Procrastination is ever so common with New Jersey borrowers when it comes to their mortgage refinance. Not only can the delay itself be dooming for the borrower, some lenders are taking 60 days or longer to complete the transaction. The delay by the borrower combined with the long lender turnaround time means the interest rate might vanish before the homeowner can close.
Take a borrower who was looking to refinance on June 1. The borrower knew it made all the sense in the world to refinance, but would not put the pedal to the medal to get it done. Finally, on July 1, he decides to get the paperwork going. He decides to do his business directly with Chase. Sadly, being a big bank bogged down with loan modifications, foreclosures, refinances, etc., Chase is taking up to 60 days or more to close a simple refinance loan.
Read this quote from Rismedia: “The upshot is that refinancing deals that used to take no more than a month now can take two or three, depending on the lender. The largest lenders-such as Bank of America and J.P. Morgan Chase & Co.-have been among the slowest, brokers say. That means borrowers are continuing to pay at the higher rate for months more than they thought they would have to, and while they wait, some are even losing their “locked in” rates as the 30- and 45-day guarantees expire.” Read more:
Meanwhile, the market and the economy moves on. Home values are declining, layoffs are still common, new appraisal requirements add another burden, and interest rates are not stable. Easily, what a borrower was qualified to do and what was available on June 1 might be very different on October 1. Also, lenders can change their guidelines and programs at any time – right in the middle of your transaction.
We all can see some benefit in waiting to buy that big screen TV. In all likelihood, it will be a few dollars cheaper in 2 months. Not so with a mortgage loan. The cost of a mortgage could be many thousands more in just 30 days – if it’s still available at all.
The moral of the story is that if you have the opportunity to refinance now, you should move on it. We may be in for some surprises in the market for the rest of 2009 and 2010 – if not longer..
By the way, our office is NOT burdened with loan modifications, foreclosures, etc. So our focus is totally on originating new mortgage loans. We can close Fannie Mae loans in 2 weeks or less provided we have a complete file. FHA files can take a bit longer due to outside requirements by FHA/HUD.
Until my next post . . .
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{ 2 comments… read them below or add one }
Carol, we want to refinance now with rates being so low, but my husband is pretty decided on the new loan being 20 years, not 30 years. Does this make sense for people? I am not familar with people having 20 year loans – never even heard of it. Won’t getting a 30 be cheaper?
@Lilly – Over the past 2 years, 35% of borrowers have opted for either a 15 or 20 year loan. That’s because with rates so low, refinancing or buying a home with a shorter term will often yield a payment not much different than the 30 year at the higher rates. If you really NEED the lowest payment, the 30 year loan always gives the lowest. But with rates so low, many astute borrowers see the possibility of actually paying off their loans within a reasonable period of time and building much more equity at a faster pace. 20 year loans are not new at all. Everybody simply got sold on paying a mortgage for 30 years and as we humans do, we followed the crowd. Given that most of us can no longer look forward to our home values rising rapidly, it makes sense to pay down the loan with a shorter term and a better rate.