simple. The land is unencumbered by any covenant requiring ownership in an association. Attached homes can also be Fee Simple as well.

With the above listed real estate property types there is always an associated risk for the buyer and the lender. Primarily, there are two sources of risk associated with property underwriting (loan approval):

• Is the lender taking a risk if they have to re-sell the property after a foreclosure?
• Is the borrower accepting a risk by living in a certain property type?

To make this short and sweet, risk is evaluated by outside factors that impact the borrower. An example would be with a Homeowners Association property type. They are responsible for common areas of the dwelling. Someone slips on ice on the sidewalks and sues the association. If their insurance policy fell short, and they lost the law suit, they might go bankrupt which would adversely impact the property values.

Determining the property type to pursue has it advantages when an underwriter in dotting the "i's" and crossing the "t's", try to weigh the pro's and con's of high risk real estate property types when considering financing or refinancing your determined property value.

Property Value to Home