Issues Which Can Result In a Failed Refinance Home Mortgage

If you're looking to refinance home mortgage, you may be aware that there are many benefits to doing so. You could be looking at obtaining equity much more quickly when refinancing, as well as improving your credit. Of course, you wouldn't be refinancing at all unless there was some kind of significant benefit to you.

Thinking about all of the benefits of refinancing may cause you to believe that nothing could go wrong. But the truth is that anything can happen to cause your refinance to fail. Luckily, if you can identify the potential problems early enough, you may be able to stay on track.

Low Appraisal

This is one of the most common reasons for refinance failure. And many homeowners are surprised when it happens. Denying what your home is really worth by ignoring falling prices in your neighborhood will not prevent a low appraisal from occurring, because your lender simply won't lend you more than the appraised value of your home.  In addition, any appraiser who uses your tax assessment as a base for appraising your home's value may think it's a safe thing to do, when in fact it can result in a failed refinance attempt.

Not Understanding The Mortgage Rate Lock

Usually, you will have 30 to 45 days to lock in your interest rate. But if the rates go down, you may be eligible for what is called ' float down', which allows you to take advantage of lower rates during the lock period. However, it's important to understand that you can only do this one time during the 30 or 45 days.

As well, many banks may advertise this float down as being free, when in fact there are many things to consider when determining the real cost of the float down. Ensuring that you understand all of the terms associated with the float down will ensure that you aren't caught with any unwelcome surprises that could cause you to abandon your goal of a refinance.

Overlays

If you have heard about a government program to help you qualify for a better rate, you may be surprised to learn that there may be quite a difference between what the program says it can do for you and what will happen once you actually get in front of a lender.

Known as an 'overlay', this phenomenon may rear its ugly head in the form of demands that you have a higher credit score than was initially understood. Some mortgage providers may even require that your credit score be one hundred points or higher than they need to be.

Overlays are most certainly making it much more difficult for many Americans to refinance their homes. But at the same time, they are necessary if the lending realities of today are to be accurately communicated. At least, so say the experts. Others say that fear of liability is fueling the high number of overlays, as many mortgage providers are putting them in place to protect themselves.

Understanding what can cause your refinance to fail can be the first step to preventing you from getting the lower rates you want. Talking with a trusted provider about your financial situation and what options are best for you is the best way to go when a successful refinance is your goal.


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