Refinancing Blues


In April interest rates fell so low that I decided to refinance. However, I made the mistake of just checking with my current mortgage holder. I’m going to hold off from naming them until I see how this issue gets resolved or if it gets resolved.

So, I contact my bank. Refinance? No problem. I pay my $400 application fee and the process starts. I can tell this is going to be more stringent than when I took out my original loan. But I’m not worried. I put down a considerable amount. I haven’t borrowed any more money and my credit score is still rock solid, something that is confirmed during the pre-approval. However, they do warn me that they are overwhelmed. It may take up to 60 days to close. But not to worry. My interest rate lock will be for 60 days rather than the customary 30. BTW, my current interest rate is 5.875 on a 15 year loan. Rate going down to 4.5 percent. Schweeeet.

Within days, the appraiser contacts me. Comes over on a Friday. Does his thing. I get some paperwork. Then nothing. From mid-April until last week I hear nothing. Last week, I find out my appraisal value. It has gone down 20 percent. Now, I realize for those of you living in California, Vegas and Florida, this may appear to be standard. But this is Houston. We did not have have the same run up in our property values that y’all did. Plus I am inside the loop, within blocks of River Oaks, the ritziest neighborhood in town.

So, far they have been very nice but said that it is up to the underwriters. I have sent them some information to try and get the appraised value raised but does not look promising. The problem I now have is that they the lock expires at the end of next week. And, yes, interest rates have gone up since. I can’t go anywhere else even if I thought I’d get a fairer appraisal elsewhere.

So, what does this mean. 1) I have to pay PMI, which I don’t want to do and think is a waste of money. Of course, I would only have to pay mortgage insurance until my equity gets back up to 20 percent. 2) Put in more money so that my equity is back up to 20 percent of the appraised value. I don’t want to do #1 and #2 would require selling stock at a time that I don’t want to sell.

Did my home really drop so much in value? Of course not. I’m sure it has dropped some but not this much. What’s happening is that just like banks were overly optimistic in their estimates prior to the financial crisis, they are now overly pessimistic. The pendulum is has swung to the other side.

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