Written By: Theresa Furzland, Op-Ed Writer
Yes, I’m still receiving the rare refinance inquiry from my loyal past clients and referrals. These calls generally start like this – Hi Theresa, I’ve been seeing ads everywhere that interest rates are at record lows and I should refinance my mortgage now...or...I got a phone call saying I could get a great refinance deal and it won’t cost me anything and will lower my rate as low as 3.5%.
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When I first get the call, we go through some general questions to get a quick glance at what the customer wishes to accomplish and their capability to obtain the desired result. We start with their current mortgage rate and balance, value of home, and credit. Sometimes we get past that...sometimes not, as you will see. I would say that in 80% or more of the calls we at this point start talking about the reasons those goals won’t be obtained....Like....
- “You have a rate of 5% right now and the current mortgage programs would put you at around 4.5%, by calculating closing costs you would not recoup your costs for 7 years”
- “With a first and second mortgage on your home and the lower home values, you just don’t have enough equity to pay off both mortgages”
- “No, I’m sorry but we can’t qualify you on your unemployment. The only time that can be used is if you are on a seasonal layoff. As soon as you have a new job and 30 days of paystubs we could submit a loan request”
- “No, I’m sorry but you have had a late payment on your mortgage in the last 12 months and your credit score is quite lower than before. With the current underwriting requirements you would not receive an offer that is better than your current terms on a new refinance.”
- “You will qualify for the refinance, however your home – although acceptable 5 years ago when we placed your loan last time – is now unacceptable because you have large acreage. “
I could go on with a few more examples, but you get the point.
There is the 20% of the conversations that proceed past this point, and a handful of them even get to closing. That is if they get past the appraisal and underwriting scrutiny. Appraisal issues are of course the most prevalent at this point.
Sometimes we find other options that work for the customer. Here is a sample of some of those:
- “I would suggest that since you are looking for a small dollar amount and want to do some energy related updates to your home that you pursue local low interest/zero interest/grant programs”
- “You are currently paying mortgage insurance and it is possible, since you haven’t missed any payments and have built up equity, that you meet the requirements to drop that. This option would cost considerably less than a refinance and based on your current terms would actually save you more monthly than a refinance at this time.”
- “Contact your current lender and inform them of your hardship. You may qualify for a loan modification program or temporary forbearance”
Once again, I could continue...but the fact remains, refinance options are almost non-existent. Those customers that are completing the process are generally proceeding because they have to for one reason or other and are lucky enough to fit into an available program.
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I continue to take the calls and crunch the numbers because those few that do get to closing have a good secure loan and many of the 80% that can find an alternative that will at least be a bridge in a tough situation and in the end, even those that we can’t find a solution for can at least make an informed decision based on their best available options.
About The Author
Theresa Furzland - As an op-ed writer, Theresa Furzland has 25+ years of experience ranging from origination, processing, closing and post closing. She is currently a producing Branch Manager for LendSmart Mortgage, LLC and own and operate Willow Wood Mortgage Services, Inc.
