Do you have enough equity to refinance? |
|
|
Application fees were uncommon not that long ago but have made a comeback and are much more widespread today, according to Metzler. Nevertheless, he says, borrowers should "never do business with anyone who charges an application fee." If you're uncertain about your equity, you might want to shop around to try to avoid this upfront charge.
Another new twist is that some appraisers now demand payment directly from the borrower at the time of the appraisal just in case the refinance doesn't close, according to Metzler and Thorne, who both say this practice is on the rise. Thorne believes a pay-at-door appraisal is reasonable since the appraiser deserves to be compensated for his or her services.
Others disagree. Greg Gwizdz, national sales manager at Wells Fargo Home Mortgage in Des Moines, Iowa, says this practice shouldn't be happening and could be a red flag as to the lender's reputation and stability.
Homeowners may wonder whether they should purchase their own appraisal before they submit a loan application, so they can avoid the paperwork and any question of an application fee. But experts advise against this strategy because lenders are highly unlikely to accept an appraisal ordered up by the borrower.
Possible lender fees:
- An application fee that includes the cost of an appraisal and credit check.
- An application fee plus additional fees for an appraisal and credit check.
- No application fee but inflated fees for an appraisal and credit check.
- A variety of other upfront fees.
"With the new rules, it has to be a lender-ordered appraisal, transaction specific, and, typically, done within the last 30 days," Metzler says.
What to do if appraisal is 'too low'
If you receive an appraisal that you believe is too low, you can try to contest it, Gwizdz says.
Questions to ask:
- Whether you can submit additional information about comparable recently sold homes to be considered along with your appraisal.
- Or whether the lender has a procedure by which your appraisal can be given a second review and further consideration.
You can offer to pay for a second appraisal, but Thorne says that's more likely to be a waste of money than to bring in a much different valuation.
Be mindful that appraisals -- and especially any perceived pressure being placed on an appraiser -- can be a sensitive issue since appraisers are supposed to make independent judgments.
"The days of the loan officer having leverage over the appraiser to maybe squeeze more value in are gone," Thorne says. "They just don't have the wiggle room that they used to have."
Another good tip from Gwizdz is to call your current lender, explain that you'd like to refinance your mortgage to lower your monthly payments and find out what options may be open to you. Some lenders may be willing to modify your loan to make your payments more affordable, especially if you've suffered a financial hardship.
"Call back every other month because a 'no' now could turn into a 'yes' later," Gwizdz says.
If none of these strategies works, you may want to ask how much you can qualify to borrow. If the amount is close to your original request, it might make sense to:
- Pay your closing costs upfront rather than finance those expenses as part of the loan amount.
- Or make up the difference in cash so you can lock in that lower interest rate and payment.
If you wanted to borrow $200,000, but the lender limited your loan amount to $196,000, could you come up with the extra $4,000 to make the deal work?
If not, you'll have to wait until home prices recover or you've paid off more of your loan balance before you'll be able to refinance.
|
