Mortgage Refinance Denied? What You Should Do Next

Have you tried taking advantage of low refinance rates from today’s best mortgage lenders only to have your mortgage application denied? Unfortunately having a good payment history alone isn’t enough to get you qualified for mortgage refinancing. Depending on the reason your lender had for denying your mortgage refinance application there are steps you can take to get an approval. Here are several tips to help you get qualified for mortgage refinancing without paying unnecessary points or fees after having a lender deny your application.

Why Was Your Refinance Application Denied?

The most common reasons for having your mortgage refinance application denied are having poor credit or an insufficient loan-to-value ratio. For most denials it’s simply a lack of home equity. If you’re underwater or your debt-to-income ratio is too high refinancing is going to be more difficult, but not impossible thanks to government refinance programs like the Home Affordable Refinance Program (HARP).

If your bank denied your refinance application there are still options. Mortgage lenders are required to provide you a written explanation for the denail. Once you know what the issue is leading to your denial you can fix the problem and reapply.

Different mortgage lenders have different standards for underwriting home loans so if one lender denies your application and you’re a good candidate for mortgage refinancing you could find approval with another lender.

Fixing Denials For Poor Credit & Too Much Debt

If the problem is your credit score or your debt-to-income ratio the only thing you can do (unless you’re underwater) is to start paying down your debts. The quickest way to boost your credit score and lower your debt-to-income ratio (especially if it’s over 45%) is to pay down all of your credit cards below 30% of your credit limit.

If you have collection accounts or other negative information try and negotiate with the creditors to have the negative information removed. If your debt-to-income ratio is above 60% it’s not going to be worthwhile applying until your situation improves.

It is possible to qualify for mortgage refinancing with less than perfect credit or debt-to-income; however, you won’t like the refinance rates and fees lenders quote you. Invest the time cleaning up your credit reports and paying down your debts to qualify for the best refinance rates.

Help For Underwater Homeowners

If you’re having trouble refinancing because you owe more than your home is worth, hence the term “being underwater” and haven’t already looked into the government refinance program known as the Home Affordable Refinance Program (HARP), you’re in for good news.

Even if you applied for HARP refinancing when the program first came out and were denied the program was recently overhauled by President Obama removing many of the barriers to qualifying with HARP 2.0.

The only catch is that your home loan has to be owned by the government (Fannie Mae or Freddie Mac) and they must have it before June 1st, 2009. If you meet that requirement you only need to be making all of your payments on time. You’re allowed one late payment out of the last 12 BUT your most recent six payments need to have been made on time to qualify.

When the program first came out many underwater homeowners were not HARP eligible because there was a limit of 125% loan-to-value. This limit has since been removed and it doesn’t matter how underwater you are as long as your loan-to-value is greater than 80%.

If you don’t qualify for the Home Affordable Refinance Program because of the Fannie Mae/Freddie Mac requirement you still have options. Cash-in mortgage refinancing is a possibility depending how far underwater you are.

With a cash-in refinance transaction you’re bringing cash to the closing table to buy down your loan-to-value ratio to an acceptable value. If this isn’t possible because you don’t have the cash on hand or are too far underwater to make it work another option could be HARP 3.0.

HARP 3.0 is the next version of the program and is rumored to remove the Fannie Mae/Freddie Mac requirement opening the program up to anyone. The great thing about HARP is there is no credit check or appraisal required making the program very similar to an FHA streamline refinance.

If you are HARP eligible you might be frustrated to find your existing lender denies your application. This is because some lenders have their own program overlays, additional requirements enforced for their participation in the program.

Mortgage lender participation in the Home Affordable Refinance Program is voluntary so if you receive a HARP denial keep applying. You’re bound to find a lender without program overlays to approve your application.

FHA Mortgage Refinancing Is Another Option

If your mortgage refinance application is denied because of your credit consider an FHA home loan. The FHA has easier standards for credit and loan-to-value ratios that could get your mortgage refinance application approved. The downside of FHA home loans is that they require mortgage insurance which can add hundreds of dollars to your monthly payments.

If you’re an eligible veteran and haven’t already used your VA mortgage, what are you waiting for? The VA home loan is hands down the best mortgage product on the market today and does not require mortgage insurance.

