Listing Your Home Can Screw Up Refi Chances

By Don Taylor of Bankrate.com

Lenders often frown upon first mortgages or refinancing loans for borrowers who have put their home on the market in the past six to 12 months. But options exist.

 

Q: A lender recently told me that it can’t do a refinancing on our townhouse, which we recently placed up for sale, worth $188,000. We wanted to get $55,000 cash out from the financing. We don’t have a mortgage.

The lender rejected the refinance, saying it doesn’t refinance properties listed for sale or listed in the past six months. Is this true of all mortgage-refi loans or just Freddie Mac and Fannie Mae? How about the Federal Housing Administration?
— Verna Vexation

 

A: Dear Verna,
If you don’t have a mortgage outstanding, you aren’t refinancing a mortgage. By your estimate, you certainly have the equity in the home to justify taking out a $55,000 first mortgage.

Limits placed on refinancing may not be germane to your situation. Lenders, however, still will be concerned with the borrower’s motivation in tapping home equity with a new first mortgage on a home recently listed for sale.

Lenders originating mortgage loans for Fannie or Freddie won’t approve a mortgage if a home is listed with a multiple listing service or has been listed in the past six to 12 months. The lenders struggle with why they should loan money to people who are or were actively considering selling their home.

In general, it takes several years for the homeowner to justify paying the closing costs associated with a refinancing — or, in your case, a financing. The lender has that break-even cost to consider, as well.

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Metro Phoenix median home-sales price up 60% from market low

By Catherine Reagor
The Republic | azcentral.com
Mon Jun 10, 2013 5:26 PM

Metro Phoenix’s median home-sales price climbed to $181,399, an almost 60 percent increase from the real estate crash’s low price in August 2011.
Despite the increase in sales prices, Arizona State University real estate analyst Mike Orr doesn’t project another housing bubble in the Phoenix area anytime soon.
“We predicted prices would rise significantly during the strong annual buying season that lasts until June,” said Orr, director of the Center for Real Estate and Practice at ASU’s W.P. Carey School of Business.
The main reason for higher home sales prices is the chronic shortage of available houses for sale in the Phoenix area, he said. The number of houses listed for sale in the region fell 7.3 percent in April.
Because of rapidly rising home prices, some market watchers are concerned that many investors who bought inexpensive short sale and foreclosure homes and turned them into rentals during the past few years, will try to resell those homes now and create a bubble of oversupply.
“Some commentators talk ominously of a bubble bursting when these homes come back onto the market,” Orr said. “Such talk gets a lot of attention because we are over-sensitized to bubble talk after the disruptive events of 2004 to 2006.”
He said even if all the big investors put their homes on the market next month, that would only add 10,000 to 11,000 houses to the number of listings, and the Valley’s market would still be undersupplied based on demand.
Rising mortgage interest rates are another concern for some housing analysts and prospective buyers.
Orr said sometimes higher interest rates create a greater sense of urgency for homebuyers, which works to increase to demand instead of reducing it.
His forecast is for metro Phoenix home sales prices to continue to climb in coming months, but at a slower pace.