The average length of time for a refinance can vary if they don’t have the right documents needed for a mortgage refinance.
Q: My husband and I started a refinance late last year with an Internet lender and we are still going through the process. Now, our mortgage broker wants a letter about my husband’s disability from the Veterans Administration (VA), and more proof of properties we owned.
The bank already has our statements of ownership on these properties, past bank statements, and my proof of retirement income. My husband receives his VA disability check direct deposited in our bank along with mine. The lender has quite a stack of other paperwork we sent as well.
Our credit score is excellent, which can’t be the reason we don’t have a deal yet. Meanwhile, the lender has lost some of our paperwork, the loan officer told us repeatedly he would call and did not. We were told several times that our loan file was complete only to be asked for more paperwork.
Are we just getting the run around? We have not paid an appraisal fee or for anything else yet but it’s been 3 months. Is this normal? We are looking to lower our 6.75 percent interest rate to under 4 percent and shorten the loan term from a 30-year term to a 15-year loan. We’ve had our current loan for 7 years.
A: You sound like you’ve been through the ringer – and when mortgage lenders put you through the ringer it’s because of one out of two reasons: Either you really haven’t been giving the lender all of the documentation that has been requested, or the lender doesn’t really want to do your loan.
We know it’s hard to believe that a mortgage lender wouldn’t want to complete a mortgage, but it happens every day. Local lenders that have been hard hit by the recession and housing crisis and lost tons of money making bad loans, might not want any more residential loans. Alternatively, the company may not want to do any more loans with your profile. Or, the lender is understaffed and poorly run.
From the description in your letter, it seems as though you have a complicated financial profile. You write of providing proof of “properties owned” which leads us to believe you have more than one rental property. If you own more than four residential properties in total (including your primary residence), you may have a hard time getting approved for the loan.
It also seems as though you might not have enough income to qualify for your loan – or at least your income isn’t a standard sort of paycheck that lenders can clear quickly. Asking for proof of a disability check from the Veteran’s Administration (VA) means the lender is having trouble figuring out what income bucket you fit into.
Your ownership of other rental properties may also change the dynamics of your loan. When people own investment properties, they receive income from their tenants and have expenses associated with those properties. However, while the cash flow might be great from the rental properties, that person’s tax returns might look quite different. Due to tax advantages of owning investment properties – in particular the depreciation you can take on those properties – the amount of income an investor may show on his or her tax return might be considerably less than the actual cash the person receives.
With this issue, the lender must justify the income, not through your income tax forms, but through a verification of the actual income you and your husband receive.
Unfortunately, the recession has forced all lenders to be much more careful about loans than prior to the housing market crash. The fact that you are a square peg trying to fit into a round hole doesn’t help your case.
And the simple, undeniable fact that if you refinanced you’d pay less and therefore more easily afford your mortgage, doesn’t count for much these days. If logic ruled the day, then it would but what we’re seeing is the mortgage lending pendulum swinging the other way.
We’d suggest you shop around for another lender that is more eager to do business with you. You can find a lender willing to do VA loans through VA.gov. At the very least, the new lender should be responsive to your questions and communications. The lack of responsiveness by a lender is never good news.
While you may still have to provide a mound of paperwork, another lender may be better able to get you across the finish line.
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