Refinancing Process Help

I'm am in the process of refinancing my home and I have decent credit.  I just want to get lower rates and consolidate some credit card debt for a better monthly outlay.  I'm working with a reputable bank, the bank that holds my current mortgage.  All my paper work was submitted 3 weeks ago.  I've been approved for the loan and locked in at 6% (rates as of 3 weeks ago).  However, the lender has been waiting for an approval on an exception.  My house was recently on the market and they have to get an exception for refinancing because of this.  I've been waiting for the lender to get me an answer and they still haven't done it.  In the meantime I've found another lender who is offering better rates with less fee's.  Bottom line - I can save a LOT of money by doing this.  They haven't even done an appraisal on my home yet - due to the fact we both wanted to wait for the exception to come through.

Can I simply call the bank I'm currenlty working with an cancel?  Will there be a cost involved?

You can cancel your loan in process with no ramifications. You should check with your Loan Officer to get status on this before you make the move. Lenders are quite busy and exceptions at your bank could just be taking extra long. Who knows, it could come out tomorrow?? Not ordering the appraisal at this point makes sense, there is no need to have you spend that $ if they will not extend you financing.

Even though you may save, you just want to make sure you let the new lender know everything up front before you walk away from your current deal. Obtaining cash out after the property has been on the market recently is pretty much an exception loan across the board, so I wouldn't want to see you end up in the same position at the new bank!

Thanks for the advice Justin.  Should I let Loan Officer #1 know about Loan Officer #2?

Also, if I locked at 6, my loan officer said we can float it if it goes down.  What does that mean and what does it cost and who pays?

Again - thanks for any and all help/advice!

I would simply let LO1 know that you have done your research and there are other options out there. No need to tell him about a specific LO you are working with. This may light some fire under him to put the pressure on, because if the exception IS going to happen, he certainly does not want to lose you as a client.

Your LO was referring to a float down option which some lenders offer, typically once per transaction. This means that if the market brings better rates then what you locked in at, you can re-lock for a minimal cost. With the current market you can certainly get lower than a 6%, but that all depends on the float down cost and pricing setup which you and your LO initially agreed upon. Your LO will be able to provide you with the details on your specific banks policy.

Hope that helps!

Steve Leary:

Thanks for the advice Justin.  Should I let Loan Officer #1 know about Loan Officer #2?

Also, if I locked at 6, my loan officer said we can float it if it goes down.  What does that mean and what does it cost and who pays?

Again - thanks for any and all help/advice!

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Is the origination fee a negotiable fee?  My LO is charging me 1% but I believe there to be better deals out there.  Also, have you seen many exceptions given for refinancing if a home has been on the market but recently taken off?

Again - thanks for all your help.

Giving "cash out" of a home that has recently been for sale is risky for a bank, as there is some chance that you will take the new loan, and then sell the house, allowing them to only collect 2-3 payments worth of interest, or less.  . .  or worse, walk away from the house once all your other payments have been made.

I do not mean to suggest that this is your intention - it may well not be! - but from a risk standpoint, this scenario carries more "what ifs" than others.

For this reason, all refinance loans (and particularly "cash out" or "debt consolidation" loans) where the home was recently listed will be individually underwritten on an exception basis.

While most fees are negotiable, including the origination fee, it may be that in your situation, due to your circumstances, the lender or investor is requiring the upfront fee in order to guard against the what ifs I mentioned above. I would encourage you to ask your loan officer directly: he or she should be able to give you a satisfactory answer.

When shopping around, make sure that you tell all potential lenders about your home being recently listed. If you do not, you cannot fairly compare one offer to the other.

Seconding the above, I would agree that it is fair to tell loan officer 1 that you are exploring all the options . . . but I would not walk away from the application (and 3 weeks of wait time) until you have an absolute commitment from another lender that you trust, as your loan is going to require a sign-off from the upper-ups at any bank, and 3 weeks may actually be the time it takes to get this done. As was already said, you don't want to re-set the clock just to wait again, especially if the current lender is willing to negotiate the rate down to current market.

Thanks for the excellent advice.  I now understand the reasons for the need to get an exception.  I guess when I took my home off the market and started the refinance process, the thought of "take the money and run" NEVER entered my mind.  And it still doesn't!  I never knew the risk factors involved.  I'd just like to continue living in my house and can have a better monthly cash outlay by refinancing and consolidating some of that debt.  I have NO intentions of selling, moving, or not replaying my loan in the foreseeable future.  I have been current on every payment since I bought my home 5 years ago from the same LO I'm using today.

I'm not really trying to "shop" around my business either.  However, when I go to buy a car, or even a pair of shoe's for that matter, I, like most people, look for the best deal out there.  Compound that into the largest purchase of my life and I believe I would only be doing my due diligence in finding the best prices.  I mean we ARE talking about thousands of dollars.  Like I said, I would do this if I were looking for a $50 pair of shoes.

I don't plan on walking away from the application.  I'm just simply trying to understand the process a little better and find out what fee's, if any, are negotiable.  And since the origination fee is the largest fee in there, why wouldn't I try and get the best possible deal to save me thousands of dollars IF it's negotiable.

Again, thanks to all for your advice.  It's greatly appreciated.

Bulldog,

Glad to hear that you are a responsible home owner! Your excellent credit will likely play into the lender's decision when they are considering the exception. If you have no history of abandoning any debt, it is is far less likely that you would do so now :)

And you absolutely have the right to question any and every fee that is charged - I, like you, am always on the hunt for a good deal. I was just hesitant to answer the specifics of the fee structure on your particular application, because it may be more difficult for the loan officer to change than it would be on a "run-of-the-mill" application, and general logic may nt apply. If you have a trustworthy LO, you should get honest answers to your perfectly viable questions, and then . . . trust your gut.

I hoped it might make more sense if I approached it from an underwriting perspective, so it didn't seem as though they were/are penalizing you when you have done nothing wrong.

I hope it gets worked out for you! It would be a shame for a good borrower to struggle to get an available loan because of the irresponsible precedent of others, but it may be an uphill battle for your loan officer:  So, stay in touch, and be ready provide all evidence that you can to help your own cause. Do not be tempted to run to a "lower cost" lender unless you are completely satisfied that they have addressed the exception issue. A sure sign of an inexperienced/clueless loan officer will be one that says "oh, that is no problem". If you find a lender that grants the exception, value that first, and THEN negotiate rate down to market, and limit fees to your comfort point.

I wish you the best of luck!

No go on the exception.  Is this pretty much the standard for all underwriters?

Steve Leary:

No go on the exception.  Is this pretty much the standard for all underwriters?

 

I would not say this is the standard.  Different companies will have different appetites for risk at different times. 

How long does it need to be off the market before an underwriter will consider it less risky?

Steve Leary:

How long does it need to be off the market before an underwriter will consider it less risky?

Some other lenders may be willing to take your loan today.  Often they will want 3,6, or 12 months to pass from the time it came off the market if they don't want to approve it today.

Bob V-G:

Admin Note: No Soliciting in these forums.

Sorry didn't mean to offend! 

Steve,

Most lenders are at 90 days for this scenario. This question comes thru my office once a week. Last I knew, GMAc, CITI, and Chase were all at 90 days. Nationwide was at 1 day off the market.