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Refinance? very long.....
I received an email from a credit union I have done business with (car loan) for years. They were offering very competitive mortgage refinance rates with both no closing costs and closing costs options. I decided to pursue this and figured out which of the options of closing costs worked best for us based on what we owe and what the interest rate would be because that went down the higher closing costs you paid.
We start the process, filled out the application, provided everything they asked, etc. I tell the mortgage consultant - when she offered ? that yes, we would take the cash out option to help pay for some updates we were doing, but that we did not need the cash, and the updates would be done regardless of getting this cash out or not. We also figured that since we only bought our home two years ago that with the market the way it is we would be lucky for our home to appraise for what we bought it for, let alone be able to have 80% equity to even pay off current mortgage. Still with me? So again went into this with a refinance only in mind, no closing costs, to lower our interest rate 1.5%, plus go from a 15 yr that was created two years ago to a 12 year which would also knock off a whole year. The savings would be a no brainer, right?
So continue along, everything is going fine, I provide all the income verifications and we pass all financial checks. The appraisal is ordered and that is when the apparent issue is discovered. The appraiser shows up and we walk him around the property and he makes a comment about the siding that we have removed. Yes, we had removed the siding because like I said we were moving along with the updates regardless of getting any cash or not. This is the first time anything has been said to us about there being an issue about proceeding with any updates. So I start to worry, but then the appraiser says that the credit union we are going with is likely to accept the appraisal anyway because they are more lenient than say ? USBank. So I call the mortgage consultant immediately after the appraiser leaves and voice my concerns. She assures me she would check into it but to me didn't she didn?t seem concerned.
Fast forward to this week after she has exhausted all of her resources to push the appraisal through and has had no luck. They will not approve the loan because we are not a candidate for a refinance based on our house being in ?construction mode? as she calls it. She gives us the option of completing the work in 90 days, getting an unsecured loan to complete the project, or discontinuing the process and then we would owe for the appraisal.
Completion in 90 days is not doable. My DH is doing the work himself, and we are only going to tear apart the house even more, add an addition, replace more windows and redo the landscaping, and because we are doing it on our own it will be a long drawn out project. We are looking at a year to two years before it no longer looks like it is in ?construction mode?. Secondly we do not need an unsecured loan to complete the project, as I told her early on we do not need the cash, we would be doing the updates regardless, and thankyouverymuch but no I do not want an unsecured - who only knows what % that would be - loan.
So finally ? if you are still with me ? am I obligated to pay for that appraisal? My argument is that I am not stopping the process, they are. And because I said up front that we were going to be doing the updates regardless of getting the cash option or not ? she never clarified that it would be best if we did not start any work. We obviously never would have started the updates knowing it would have caused an issue ? or we would have never started the refinance process. Oh and to top it off, she also informs me that she found out just now this ?offer? that was emailed out is refinance only, so even if we could move forward (be done in 90 days option) we couldn?t cash out anyway because that wasn?t part of the offer - and remember she offered the cash out, we didn't think our house would appraise high enough, and our house ended up appraising for about 10K more than we bought it for.
And what options do I have to fight not paying it? Because I assume that if we don't they will just turn it around to collections - or being I still have my current car loan with them, they could hold the lien on that if I don't pay it.
eta:fixed some spelling errors
Re: Refinance? very long.....
If all you have done so far is remove some siding, can you replace the siding and continue without the cashout then finish the remodeling? What are the terms of paying for the appraisal if the house was not worth enough? I think that's what it would fall under since no one is willingly stopping the process; you're just not approved.
In the future, don't tear apart a house that's about to be appraised because there is no way of figuring an accurate value. They look at what is in front of them.
I don't think they can hold your car as collateral since you never gave your car as collateral for the appraisal. They are two seperate transactions.
Ditto. Just pay the appraisal. It's what, a couple hundred? It stinks that it wasn't understood on both sides that the house was already in the middle of renovations and how that would play in, but chalk it up to experience and move on.
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Thinking of doing cosmetic updates to a dated home? These were our costs.
Pay for it. You knew an appraisal was necessary for this refi and most people assume that it means the house needs to be in the best shape possible. Can you replace the siding and then have the appraiser come back out to verify that its no longer under construction. Since you said you don't need the cash, then drop it or ask her supervisor if you can do a cash out refi. I can see where a no closing cost refi would be a "streamline" refi which is pretty much the most basic refi you can do (lower rate and possibly change the term).
You should pay for the appraisal. Why should the bank, or the mortgage consultant, have to pay out of pocket? I realize you have never refinanced before, but you could have found this information on the internet with a little research.
The appraisal is $430, so not just a ?couple hundred?.
The problem with replacing the siding is that we are putting on completely different siding then what originally was on the house so it still won?t look finished. I do have to pull out the application that we signed and find out what is says. Had we not had an appraisal high enough then we would have had to bring cash to the table to close or back out of the process and then yes at the point of US backing out then I would owe for it. I was fully aware of that and was prepared to bring cash to the table if need be ? instead of paying closing costs to ?back out? I would have rather paid the principal down to close.
We never would have started residing or started the refi process if we had thought that one would affect the other. I never was trying to hide that we had started and once we realized the problem it was too late. So, no I never searched online in the beginning because we never related the two together.
We were supposed to have a no closing cost refinance that if we chose to not move on then we would be responsible for any costs ? but we are not the ones stopping the process ? they are. We were up front about doing the updates and she never told us that we couldn?t or shouldn?t start. She keeps saying we have a unique situation and that ?most people? need to wait for the refi to go through so they can get the money to do the update. Well we aren?t most people, we didn?t need to wait, we had the cash and I told her we would be doing them regardless, and she never said it would be problem.
I know you don't want to hear this, but it really is YOU who is causing the process to stop since you chose to begin construction during the process. While not exactly the same, a similar example would be if the "Smith Family" went out and spent a ton of money and ran up their credit cards during the loan process, then "The Smiths'" actions would cause the bank to stop the process.
It is not the bank's responsibility to tell you what you should and should not do to be in the best position to get a loan. If you did not get it in writing that it was "ok" for you to begin demolition during the process, then you did not have approval from the bank. It sounds like you made a $430 mistake by not doing your due diligence.
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Sorry that your loan is declined for unacceptable collateral. It has nothing to do with your loan officer, and I can assure you that IF your loan officer had any idea that your loan would be declined, they certainly wouldn't have pushed it forward. OR they would have had you pay for your appraisal upfront. Your loan officer isn't the one to make the call - this is coming from an underwriter.
So long as you have some kind of siding on it, even if it doesn't match, you should be alright. Finish that project and do not start a new one until your loan is closed.
FWIW, it is possible to get SOME cash back on a rate and term refinance.