Cash Out Refi Declined
by Kevin F
(Newtown, Connecticut, USA)
Ask Kate about cash out refi that was declined and relocking the mortgage rate: Hi Kate. Great site. I just had my loan application declined because my cash out amount was too high. It's a $600K house, I owe $200K and want an additional $100K for improvements.
The lender is great and the issue is that my income in 2009 and 2010 was a lot less than this year, so I understand the reason. I am okay with only cashing out at the level they said is acceptable ($50K vs the $100K) as I will scale back my plans.
However, since my rate was locked at 3.63 percent APR, the rates have fallen at least .25 to .375. If I moved forward with a new amount to cash out, isn't that a new loan and therefore my broker/representative/lender has the option to get me the lower rate and then re-lock me in again on this new loan?
I see it as my loan was declined and I have the option to reapply if I want to without any penalty (am out the $450 for completed appraisal). If that's the case, couldn't I ask for a new rate and lock?
My original lock expires tomorrow including a 10-day extension they gave me. We have both been working constructively and respectfully throughout, and I want to borrow from them. Thanks. Kevin
Kate Answers: Cash Out Refi Declined
Yep, it sure sounds to me like you were declined for lack of income.
But first things first. If you haven't received it already, ask for the loan decision to be put in writing.
Verbal doesn't cut it.
Mortgage Rate Lock Agreement
Secondly, haul out your mortgage rate lock agreement
with the lender's terms. (You DID get the lock-in terms in writing, right?)
The first thing I'd look for is a rate lock cancellation fee if the mortgage application is declined. After all, you want to know what to expect when you approach the lender over a re-lock.
Mortgage Rate Float Down Provision & Re-Application
Thirdly, go through the rest of the terms carefully. The rate lock agreement should spell out the procedures for re-locking if rates come down. This is called a float-down. If this is available, getting the current mortgage rate could be a very simple procedure.
Fourthly, you should find out what happens if you allow the lock-in period to expire. Some lenders will not allow re-applying borrowers to lock in a lower mortgage rate for a specified period of time.
Interest Rate Lock Practices
Due to mergers, I worked for several mortgage companies and later on, brokered to dozens of lenders. This is what they had in common when it came to locking and re-locking a rate: Very, very little. I found they even had different interpretations of the federal statutes, not to mention varying internal practices.
So what this boils down to is the mortgage rate lock agreement you signed, and hopefully have a copy of. Those are the rate lock terms the lender and you have agreed to.
But I want to add one more thing you can do. Tell your mortgage broker/representative/lender
that you want a lower interest rate due to current market conditions. Enlist their help. You never know! Your simple request may be enough to get you the lower rate.
Comment and Link To This Page
Kevin, good luck! Let me know how it turns out. I'd like to hear back from you.
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