31 Jul Your Re-Finance Has Been Approved–How Do You Get to Closing?
In the last several months, with interest rates at historic lows, and bailout cash funding some new loans, it has become possible to get a traditional re-finance approved, usually to take advantage of lower rates. It may not be possible to refinance if you have no equity (or negative equity) in your home, but if you aren’t under water yet, it may be approved. Or, you may be able to get approval to purchase a new home. Once approved, though, you have to get the transaction closed, and that may be more of an adventure than you expect.
When I bought my first home, no one had ever heard of no-doc or “liar’s loans.” I went through a bank, and a traditional (and very conservative) underwriting process. I remember what a hassle it was–seemingly endless requests for documents, verification of every piece of information, and not only a down payment, but a requirement that I also have two months of payments on hand when we got to closing. Combined with a few issues to do with title insurance, and I was ready to walk away more than once, but there were no other options.
A few years later, when I bought my second home, all of that had changed. I kept calling the loan officer to ask if he needed anything, and the loan closed quickly and with a minimum of fuss. I still have the files generated by each closing. The first one is in a multipart binder that’s about three inches thick; the second one I could stick in my wallet.
If you remember the days of old, then you’ll be better prepared to deal with the underwriting process once again. If you bought your first home in the days of no-doc loans, you may be in for a rude awakening. You may be left scrambling to provide verification of income, including gifts, you will have to provide bank records and tax returns, and you may also have to have money in the bank to get a loan closed. Be prepared for a longer, more tedious process, and ask questions. Ask what they are going to require you to do, what documentation you will need, and when. If the loan is in underwriting, you may want to contact those folks directly. Make sure you understand any deadlines, including the expiration of your interest rate commitment. My advice is to pick your own attorney to handle the closing for you, and make sure he knows about those deadlines, too.
It may be a very favorable time to refinance if you qualify, and it may pay off in the long run, but expect the process to take longer and be more frustrating than it has been in a number of years.
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