Solano Real Estate Scene: Refi Mania now on steroids
Mortgages date back to 1190 in England and home mortgages in America became popular in the late 1800s and early 1900s when the U.S. population grew dramatically from immigration. The mortgage improved housing affordability for immigrants that didn’t have enough money to pay cash for a home or build a home.
The word mortgage is from two Latin words: mort means death and gage means pledge. A mortgage is a dead pledge. A homeowner pledges their home as collateral for a home loan and when the loan is paid off the pledge is dead.
Obtaining a home loan won’t kill you but it could make you a little sick when you are refinancing during a period like this if you don’t have some important and calming tips.
Refinance applications from May 1 to Aug. 1 for refi loans are up at least 300% over the same three months in 2019 and staffing at every credit union, bank and mortgage company is only up 5 to 10% nationwide. This is a math problem because the staffing that existed in 2019 were all employees working hard, 40 hours per week. The mortgage industry had had significant layoffs in the first quarter of 2019 after a slow second half of 2018.
The purchase money mortgage loans are also up these past three months in our “Red Hot Market” but the numbers are nowhere near the level of refinances. Most local mortgage companies and credit unions prioritize purchases in processing and underwriting because real estate brokers and sellers like and require 30- to 45-day purchase agreements.
I did a survey last week and many reputable banks and credit unions are quoting 60 to 90 days to close a refinance and some cannot even return phone calls for weeks because of the sheer numbers of inquiries and rate quote shoppers. Here are some tips for refinancing:
The low point for mortgage rates will be a four- or five-hour period in your lifetime and no one knows when that four or five hours will be. If it makes sense to refinance now, just do it, Lock it and forget about it for the 45 to 60 days unless rates drop from an average nationally of 3% today to 2% during the processing of your loan. Most lenders will renegotiate to avoid losing the loan but most will not or cannot if rates go down by just a quarter or a half a percentage point in rate after rate locking a loan for a client because there is a cost involved for lenders when they guaranty delivery of a loan to Freddie-Mac, Fannie-Mae and Ginnie-Mae.
Rate lock your loan for 60 days and make sure the lender is reputable and obviously confirm with the lender they can close within that 60 days.
A rate quote means nothing if the lender cannot deliver the loan within the lock period and I would never trust my loan with a loan officer that doesn’t go to the local Safeway, Costco and Raley’s. If a local lender drops the ball and doesn’t deliver on promises, they will be out of business very soon but if a call center loan officer out of Texas, Florida, Michigan or the Philippines drops the ball, they lose very little and possibly nothing.
There is a luck factor when you choose a lender for your refinance based on the brand name, marketing or the internet. There are some great mortgage companies in America, but the key to a happy refinance is the licensed loan officer who signs the loan application below the borrower’s signatures. The mortgage business is just like every sales and service industry in America. Ten percent of the loan officers are great, 20% are good, 30% are adequate, 30% are lazy and sloppy and 10% are about to be fired. Feeling lucky?
Be patient and communicate with your loan officer and your loan processor and get the mortgage company everything they need upfront to avoid underwriters asking for a bunch of stuff at the end of the loan process.
Closing a refinance today in 47 to 55 days is an accomplishment and although a great loan officer has all loans pre-approved prior to locking in, there is a lot going on behind the scenes a consumer cannot see because of government compliance and underwriting. This applies to all loans, including the super-easy loans where the borrower is doing a loan $1 million lower than what they can qualify for.
Finally, my first refi mania was the biggest refi rush since 1190 AD, and this was 1986 when rates dropped from 14% to 6%. There were no computers or internet and loans that normally could be manually underwritten and closed in 45 days took 120 to 150 days to close. Many mortgage companies could not honor their rate locks because the 6% rate only lasted a month or two and then rates jumped to 8% in middle May. Many huge banks and mortgage companies could not honor tens of thousands of 45- and 60-day rate locks issued in May that expired in July.
The bottom line is you should buy local and buy reputation because the difference between 2.5% and 2.75% is not that big of a deal considering 2.75% is the lowest 30-year fixed-rate mortgage in American history and it costs $250,000 to raise a kid from birth to 25 years old.
