How to Refinance a Mortgage and Solve Glitches
by Rebecca in Long Island, Veronica in Allentown, Rick in NYC, and Savio in...
Ask Kate how to refinance a mortgage and solve loan approval glitches: Pushing past certain home loan requirements can be time consuming and frustrating. You know you're a good risk, responsible, and dedicated to making your house payments. But how do you convince the bank's underwriter to grant you final mortgage approval? Meet 4 borrowers in the throes of financing their homes who have encountered glitches.
Question 1: Bank fails to fund refinance after 3 day right of rescission because of Hurricane Sandy By Rebecca from Long Island
Kate, when a hurricane hits the area, can the bank require a re-appraisal of the property after closing and delay funding a refinance of a primary residence?
By the grace of God, neither the house or neighborhood was damaged.
If so, do all the closing figures have to be readjusted? 17 days will have passed since the closing by the time the appraiser re-inspects. They have $38,000 of my money in a certified check. If they don't fund soon, should I pay my original bank for this month? Is the bank responsible for the losses?
Ask Kate answers: Bank fails to fund refinance after 3 day right of rescission because of Hurricane Sandy
I'm happy to hear your home and neighborhood escaped damage from Hurricane Sandy. Even so, natural disasters can throw a monkey wrench into an ongoing finance process.
After hurricanes and earthquakes, for example, banks can and do
delay funding until they reassess the hardest-hit areas. This includes using appraisers to perform physical inspections.
When this happens, the mortgage funding process grinds to a halt. Once determined there is no damage, loans can proceed to funding. But if the appraiser determines significant damage, repairs must be made and often another physical inspection is required before funding.
Keeping your mortgage current during this delay is the best practice. But ask your closer for advice on documenting house payments.
This will alert escrow or the closing attorney to the fact that your mortgage pay-off might need an adjustment as well as other prorated items.
When you call the closer, ask if your cashier's check will be sufficient. If the difference is small enough, sometimes they'll accept a personal check from the homeowner.
Of course, if the check is greater than needed, ask when you'll be reimbursed.
As far as the bank absorbing losses, I'd concentrate on extending your interest rate lock. Don't assume it's been done. Ask right now and get any new terms in writing.
Helpful tips for locking (or extending) interest rates over the phone are found at Get Your Mortgage Rate Lock Agreement in Writing
Question 2: Lender Refuses to Lock In My Mortgage Rate By Veronica in Allentown, PA
Kate, When I received the Good Faith Estimate, the mortgage rate was 3.3%. I wanted to lock in at that time and was told I cannot until the loan is processed. Well shocker, one week after sending back all necessary documents, the broker contacted me and stated the rate went up to 3.5%. I again asked to lock in and was told not until the loan is processed. So what is to stop the same thing from happening again?
Ask Kate answers: Lender Refuses to Lock In My Interest Rate
Without locking in your interest rate, nothing is stopping your cost of getting a mortgage from rising. So stop, back-up! Qualify your loan professional by asking these questions about locking in your mortgage rate
Then go here to learn more about the relationship between mortgage rates, closing costs, and discount points
on a Good Faith Estimate form.
Often, it's comforting to know that other homeowners have run into similar challenges. Meet 4 borrowers who asked me for lock-in help at Mortgage Rate Lock Talk
Question 3: Borrowing Power and Home Loan Requirements By Rick from NYC
Kate, Why is the amount one can borrow so dependent upon income as opposed to assets and cash in the bank? I am seeking a loan backed by my parents. We both have decent savings and they own several properties outright.
But when it comes to qualifying for a loan it all seems to hinge on what your current income is. Why is there less security in the bank's eyes to taking on a loan with someone who already has the resources to cover it, as opposed to earning a high annual salary?
Ask Kate answers: Borrowing Power and Home Loan Requirements
Although the mortgage industry likes to pat itself on the back for using common sense underwriting, home loan requirements often frustrate financially stable homeowners with non-traditional qualifications, such as yourself.
Before the financial collapse of 2007, no-doc home loans came to the aid of borrowers with strong credit histories and major assets who wanted to sidestep the hassle of income documentation. After being misused, this loan program was one of the first to disappear.
It's possible to scrounge up a no-doc home loan today. But read the fine print to watch out for adjustable rates and prepayment penalties. You may find the cost is prohibitive because, when push comes to shove, documenting stable and ongoing income has once again become standard among lenders.
Here's another idea for home buyers in your same financial shoes. Go here for Seller Financed vs Stated Income Mortgages
Question 4: Getting Rid of PMI (Lender's Mortgage Insurance) and Appraisal Fees By Savio from Montgomery, AL
Kate, will refinancing the house and paying the new refinance company the extra amount to get the loan down to less than 80% to avoid paying PMI help me avoid the appraisal fees of $350. Or how do I avoid paying the appraisal after paying off 20% - 25% of the loan amount. Thanks.
Ask Kate answers: Getting Rid of PMI (Lender's Mortgage Insurance) and Appraisal Fees
Before cancelling mortgage insurance, the first step is for the lender to determine current value with a property appraisal. This is how you'll know the amount of cash needed to pay down the mortgage for dropping the PMI.
Do you know the difference between borrower-initiated PMI cancellation and automatic termination? Go to Juan's story at How Can I Cancel PMI
to understand the lingo!
Then read about Chris at Foolishly Thinking I Could Get Rid Of PMI
. He paid down his mortgage only to find out his lender wouldn't remove the PMI. He depleted his savings and still had to pay the lender's mortgage insurance premiums.
So do your homework! Be on your toes! Get all promises in writing!
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