Philadelphia Weekly

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Red flag to lenders a sign of the times

Ilyce Glink
Co-written by Samuel J. Tamkin
Inman News

Q: Can you tell me about a rule that you are not allowed to refinance a home if it was on the real estate market less than six months ago? I was told by my lender that because my house was on the market last September (it didn't sell and I took it off that month) I would be unable to refinance until it was off for six months. What is the reasoning for this rule?

A: If you are applying to refinance your primary residence, the lender's underwriting guidelines provide that the loan will be given to you only if you use the home as your primary residence.

If you have listed the home for sale, the lender has knowledge of your intent to cease using the home as your primary residence and does not want to take the chance that you'll obtain the loan and then decide to sell or rent the home.

The lender wants to give you the loan only if you will continue to use the property as your primary residence. Also, it's expensive to underwrite and process the loan, and lenders don't want to go through the expense of giving you the loan and then have you pay it off a short time later.

If six months have gone by after a home has been taken off the market, the lender then can view the prior listing for sale as too far in the past to affect the lender's underwriting decision. So, the lender can proceed to refinance the home and once again ask you whether you use the home as your primary residence and ask that you confirm that you will continue to use the home as your primary residence after the closing.

Given the state of the real estate and financial markets, lenders are being extra careful in evaluating each loan. In past years, some lenders might have decided that a listing of a home close to the application time would not affect the application process, but in today's market more lenders would view that as a negative.

But you may find that "six months" is not a rule with every lender. Some lenders may be willing to refinance your home if the home has been off the market a shorter period of time.

You should probably call around and talk to at least one other mortgage lender, one mortgage broker and your credit union (if you are a member of one), and find out what their guidelines are for your situation. You might also want to investigate an FHA loan.

If you find out that another lender is willing to assist you in refinancing your property, you might decide to go with that lender and plan to stay in the home for a while.

Q: We submitted an offer on a bank-owned foreclosure on a Monday. That day, we were told that the bank requires us to fill out a mortgage application with their mortgage division in order for them to consider our offer. We were also informed that two other parties were interested in the house.

We complied with the request and they received our offer on Tuesday. On Wednesday, we were told the bank was going to give a counteroffer to the best-qualified party only. Then Thursday, we were presented an offer from the bank and we gave a counteroffer. Later that day we were told that our offer had been rejected and they were going to open the bidding and all interested parties were to submit their best price.

We increased our offer and had our agent submit it. Later we were informed that someone else had given them full price but had to include the closing cost in the loan. Right now the house is still pending 30 days later. Have any laws been broken or any ethics violated?

A: You should know that negotiating for a house can be tricky in the best of times. In these times, where so many homes are owned by lenders, the information you get may not always be accurate and you should always remain vigilant.

If a seller lies to you in the course of negotiating the purchase of a home, that seller may be committing a fraud. If a real estate agent lies to you while negotiating the purchase of a home, that agent at best is violating the ethical rules of the real estate profession and is, at worst, committing a fraud.

Having said that, the description in your letter does not seem to indicate that you were lied to or even that anybody in the transaction violated any ethical rules.

Other people may have been interested in the home at the time you were looking at the home. In some cases those other interested buyers could have seen the home in person or could have been shopping for foreclosed homes in bulk and negotiating directly with the lender.

If the home is still available and is not under contract, it's possible that the deal to sell the home to another buyer may have fallen through or may have never even reached contract.

If you are pre-approved by a lender, have a high credit score, and have 20 percent to put down towards the purchase of a home, you should be the ideal buyer for any seller.

But just because you don't end up with a home during the negotiation process does not mean that the seller or the agents involved did anything wrong.

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