Risks of Mortgage Refinance Denial

According to industry watchdogs homeowners who have their mortgage refinance application denied are more likely to face foreclosure or simply walk away from the home. If you’re struggling to make your payments and cannot qualify for any of the options or government refinance programs available contact your lender. There may be modification or payment plan options available that will help you avoid going through a foreclosure.

Refinance Rate Shopping Matters

One common mortgage mistake is overlooking lender fees. Many homeowners are so happy to get an approval they don’t bother questioning fees. If you pay too much at closing for things like the loan origination fee or discount points it can be difficult or even impossible to break even recouping your closing costs.

If you never break even recouping your out-of-pocket expenses you’ll be losing money no matter how attractive the refinance rates. Getting your mortgage refinance application approved is only the first step when it comes to getting the best deal.

Pay close attention to the fees found in section 800 of your Good Faith Estimate and make sure you’re comparing zero point quotes. Shopping for the lowest refinance rates AND fees will ensure you’re getting the maximum benefit from your new home loan.

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You can learn more about paying less for mortgage refinancing by avoiding unnecessary lender fees and discount points by checking out my free Underground Mortgage Videos.

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Lower Mortgage Rates

mortgage broker Lower Mortgage RatesIf you’re in the market for a new mortgage and are searching for lower mortgage rates, there are several things you need to know about the rate quotes you receive. Many homeowners think that comparing offers from several different lenders is all they need to get the best deal; however, what most people don’t understand is that they are simply comparing retail mortgage rates with the same markup. If you really want lower mortgage rates you’ll need to find someone willing to offer you wholesale rates without paying garbage fees. Here are several tips to help you refinance your mortgage with a wholesale mortgage rate and save thousands of dollars in the process.

What Are Wholesale Mortgage Rates?

Wholesale mortgage rates are offered by a certain type of mortgage lender that does not do business with the public directly. These wholesale mortgage lenders offer their best rates to mortgage brokers and other retail mortgage companies that sell loans to the public for a commission. Many people think that by contacting one of these lenders directly they can refinance with a wholesale rate; however, wholesale lenders have retail branches that deal with the public and do not offer wholesale mortgage rates. In order to refinance your loan with a wholesale rate you’ll need to enlist the help of an honest mortgage broker willing to give you access to these rates.

Mortgage Brokers Work For a Commission

The problem with refinancing your home loan with a mortgage broker comes from the way that brokers are compensated. Mortgage brokers are paid for their services in two ways. Most brokers charge you an origination fee for their services. This fee could be one percent or more of your loan amount; however, one percent is a reasonable amount to pay for your mortgage broker’s services. The second method your broker receives compensation is from kickbacks the lender pays for overcharging you with your mortgage interest rate. Many brokers mark up the mortgage rate you qualified because lenders pay a commission of one percent for every .25% they overcharge you. This commission is called Yield Spread Premium and is the reason that most homeowners overpay when refinancing their mortgage loans.

Yield Spread Premium Can Be Avoided When Refinancing

Most brokers get defensive or even angry when questioned about Yield Spread Premium. And why wouldn’t they? This markup of your mortgage interest rate can double, even triple their commission on your loan. You can avoid paying a higher mortgage rate with Yield Spread Premium by finding a mortgage broker willing to work for the origination fee alone, without this kickback from the mortgage lender.

Shop Around For Honest Mortgage Brokers

You can start your search for an honest broker to refinance your mortgage by searching the Internet for an “Upfront Mortgage Broker” in your state. Upfront mortgage brokers charge a flat fee for loan origination without charging Yield Spread Premium on your loan. The Upfront Mortgage Broker’s Association maintains a registry of brokers on their website that is categorized by State.

If there are no members in your State you can find the right broker by contacting mortgage brokers found in the phone book. Start by telling these brokers that you understand Yield Spread Premium and will not accept any loan offers that include this markup.

It is usually easier to negotiate this type of deal with a mortgage broker that has their own business as those working for a large brokerage firm may not have the authority to give you the deal you are looking for. You can learn more about finding the right kind of mortgage broker to refinance your home loan without paying Yield Spread Premium and other garbage fees by requesting a free mortgage refinancing DVD.

Mortgage Refinancing – Five Common Mistakes

three day rescission Mortgage Refinancing – Five Common MistakesThe mortgage industry is undergoing the worst crisis lenders have ever faced; if you’re considering refinancing your mortgage it’s more important than ever do your homework and choose an honest lender. Here five common mortgage refinancing mistakes you need to avoid in order avoiding paying too much for your next loan.

