I'm trying to refinance my mortgage. It seems to be taking forever, and I'm worried that my interest rate lock will expire before I can close my loan. What gives?
I hear from a lot of folks who are having difficulty getting their mortgages done. There are several reasons for this. Let's make sure that you are doing everything you can to speed up the process.
The best mortgage rates in a lifetime are available today, and people are refinancing their mortgages as fast as they can. Meanwhile, many mortgage lenders are busy adjusting to new laws, such as licensing requirements and disclosure changes, and also dealing with requests for modifications and trying to avoid foreclosing. Add in the extra time it takes to close loans because of appraisal requirements imposed by the Home Valuation Code of Conduct (HVCC), which requires that outside parties control the appraisal process, and Fannie Mae's Loan Quality Initiative, which requires that borrowers' credit be checked again just before closing, and you see why loans aren't closing in a matter of days like they used to.
What Can Borrowers Do to Speed Up a Mortgage Refinance?
First, understand that lenders do give priority to purchases over refinances because if you miss a purchase deadline you can lose the home. But there are things you can do to make sure that your mortgage keeps its place in line and closes on time.
1. Don't put off until tomorrow...When your loan officer calls you for a piece of documentation, don't let the request sit on your back burner. Because, if you do, that's where your file could end up at the lender. Imagine your loan officer gets a condition from the underwriter for a copy of your divorce decree (to make sure that you don't have an alimony or child support obligation). She calls you and asks for it, then your file goes back in the drawer and sits until either you bring in the document or her time management software tells her to check with you because it's been a week. No one babysits your mortgage refinance application.
2. Don't change things up. Fannie Mae and Freddie Mac have new guidelines that require lenders to recheck your credit just before closing. If there are a slew of new inquiries, implying that you've been looking to acquire more credit, you're going to have to explain every one of them, proving that you haven't taken on any new debt, or showing what the new credit terms are. Your application can be re-underwritten with the new debts. If your credit has taken a hit during escrow, you can be declined for your loan or it could be repriced. Finally, if you're purchasing a home and your accounts show a big influx of unexplained cash, you're going to have to prove its origin. Underwriters want to make sure that you haven't borrowed your down payment.
3. Provide accurate information. Especially when refinancing a mortgage, the property value is a big deal. Don't assume that your home is worth more than (or even as much as) you paid for it if you bought it in the last few years. One of the biggest deal-killers around is an appraisal that comes in significantly lower than expected. So, if you owe $160,000 on your home, check a few online valuation sources to make sure that it's worth at least $200,000 if mortgage insurance is a deal-breaker for you. Ask your loan agent to price your loan based on a lower appraised value and see if you'd still be willing to close your mortgage on those terms.
Expect the Unexpected
Almost every loan process has at least one surprise, from a septic tank that hasn't been pumped or inspected in years, to a bank statement with a couple of bounced checks on it. A good loan agent will tell you why an item needs to be explained, documented, or fixed. Understand, though, that he wouldn't be asking for something from you if there was a way to get around it; no one likes to add difficulty to the process.