Casual approach puts you behind in refinancing


September 27, 1992|By ELLEN JAMES MARTIN

Are you one of the holdouts yet to refinance your mortgage? Then listen to the sages of the mortgage world and spare yourself wasted time.

"Refinancing your home doesn't have to be a big hassle," says Stephen Brobeck, executive director of the Consumer Federation of America in Washington.

Too often, homeowners take a cavalier attitude toward the refinancing process, says Alex Peters, branch manager for the Silver Spring office of American Residential Mortgage.

"Like the moon follows the sun, people think a refinance will just happen," Mr. Peters says.

Many are nervous about getting a mortgage when they first buy a home yet imagine refinancing will be easy in comparison. After all, they reason, they already live in the home and simply want to reduce their payments.

The best way to hasten the refinance process is to cooperate fully with the lender, Mr. Peters says. "The lending process is chaotic as it is. It behooves you to be prepared."

, What many homeowners fail to

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realize is that in most cases refinancing requires a wholly new loan. And since most lenders now sell the loans they make to investors who live hundreds or thousands of miles away, they must present the loan in a package that meets the standards of the investment community.

"Usually, the guidelines are just as strict for the refinance as for the first loan," Mr. Peters says.

Learn the rules of the game and it will be far easier to play, the experts say. Ironically, a casual attitude toward a refinance could result in more time wasted rather than less, they say. Here are five suggestions they offer to speed the process:

* Investigate the idea of borrowing from the same lender you used when you bought your home.

"Your old lender knows your payment history -- how your loan has performed," says John Hemschoot, director of home mortgage standards for the Federal Home Loan Mortgage Corp., one of the nation's largest mortgage investors.

0$ At the minimum, you'll be spared

the need to dredge up a lot of information on your current mortgage -- since most of that should be in the lender's computer already. If you're very lucky -- and your payment record is good -- you'll be allowed to "renegotiate" your current loan for a small fee. To keep good customers, lenders are now letting some borrowers simply remake their mortgages at a lower rate -- without having to go through a full refinance. The catch is that the rate on a renegotiated loan is usually a shade over market.

L * Ask whether you're eligible for a "streamlined" refinance.

You may well be unable -- or unwilling -- to renegotiate your old loan. But if you're dealing with the same lender, you could still be eligi

ble for a streamlined loan -- a low-cost, low-aggravation way to rush through the refinance process.

"Potentially, you can save three to four weeks in processing time and also the appraisal fee, which runs $250 to $300," Mr. Hemschoot says.

Most streamlined programs require a clean mortgage payment history for at least 12 months, no decline in the borrower's income, no cash out of the loan and a prospective payment no more than 15 percent higher than the old payment.

"If you fit the qualifications, you won't have to jump through as many hoops," says Keith Gumbinger, an analyst for HSH Associates, which tracks mortgage rates for consumers throughout the country.

* Gather your papers before your loan application meeting.

Lenders vary in what they want to see -- whether that be pay stubs, W-2 forms, tax returns, bank statements or the deed to your home. The trick in quick loan processing is to ask ahead what's wanted and produce as many of these papers as possible when you first apply.

"A loan application is very paperwork-intensive. But 75 percent of those who apply come totally or partially unprepared," says Mr. Peters, the Silver Spring lender.

* Get to know your loan processor.

Don't be surprised if the individual who took your loan application -- usually known as a "loan officer" -- is tough to reach after the application is submitted. A loan officer is essentially a salesperson, working on commission, whose purpose is to make as many good loans as possible. Once your application has gone in, chances are a "loan processor" will take over and lead your file through the pipeline at the so-called "back office."

By making a friendly call to the processor and cultivating this individual, you enhance your chances for expedited loan processing.

* Don't procrastinate in your follow-up.

The proper job of the loan processor is to nit-pick your file. It can be annoying to have to respond to requests for information on your savings account, home insurance policy or credit history. Some requests may seem trivial and others, intrusive of your privacy. But chances are, you'll have to cooperate on each one of these requests or your loan won't go through. If you ignore your sense of outrage and respond quickly, your loan will go through more quickly.

As Mr. Peters notes: "Any little detail -- like a pay stub not being there or a missing insurance policy -- can stop your mortgage from closing."

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