Mistake Number One: Going for the “Cheapest” Loan

The cheapest mortgage offer isn’t necessarily the best loan for your situation. Turn on the television and you’ll see lenders bragging about their “unbelievable mortgage rates” or “no closing costs” loan offers. These loans are nearly always loaded with fees and unnecessary markup of your mortgage interest rate; always treat these loan offers with a healthy dose of skepticism. Most mortgage representatives are simply trying to get your application and commit to the loan; after you’ve done this you are at the mortgage company’s mercy for rates and fees. This is why you should choose loan offers carefully and make sure nothing changes once you’ve committed to a loan offer.

Mistake Number Two: Comparing Dissimilar Loan Offers

When you’re comparing mortgage offers it’s important to compare similar loan types. Comparing a 30 year fixed rate mortgage to a 15 year loan with an Adjustable Mortgage Rate does you no good. Keep in mind that a company with great fixed rate loans may not have the best adjustable rate offers. Make sure you are using the Good Faith Estimate to compare loan offers and are making apples to apples comparisons before choosing a lender.

Mistake Number Three: Relying on the Annual Percentage Rate

Many people think the Annual Percentage Rate (APR) is the best way to compare loan offers. While it’s true that Truth-in-Lending laws require lenders to publish Annual Percentage Rates, which is supposed to tell you the total cost of a loan expressed as an annual percentage, there is no standard for calculating this rate. The APR from one lender may not reflect the same costs as an APR from another, making this figure completely useless.

Mistake Number Four: Not Requesting a Good Faith Estimate

Mortgage lenders are required to provide you the Good Faith Estimate after receiving your application; however, most lenders will provide you this document upon request. This document is an itemized list of all expected fees you will be responsible for paying; however, keep in mind that the Good Faith Estimate is only an estimate. Dishonest mortgage companies change loan offers and terms after you’ve committed to a loan. This is why it’s important to reconcile your Good Faith Estimate with the HUD-1 statement before signing the contract.

Mistake Number Five: Shopping Over a Period of Time

Interest rates change on a daily basis. If you do your comparison shopping over a period of days or weeks the mortgage rates you compare may no longer be available. Try to limit your comparison shopping to one morning or afternoon at a time. This will allow you to keep up with changing interest rates.

You can learn more about your mortgage refinancing options, including other mistakes to avoid by registering for a free video tutorial. The videos walk you through the entire process of refinancing with a wholesale mortgage rate, saving you thousands of dollars in the process.

Find The Best Mortgage

If you are in the market for a mortgage to purchase your home or refinance an existing mortgage doing your homework will help you find the best mortgage for your situation. Doing your homework means researching how mortgage companies and brokers make their money and how this compensation affects your loan. The most common pitfalls result in overpaying thousands of dollars and can be easily avoided just by doing your homework before applying for a mortgage. loan Here are several tips to help you find the best mortgage loan for your situation.

Finding The Best Mortgage

Comparison shopping from a variety of mortgage offers will help you find the best mortgage. It is important to understand what you’re looking at when comparison shopping; knowing how to compare loan offers can be confusing for many homeowners. With so many different factors to consider when taking out a mortgage, how do you know which type of mortgage rate, term length or APR is best?

How to Compare Mortgage Offers

The first thing you need to know about comparing mortgage offers is that the Annual Percentage Rate (APR) will not tell you anything about the mortgage loans you are considering. Truth in Lending legislation in the United States requires lenders to publish Annual Percentage Rates for their loans; however, there is no standard method for lenders to calculate their Annual Percentage Rates including which fees they are required to include in the calculation.

If the Annual Percentage Rate is not a reliable method of comparison shopping how do you know which mortgage is better? If you discard the APR the best way to compare fees associated with each loan is by using the Good Faith Estimate and HUD-1 Statement.

Good Faith Estimate

The Good Faith Estimate (GFE) is an itemized list of all fees associated with a mortgage offer. Mortgage lenders are required to provide you with the Good Faith Estimate within 24 hours of receiving your application; however, most will give you one upon request. Remember that the Good Faith Estimate is really just an estimate; many brokers omit fees including their own markup of your mortgage rate to make their loan offers seem more attractive. This is why you should always reconcile what your mortgage broker tells you with the HUD-1 statement before closing on the loan.

You can learn more about comparison shopping for the best mortgage by registering for a free mortgage refinancing DVD.