There's one thing about change that seems constant, frustration. For Mr. & Mrs. Homeowner, it can be downright mind boggling with all the changes that have occurred and probably will continue to happen in the Mortgage Financing Market. It's hard to keep up and the only saving grace to be had is that of clear & present education, as it happens. I was inspired to write this post because of some folks that called me looking to refinance their existing mortgage. I haven't saw this topic written about much at all and think it has to be addressed. The following is their situation...
Sal & Vicky consolidated all of their high interest credit card debt with their mortgage a little over a year back. In turn, this boosted their credit scores dramatically and their credit now gleams with a stellar rating. Recently, Sal & Vicky found out that they are having another child. This being their second child, Vicky wants to cut down her work schedule to spend time nurturing and bringing up their children. Yet, cutting back her work schedule also entails cutting her income in half...at least temporarily.
Meanwhile, Sal stands a good chance reaping the rewards of hard work by moving up within his company and also in his pay. Assuming that happens, it isn't likely to happen for at least 12 months and it isn't anything they want to necessarily bank on.
They are in a position where their life changes also translate to a change in their financial needs. Less income will be coming in, same old debt going out. While I had never worked with them before, they found my information and gave me a ring.
Initially, Sal & Vicky thought it a good idea to list & hopefully sell their home. This way, they could downsize for the short-term and then turn around and buy another house of similiar size & price down the road. So, they listed their home on the MLS with a REALTOR. But then Sal did some thinking, "Why not just refinance into a program that allows for a lower payment for a bit, rather than sell our home now and buy something similiar at a later date. Heck, we love this home! The neighborhood is perfect!! This would enable us to sail through our life changes and avoid moving backwards in our quest for continuous forward motion for the lives of our family."
Rather than sifting through the programs that are available for their situation, I want to get to the point of this post. Listing your home limits your lending options if you are thinking about refinancing as well. Let me repeat, listing your home limits your financing options.
Some Lenders require the home to be off the market for 6 months, some 12 months. Look into your refinancing options before you list your home, if each is a consideration.
Here's why:
- Conventional Lending Institutions have what I like to call a 'Cover Your Keister' clause. Meaning, let's say you refinance and then go to sell your home anyway after you do. Because of the typical costs associated with refinancing, it eats at the equity you have in your property. That's not necessarily a bad thing because when you refinance, the idea is to put yourself in a better overall financial situation. However, if you go ahead and sell your home shortly after you refi, you may be inclined to come back and say, "all those costs ate up my equity and now I can't get out of my house what I need too." Hey, I have a Robin Hood mentality in this Corporate World (without the stealing thing) but I understand the mind-set. Heck, if they give you a free cup of coffee with your refi and you spill it on yourself....well, you get the drift I hope.
- Let's say you put your home on the Market for $280,000 and it's on the Market for 2 weeks. After those 2 weeks you decide to refinance instead and the appraisal comes in at $300,000! Well, that is wonderful but let's take a look into the Lender's thoughts...."I know the Collateral we are lending against is appraised at that, and it seems a very good and accurate assessment. Yet, that very Collateral was on the Market for 2 weeks at a lower price and didn't sell. This doesn't give us much confidence in the Collateral we are lending against, God Forbidding something happens and you default on your Mortgage. At that point, we are stuck with Collateral we are now unsure of in regards to its Market Worth."
Make sense? I hope it does. Bottom line, there are programs available to refinance your property one day after you take it off the MLS. Those limit your options though. So, if refinancing is even a thought in your head... talk to a Mortgage Professional before you even think about listing your property for sale. Your options will remain open and the best route will be for the taking....
Jason Sardi
Mortgage Consultant
Toll Free: 1-866-262-8720 ext. 220
Locally Here in Allentown: 610-439-2166 (same extension:-)
jsardi@fcegi.com
Licensed with the Pennsylvania Department of Banking
And My Mother Loves Me... and I, her! Happy Mother's Day Mom!!!
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Ok, now I REALLY AM getting that tattoo! ;-)
Great information here. I can honestly say this is something I didn't realize. Very well written, as always.
btw... Happy Mother's Day Elaine! MWA!