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So, You Say You Want to Refinance?


Easy-money era is ancient history.

It seemed like a good idea at the time. Extract some equity to finance needed home repairs and knock $300 off my monthly mortgage payment at the same time. But it's now five months and counting since I started the process to refinance my home mortgage, and there's no closing date in sight.

The name of the lender can remain anonymous, but it's an institution I've had a relationship with since the mid-80s. My mortgage is not underwater. My credit rating is stellar. Homes on both sides of me have sold within the past year for prices that, while not peak, are nothing to sneer at.

I breezed though a home equity line of credit (HELOC) application with the same bank a year ago in record time. But we now live in another era.

It's one thing to read about tightened lending standards and overwhelmed underwriting departments. It's something else to live through them. You can name any of the big banks and the story is pretty much the same: Bank of America (BAC), Wells Fargo (WFC), Citibank (C), JPMorgan Chase (JPM). Consider this a cautionary tale.

If you're looking to capitalize on lower interest rates, save yourself a little time by assembling all your essential documents that prove your financial stability in one place.

At minimum, you will need: Your tax returns for the past two years, at least two cycles of pay stubs, home insurance records, copy of your divorce decree if you have had any name changes, every single page of the statement from your mutual fund and/or other accounts being put up as proof of assets.

Also throw in the results of your latest Myers-Briggs personality assessment. (Just kidding on that one.)

Be sure to keep all of these documents in a secure place and near you at all times, because if your experience is like mine, you'll need to send them once, twice, and then update again a third time before the process is complete. My final pointers:

1. Present your home in as pristine a state as possible to make your appraisal as high as possible. It affects the amount you'll eventually be able to finance.

My bank restricted me to 50% of the appraised value, so every dollar of appraisal counted. I suspect the value came largely from the square-footage and comparable property sales the appraiser uncovered, but I probably could have helped my cause if I'd been a little neater.

2. Don't count your chickens before they're hatched.

Not until early in month five did bank officials advise me they no longer consider my three-unit condominium building a conforming property. So the equity I had intended to extract to pay for repairs was no longer an option. The loan was rejected. An exception was made, but only because I accepted the terms of no cash out, which pushed my monthly payments even lower, but left me to scramble for an alternative source to pay for the needed work. I also must give up all but $10,000 of my HELOC.

3. Get friendly with your processor. Email them every week or so to see where things stand.

Turnover rate is high. I'm now on my third processor since this all began. I learned that nudging by phone and email definitely keeps your application on the top of their mind. Keep your loan number in an easy-to-access place. You'll be using it frequently.

4. Pray. Meditate.

At this point, it couldn't hurt.

Get another perspective from a mortgage banker here.

What type of experience have you had trying to get a mortgage or refinance an existing one? Any positive stories to share? Weigh in on The Exchange.

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