Long time reader, first time poster. Thanks in advance for reading this and for any advice.

We are currently 2 years into a 30 year mortgage at 4.875% (P&I=$1,836.35/mo) and looking to refinance. Balance on mortgage is roughly $329K. The original appraisals were $515K and $445K (pre-construction and final). This house is in Middleton, WI (suburb of Madison) where home values have been relatively consistent. Credit score 800, no debts other than house, $160K/yr gross income, and a small pile of cash - planning to pay down to $310K or $320K for the new loan amount.

We locked a rate of 4.000% with a local credit union with a $500 application fee. After some delays, including 2+ weeks for the appraisal, it came back today at $345K. I wanted to review it for accuracy since I thought it was low but unfortunately the credit union was not willing to let me see the report without me paying an additional $350. From the limited information they did give me (including street names where the "comps" were), it seems that the appraiser selected all comps from a single-builder development with "starter homes" that's in a different part of the city, whereas our home is in an upscale subdivision of custom homes. We know there is a substantial quality difference, because we "graduated" from a home built by aforementioned builder when we moved into our new one. There seem to be recent sales closer to our neighborhood that would be more similar. Beyond this I can't speculate as to any other potential problems with the appraisal. I do not wish to pay hundreds of dollars to see the appraisal because I don't think credit union is interested in working with me to challenge it anyway.

Our numbers:

• Current payment - $1,836.35/mo, $0 PMI, + taxes & insurance
• Proposed credit union payment - on loan of $310,500 (90% LTV on new appraisal) = $1,482.37 P&I, + $105-ish PMI = about $1587.37/mo total (+ T&I)
• Credit union payment is about $249/mo less than current payment

I'm trying to decide whether I should just continue the refinance with the credit union, or to start the process over with a broker whom I have worked with in the past (but unfortunately couldn't reach in early September when I thought 4.000% was a once-in-a-lifetime opportunity).

This is where I need the advice - take the bird in the hand and save $250/mo, or reach for two in the bush to hopefully avoid PMI, but pay for another appraisal with some risk of an even worse result (you never know I guess). Thanks in advance for any advice.

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1)      When does the CU lock expire? Can you extend it free?

2)      Check with your realtor friends to give you some comps.

3)      If you think the comps show a  higher value

4)      Approach a Mortgage Broker  (MB) who can act fast and appraise fast.

5)      You will loose the appraisal fees if value from CU and MB are same

6)      This is better then paying the CU $350 to look at the Appraisal.

 

Jacob Varghese

NMLS 327096

     http://www.swanloans.com/?pgcnfID=113371

I am most suprised the CU will not give you a copy of the appraisal - the law of the land is - with a refinance you have a 3 day right of termination after you sign the closing documents if you candel the loan - all fees you paid with the refinance are refunded to you, including the application fee.  I would mention this to your credit union - that you know this law and maybe they will give you a copy of the appraisal so you can have the value reconsidered. 

The second part is - the PMI - is your current loan owned by Freddie or Fannie?  It's not who you write the check to - it's who owns the actual debt.  Google and find out - if it is, you can then refinance into a current rate and term without the PMI if the appraised value is as low as the CU says it is - just go to your current lender if your loan is owned by Freddie/Fannie and ask them what they can do for you. 

If it is not owned by Freddie/Fannie - and the CU will not let you see the appraisal - I would see if the $500.00  fee is refundable - and speak with your trusted broker to see what they can do for you - the rates are still very low - about where they were when you locked your loan - hope this helps!

Jennifer...I do not believe this borrower will qualify for HARP based on the origination date (assuming it was fall of 2009).

First and foremost, thank you Jacob, Jennifer, and Jason for taking the time to reply. This site is a great resource even for consumers such as myself who want to understand the process and keep up on rate movements.

I wanted to follow up here because the closing was today, and the appraisal was one thing in the packet. It was appalling, where to start:

* 1 of the comps was a CONDO with a shared wall (is such a thing really comparable to a single family home on its own lot?)

* 1 of the comps had the price on the appraisal that was $20,000 lower than MLS says

* Miscellanous things: fireplaces wrong, valued our screen porch at $0, said we have "neutral" view when we back up to a conservancy/pond and all other comps back up to other houses, forgot about our microwave, valued our hardwood and tile floors at $0 as compared to vinyl and laminate, etc.

Based on the wrong description of our neighborhood boundaries (coincidentally matching all the "comps") and other tidbits throughout, it's obvious that this appraiser took an appraisal he already did, for a house in that neighborhood -- 2.5 miles away -- and changed some but not all details to match ours.

As I understand things, my only recourse at this point would be to cancel the transaction with the credit union and try to refinance elsewhere. Does anyone know if I will get my "non refundable application fee" back if I do this? It's "only" $500, but it will give me the satisfaction of "reinforcing" to the loan officer that it wouldn't have been such a bad idea to let me see the appraisal before he declared it to be accurate.

As it sits (if I am reading correctly) you received a rate of 4% with roughly $100 in PMI. As it relates to rate relative to current market conditions, you don't have much to gain. 4% is strong and while you may find some folks offerring 3.875%, this will likely require additional costs. So it really boils down to PMI. With a higher appraisal obviously this could be avoided, but in our current market there is no guarentee the next appraisal will be any better. Although I would admit, the idea of using a condo as a comp on a single family appraisal is nothing short of appalling.

It really comes down to whether you feel comfortable gambling "a bird in the hand" for the chance at getting rid of PMI. I would watch the jobs report in the morning to see how this impacts rates. If it results in a solid 3.875% or even 3.75% becoming available, I would go for it. If the report pushes rates higher, or even makes getting 4% an iffy proposition...I would stick with what you have.

Make sure and stay on top of your final servicer about getting rid of the PMI as early as possible. As for getting the $500 if you walk...I would not count on it unless you have a significant relationship with the CU that you can threaten to pull.

 

Best of Luck,

 

Jason