TRIED TO LIST & SELL YOUR HOME, BUT COULDN'T, LAST YEAR? Might be Tough to Re-Fi This Year!
SOME LENDERS PROHIBIT RE-FINANCING IF HOME WAS LISTED FOR SALE IN LAST 12 MONTHS!
Here in Chicago, and elsewhere, some property owners facing possible increased ARM rate resets try to sell their homes or investment properties, and re-size to different quarters. Should they fail to sell, however, and then consider refinancing, some lenders may reject their application.
Although not enforced by every lender, many are imposing restrictions on refinancing by those who recently tried to list their property for sale. Technically, the rule has been around for a long time - but rarely used recently, as most properties in Chicago and nearby sold quite quickly.
As sales slowed, however, many sellers, facing increasing competition from a residential inventory over 52% higher than last year's levels, could not sell. Many lenders shy away from these failed sellers when they seek a new loan - they fear these newly-refinanced will sell again quickly, erasing any potential bank profit on the new loan. In essence, many seeking a new mortgage loan are unable to take advantage some of the lowest rates in the area since 2004.
Many lenders have a minimum 90-day-off-market policy. Some, such as National City Bank, enforce a far-longer twelve-month rule. The Bank of America has no restrictions - but the rules of many banks are changing with stronger re-fi demand, and tighter credit requirements.
Property owner Cherya Jenkins and her husband live on the West Side of Chicago, in the Austin Neighborhood. She had her three-flat apartment building on the market for the better part of 2007, but was unable to sell. She wanted to move the property to re-coup some of the investment she and her husband made on improvements. When taxes increased on the building, the couple investigated re-financing, at today's lower rates, to counter the $175 increase in each monthly payment.
After contacting a representative from National City, she was told the new lower rate would help them wipe out the monthly increase. The loan was rejected, however, due to the recent listing status of the building. The Jenkins' were told they had to wait a minimum of 12 months from the expiration of their last listing.
She checked with several competing lenders and was similarly rebuffed. Wells Fargo Home Loans require a six-month wait time from end of the last listing for sale. Bank of America has no wait times, but have restrictions on loan-to-value, and borrowers must wait at least 90 days if they want to do a loan involving cash-out.
Several lenders enforce no waiting period, but require the subject property be owner-occupied. Since the Jenkins own their building as a non-owner occupied investment, they did not qualify.
In some cases, some smaller, local banks may make exceptions to the waiting time rule, but these are often hard to come by.
See Mary Umberger's column in The Chicago Tribune from Last Monday, January 28th, for more detail, as well as some thoughts from independent loan brokers knowledgeable with the rules.
DEAN & DEAN'S TEAM CHICAGO
