I'm attempting to refi my mortgage. The broker involved is offering me a no-cost refi, fixed 30-years, at an interest rate .375 lower than my current 30-year mortgage which I took out last year when I bought the home.
Ordinarily, I wouldn't refi for a small .375% interest rate reduction - but the broker is paying all of the costs. If I were to pay the costs, the rate would only drop by another 1/8th of a percent. In addition, I had gotten the mortgage with only 15% equity, I am now at 20% equity and would like to eliminate the monthly PMI - but my current lender won't do that until I am at 25% equity. which I don't have on hand. Refinancing at 20% equity will let me get out of PMI. It seems to me that spending none of my money and eliminating PMI and reducing my rate .375% is a good idea.
I'm trying to figure why the lender the broker is using seems to be giving me such a hard time.
The basics:
Credit Scores: All three were 750+ when they pulled my credit for the loan. While these aren't perfect scores, they are not that bad and a definite improvement from what they were 18 months ago when I got the current mortgage.
Misc. Credit info: I have no judgements, no late pays on my mortgage, no collections, just a couple of late pays (30 days) on credit cards 4 years ago that occurred during a divorce process.
House equity: The appraisal came back with the same value as when I bought the property, so I applied extra money to the principal to get the equity to 20%, so I can avoid PMI on the new mortgage. The real estate market is steady in our area (not declining).
Job History: Except for two brief periods of unemployment (one week in January 2010 and three weeks in May 2010), I have been gainfully employed since March 2002. I was unemployed from January 2002 to March 2002 (eight weeks), but that was nine years ago. Otherwise, I've been pretty much steadily employed in the IT industry since 1985.
Debt-to-Income Ratios:
The debt-to-income of the new loan, principal & interest, would be 19% of my gross income.
The debt-to-income ratio for all loans (new mortgage, student loan and car loan) would be 28% of my gross income.
I thought all of the above would make me a reasonably strong candidate, but I feel like I'm missing something. The lender appears to be doing everything possible, short of denying the loan, to make me not continue the loan process.
Prior to application, I was told that the only paperwork and documentation that I would need to provide would be:
- 3 years W-2's
- 2 recent consecutive paystubs
- 1 recent bank statement
- application
- appraisal and credit fee, to be refunded at settlement.
We had a 30-day rate lock, which has come and gone. The lender the broker is working with keeps asking for additional documentation, always several days apart from each other - we are now nearly six weeks in.
After I provided all the documentation, they came back with they wanted proof of my retirement assets (401K's etc.), which was over $90,000. I gave them the most recent statements. One of my IRA's only provides quarterly statements; they demanded a monthly statement. I managed to pull a current snapshot of the account and gave that to them, which they unhappily accepted.
About two weeks into the 30-days, the lender demanded proof that my 2010 taxes had been filed. I provided them with a copy of the tax return, which I had self-prepared and mailed (it has the form 5405 homebuyer credit requested, so that HAS to be paper-mailed - and can take 14 weeks for the IRS to process). Well, since I had no proof other than the copy of my return, and the IRS hasn't processed the 2010 return yet, any tax return transcript request to the IRS comes back as not filed. Less than 48 hours before we were supposed to go to settlement, the lender comes back and says that they need "real" proof of my income.
Hello?
My paychecks are direct deposited into my checking account. They already had proof of my paychecks and had already confirmed with my employer that I am employed with them. They had my bank checking statement, showing the direct deposits. They had my W-2's. They had copies of my personal tax returns.
That's not sufficient proof that I am gainfully employed? I asked what the heck else would suffice?
Turns out they want my 2010 tax return transcript from the IRS to come back as completed. Heck the rate lock was only for 30 days and it can take 14 weeks for the 2010 with the homebuyer credit to be processed. In lieu of that, they said they'd accept a letter from a CPA indicating my 2010 taxes were indeed filed. I reminded them I self-prepare my taxes, and the answer was "tough luck". Either find a CPA, or wait for the IRS to process the return and see where interest rates are in 14 weeks.
So I had to find (and pay for) a CPA that was willing to certify that my return had been filed - no easy feat, since I self-prepare my taxes.
