Refinancing home now takes more than 90 days
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By Scott Sheldon  December 7, 2012 12:00 am

Homeowners refinancing their mortgages will now come to learn the refinance process is taking longer than 30 days.
Here’s the scoop: mortgage-backed securities (MBS) continue to be a very lucrative investment vehicle in these economic times.

Safe, conservative returns with a fixed income provides an attractive place to park one’s money, considering the little volatility compared to individual equities. As a result, mortgage rates remain very attractive, with the average 30-year fixed rate mortgage being around 3.5 percent, no points.

This refinance optimism lenders, banks and credit unions are experiencing has translated into higher aggregated volume than otherwise normal operational capacity supports.

Daily, lenders are dealing with a radically increased demand for refinance money over purchase money requests. The transition to a larger mortgage volume environment has only been in existence for the last 60 days but continues to be a challenge for mortgage lending operations.

Will your refinance close? Yes, although it might take a while. Following is what you can expect moving forward, given the positive direction of lower mortgage rates and increased appetite for debt restructuring.

• Large depository banks and financial institutions: Mortgage loan origination, including both refinance and purchase activity, is only  a single division. These banks are also looking for other credit products such as wealth planning, bank account deposits, credit cards and the full banking product menu. In other words, loan origination is not  their prime focus. On all the products collectively, expect turn times of 90 days at the minimum.

• Mortgage lenders and mortgage brokers: These brokers specializing in mortgage loan origination only, can facilitate  faster operational turn times, 45 days in most cases.
Homeowner refinancing tips to ensure your loan will close as expediently as possible:

• Pick the right mortgage lender by getting a mortgage rate quote upfront and deciding if this person’s product and costs are reasonable enough for you to conduct business with them.

• If your mortgage lender/servicer is soliciting you to refinance your loan, obtain in writing how long it’s going to take. Most of the time, they’re in the same boat as large depository institutions, and they will require all of your financial documentation. It’s best to get a second opinion.

• Let the mortgage professional pull a copy of your credit report and review your financials to make sure you have the best possibility of qualifying for the home loan.

• Don’t take a 30-day mortgage rate lock if your loan takes 45 days to close escrow. The lender or you will have to pay the 15-day cost to extend the interest rate further into the future. Best to consider taking the 45-day rate lock for a slightly higher cost. In fact, most lenders, to support the increased volume offer 45-day lock choices for 30-day pricing, another sign you’re working with a “makes sense” mortgage company.

• Longer lock periods such as 60 days, 90 days or even 180-day rate locks cost more. The longer the lender takes to close your loan, the higher the costs you will be subject to.

• If you do have to extend your mortgage rate lock, ask the lender to do it for no charge. Most mortgage companies will gladly accept the cost of extending a mortgage rate lock for the opportunity to close your loan.

• Should you attain mortgage approval, it will most likely be a “conditional mortgage loan approval.” There are lenders out there claiming to have final loan approval up front, but that almost never happens in this credit market. What this means is the mortgage company needs additional information from you to sign off conditions to release your file for final loan documents for a subsequent loan funding. Providing the necessary documentation to the mortgage company within 24 business hours ensures a faster close of escrow.

Why refinance despite the longer-term times?
For many homeowners, the opportunity to secure a 30-year fixed-rate mortgage,  a 15-year fixed-rate mortgage or any other fixed rate term with rates in the low to mid-3s provides an immediate net tangible benefit, many break even within one year.
Today’s mortgage rates make refinancing an attractive tool to help people accomplish their financial goals, borrow money extremely cheaply, create debt relief and reduce interest expense.

Scott Sheldon is a local mortgage lender, with over six years of experience helping people purchase and refinance primary residences, second homes and investment properties. Visit him at www.sonomacountymortgages.com.

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