Thursday, June 18, 2009
Loan Too Slow!
Dear Sue,
Earlier this year, when interest rates were at an all-time low, we decided to refinance our existing 30-year loan on our primary residence.
We applied for the loan with the bank we have been dealing with for several years and they explained that the loan should be “no problem.”
We have supplied them with our tax forms, all our investment income, everything they have asked for. Yet, about every week, they ask for some other form—the latest, our Social Security income records.
So it goes, on and on for nearly two months and they say it will still be another two or three weeks before we have the loan, explaining that the bank has new owners and they are very careful with all their paperwork, etc.
Is this two or three-month period to get a refinance loan normal or is the bank simply stalling, as interest rates are now continuing to go up? Should we cancel and start over or just go along with their snail-pace approval process?
Very Concerned
Dear Concerned
I spoke with another borrower, Donna London McClaren. She is in the process of refinancing her home with Wells Fargo. She is in the third month and finding the process to be very frustrating. She said the lender calls her a couple of times a week asking for something new. She feels like she is forced to hang in there with Wells Fargo because they locked in her rate at 4.75%, saving her over $200 a month on her loan payment.
I shared your and Donna’s stories with Ryan Rivera, Broker with Goldmine Financial. Ryan explained that when banks make loans they eventually sell them on Wall Street as mortgage backed securities.
As a backlash to the recent laxity in qualifying borrowers, investors buying those mortgage-backed securities require that the buyer’s qualifications are fully documented. The loan package must be in perfect order. They don’t want any missing financial documents. It doesn’t matter how strong the borrower is or how much is being borrowed, all financial documents must be in the file.
Purchase loans always have priority over refinance loans. Purchases contractually stipulate certain time frames for the escrow period. Where the refinance has an open-ended time frame.
The huge number of loan applications that have been submitted because of the low interest rates has swamped the lenders.
“The typical loan should take between 30 and 45 days,” Ryan says. “A 90 day turn around is a very long time. I have never had a loan take that long.”
Ryan recommends that you contact the lender and ask where they are in the process. Have loan documents been ordered? Is the interest rate locked in? What is the interest rate? When is the lock due to expire? What is it costing you to get that rate?
Ask for a good faith estimate and have it reviewed by your financial planner. Verify that there are no hidden costs and that you are being offered a competitive rate. If you are not happy, don’t be afraid to negotiate. Nothing ventured, nothing gained.
While longer processing times seem to be the name of the game, you, the borrower, can be proactive by being fully prepared with all of your financial documents when applying for the loan. This doesn’t mean that the lender won’t ask for something unexpected, but it will help to shorten the process.
Ryan suggests bringing in all of the following:
1) 2 Years tax returns
2) Pay stubs
3) Current bank statements
4) Current mortgage statements
5) Property insurance agent’s name and number
6) Landlord’s name and number
7) Copy of drivers license and social security card
A tip is to keep a current document folder handy. When you receive your current bank statements or pay stubs, just throw them in your folder. Ryan guarantees that your lender will be asking for them.
You can help shorten the loan process by being proactive and prepared. It is a matter of Good Home $$s and Sense.
Earlier this year, when interest rates were at an all-time low, we decided to refinance our existing 30-year loan on our primary residence.
We applied for the loan with the bank we have been dealing with for several years and they explained that the loan should be “no problem.”
We have supplied them with our tax forms, all our investment income, everything they have asked for. Yet, about every week, they ask for some other form—the latest, our Social Security income records.
So it goes, on and on for nearly two months and they say it will still be another two or three weeks before we have the loan, explaining that the bank has new owners and they are very careful with all their paperwork, etc.
Is this two or three-month period to get a refinance loan normal or is the bank simply stalling, as interest rates are now continuing to go up? Should we cancel and start over or just go along with their snail-pace approval process?
Very Concerned
Dear Concerned
I spoke with another borrower, Donna London McClaren. She is in the process of refinancing her home with Wells Fargo. She is in the third month and finding the process to be very frustrating. She said the lender calls her a couple of times a week asking for something new. She feels like she is forced to hang in there with Wells Fargo because they locked in her rate at 4.75%, saving her over $200 a month on her loan payment.
I shared your and Donna’s stories with Ryan Rivera, Broker with Goldmine Financial. Ryan explained that when banks make loans they eventually sell them on Wall Street as mortgage backed securities.
As a backlash to the recent laxity in qualifying borrowers, investors buying those mortgage-backed securities require that the buyer’s qualifications are fully documented. The loan package must be in perfect order. They don’t want any missing financial documents. It doesn’t matter how strong the borrower is or how much is being borrowed, all financial documents must be in the file.
Purchase loans always have priority over refinance loans. Purchases contractually stipulate certain time frames for the escrow period. Where the refinance has an open-ended time frame.
The huge number of loan applications that have been submitted because of the low interest rates has swamped the lenders.
“The typical loan should take between 30 and 45 days,” Ryan says. “A 90 day turn around is a very long time. I have never had a loan take that long.”
Ryan recommends that you contact the lender and ask where they are in the process. Have loan documents been ordered? Is the interest rate locked in? What is the interest rate? When is the lock due to expire? What is it costing you to get that rate?
Ask for a good faith estimate and have it reviewed by your financial planner. Verify that there are no hidden costs and that you are being offered a competitive rate. If you are not happy, don’t be afraid to negotiate. Nothing ventured, nothing gained.
While longer processing times seem to be the name of the game, you, the borrower, can be proactive by being fully prepared with all of your financial documents when applying for the loan. This doesn’t mean that the lender won’t ask for something unexpected, but it will help to shorten the process.
Ryan suggests bringing in all of the following:
1) 2 Years tax returns
2) Pay stubs
3) Current bank statements
4) Current mortgage statements
5) Property insurance agent’s name and number
6) Landlord’s name and number
7) Copy of drivers license and social security card
A tip is to keep a current document folder handy. When you receive your current bank statements or pay stubs, just throw them in your folder. Ryan guarantees that your lender will be asking for them.
You can help shorten the loan process by being proactive and prepared. It is a matter of Good Home $$s and Sense.
# posted by Sue Thompson @ 12:14 PM 
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