Then they saw a deposit into my account, and questioned that. (A friend lives with me and gives me some money each month to account for their share of living space, food, water, heat, electricity, cable tv and internet). I had to get my friend to get a copy of the cancelled check's back and front and then write a letter detailing what that was.
Then a month-end went by, so they again saw the same monthly deposit from my friend's check, and questioned that again. So I had to get my friend to detail that cancelled check as well and another letter had to be written.
Although my income is from W-2 employment, I co-own a small, part-time partnership interest in a business from which I never took a salary (which I am closing down this month), now they are saying they want the K-1's from that business to corroborate the amounts on my tax returns (miniscule losses of about $100 or so each year). I informed them it will take me a couple of days to get that scanned and sent to them. Keep in mind, they have had my tax returns for over two weeks. They could have asked for these additional forms when they first reviewed my returns, but they continue to wait and ask for one or two items at a time.
Now they say they also want the partnership's 1065 forms AND the Form 1120.
I called the mortgage broker and let them know that it seems to me that the lender is stalling and doesn't want to make the loan, because they keep trying to get the impossible. Form 1120 is not for partnerships, it is for corporations. This business that I am a part of is not a corporation, therefore there is no form 1120 filing. I explained that a business can either be a partnership (form 1065) OR it can be a corporation (form 1120) - but not a "partnership corporation" where both forms are filed.
The broker said she'll check with the lender, but she said they were pretty emphatic that they would want both the 1120 and the 1065. I reminded her that it was impossible. I pointed out to her that the last time I saw something like this in a mortgage application process was a couple decades back - when a lender wouldn't give a loan unless I signed a statement that I wouldn't get pregnant for two years, since I was a female. I supposed I should expect that next?
I'm finding this process to be really frustrating. Am I missing something? Or is this normal? Should I start trying to anticipate the next roadblock they might throw up?
Thanks,
Harriet
Starting Score: 2014 775
Hi Shane, I know I wouldn't have been thrilled if I had been presented with the long list of documentation from the get-go, but I would at least have then KNOWN all of what I would need to get together before putting the application in. I specifically had asked the broker for a list of ALL the documentation that would be required to close the loan to avoid this nightmare, not just a list of "starter" documentation.
What is also frustrating is that typically a few days go by between each request, so we are now long past the rate expiration. I have no guarantee that by the time the lender *might* decide to approve the loan whether or not the interest rate will be lower than my current mortgage interest rate. I'm told that the since the lock expired, I am guaranteed to get worst-case pricing - either the rate lock or the current rate, whichever is higher, if the loan is approved. So I could be doing all of this, and if the lender comes back with an approval, the rate could be higher than my current rate, meaning this whole exercise will have been a waste of time and money.
The IRS can't certify the returns - I tried - because I had mailed them in. Since they are already in the mail to them, but processing hasn't been completed, they won't accept a duplicate return, they won't provide any documentation to indicate that they were even received. Again, if the lender had communicated to me that they would need proof that the return due on 4/18/2011 had to have proof that the IRS had received them, then I would have known not to mail them, but to take a day off of work and stand in line at the IRS field office. But without that information, I mailed them and so have no proof.
Now the lender is saying they won't accept the CPA letter; they are demanding that the CPA sign my tax return, even though the actual return was mailed off to the IRS nearly 3 weeks ago. The CPA is now taking a much-needed extended vacation, and since he didn't actually prepare the returns (he reviewed and wrote the letter, but didn't prepare them), I have no idea if, when he returns from vacation, if he'll sign the returns.
I'm told by the broker that the lender (who you correctly guessed the identity of) will reject my loan application if the CPA doesn't sign the returns, even though he didn't prepare them. I'm not even sure if it is legal for a CPA to sign a return as a paid-preparer when, in fact, he didn't prepare the returns, so is this a case of the lender requiring the CPA to do something illegal in order for me to get the loan?
I've also heard that if a person applies for a mortgage and is rejected/denied, that it will show up on a person's credit report and make it much harder to get a refi anytime down the road; is this true?
It just seems to me that the lender doesn't want to make the loan. Every time they have requested something, I have provided it to them, then waited several days, only to be told that they want something else.