Q: Two months ago, I applied for refinancing with my current lender and was offered 4.875 percent (90 day lock rate) compared to my current 5.75 percent. I was told I could back out anytime and the cost to me would only the appraisal cost of $380 and the cost of the survey. Both of these were charged to my credit card and the appraisal was done and was more than enough to qualify for the loan. For the last four weeks, I have been e-mailing and leaving voicemail asking if we can lower the rates, given that these have come down, and to get updates on the loan processing. The loan officer responded that closings were averaging 75 days and that we were only 50 days into the loan application. He did not respond to my interest rates query. I read the fine print in my loan application, and there is no clause about penalties of cancelling, not pursuing or closing the loan. Yesterday, the loan officer e-mailed me requesting more information from me that the underwriter had requested to complete the loan application. In the meantime, two weeks ago, I checked with my regular bank and I verbally gave them my credit score and the amount from my recent appraisal. On that basis, my regular bank offered me 4.375 percent for a refinance. What are the strategies and options for me to salvage a better rate given the above? Do I ask my current bank to send me the loan application and evaluate? If my current bank offer of 4.375 percent is credible, can I accept it? My crystal ball seems to say that that interest will remain the same for the next couple of months.
A: Can we borrow your crystal ball?
Seriously, if you want to walk away from your application, the cost will probably be the $380 you've already paid for the appraisal and any other costs that have already been paid. You should check the paperwork to make sure there isn't anything else that you will be charged going forward (remember, they do have your credit card information). If not, feel free to move forward with another lender.
You should also call your loan officer and tell him that you've been given another quote for 4.3 percent on a 30-year fixed-rate loan and are thinking about walking away from the appraisal fee unless they make you a better offer (or match it).
You've already done the shopping around. Now you just have to close the deal. It's definitely worth it for you to walk away from this higher priced loan for one that is a half point cheaper. The question is, could you shop around more and find a 15-year loan for 3.75 percent that would cost about what you're paying now? If you can afford the monthly payments, that's really the deal to chase. You'd save tens of thousands of dollars over the life of the loan.
Lastly, if the lender you have been working with gives you the green light to move forward, what are you going to do? If you go with the second lender, you may find out that they won't give you the loan for one reason or another or may find yourself losing the first deal and finding out that the second lender won't or can't close on the deal for you.
If you can get the first lender to agree to give you a lower rate, you'll have what you want: a lender ready to close at a lower rate. But if you go with the other lender, you'll be starting from scratch.
You have to decide what you want to do. We frequently get letters from mortgage brokers who tell us that homeowners should stick with their current loan application and see it through. Some loan applications do have a penalty involved, while others do not. If there is no penalty, you have the legal right to continue to shop around. It may not be nice or even the right thing to do; nonetheless, you have that right.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink's latest book is "Buy, Close, Move In!" Distributed by Tribune Media Services.
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