Refi Question - Is This Legal?!

[DETRoadster]

I know, I know, I'm asking a financial question on a BMW forum...But there's a lot of smart folks here who I respect.

Heres the deal. In the middle of a cash-out refi to consolidate our primary mortgage, HELOC we used to help buy some vacant land for a future home build, and pull some additional cash out to help with pre-construction costs. 4 weeks ago when we initially got the closing cost estimate worksheet from the bank they had our rate at 3.375% with no points. Today I get the closing docs and they've snuck in a 0.5% rate buy-down, AKA "points" while keeping us at 3.375%. I called the out on it and they said that the original number they used for our estimated property value was $100k above what it actually assessed at. What it assessed at was within $6,000 of what my wife and I figured it would. Where they got this number that was $100k above is beyond me. They are telling me that because the house appraised significantly lower than "we" anticipated, it bumped us up into a higher rate and they had to add the points in to keep us at that rate. Of course none of this was ever discussed. Just 'Hey, here's your closing docs, sign and you're all good."

So to me, it seems like they artificially inflated the estimated home value to secure a more attractive rate, then tried to sneak the points in at the end. Is that shit legal?! Seems like a serious bait and switch to me.

[UncleWede]

"Good faith" estimate. Call them on that BS. It's a PIA, but there are probably 17 other lenders who will give you the same rate. . .

IF you send me your account number and the last 4 of your social, I'll spot you the .5 in a check, then you can just Zelle me that cash back.

[nyalpine90]

i wouldnt sign any docs until you get what terms were agreed upon.
100k is alot of money for them to screw up the rate. Thats big mistake on their end, not yours.

[DETRoadster]

Thanks guys, yeah, at the end of the day the up front documents are "estimates" and it clearly states that rates may change. However, to sneak in a 0.5% buy-down to keep the rate the same and not say anythgin till I catch them. Man, that's either negligent or totally dishonest. I'm not sure which it is, but either way it's not a good look.

I e-mailed the loan officer back and just said "Fix this or we walk on principle alone." They are scrambling. She blamed the e-mail with the link to the closing documents being an automated e-mail that made it to me before she could tell me personally about the points that were added in. What a cop out. Take ownership of your screwups. Don't blame a computer.

Meanwhile we are talking to another bank to see what they can offer. May have to start this whole process over again. Ugh.

[4Hockey4]

Assuming thats a jumbo loan, 30yr jumbo is 3% currently. If that is under 600K loan, thats way too high. We just got 2 1/8% on 10 or 15yr. 30 yr was 2.25%.

Go to a Mortgage company, "banks" are notoriously high.

[zx10guy]

It's been a while since I did a refi. But I seem to recall a HUD-1 would be required. If you have one, what does it say?

I guess I'm one of the rare situations where a mistake with a mortgage rate worked in my favor. I was purchasing my vacation home back in 2012 and working with the builder's in house mortgage company. Through corresponding with the loan officer via email, I didn't catch the loan officer's mistake. Although it would have probably popped up later, she had realized her mistake in short order and owned up to what she put in writing. She had mistakenly given me another .25% buy down on the interest rate for the .5 in points I was paying.

So what I'm getting at is go back to your written correspondence and see how recent it is and what the numbers state.

[DETRoadster]

Originally Posted by 4Hockey4

Assuming thats a jumbo loan, 30yr jumbo is 3% currently. If that is under 600K loan, thats way too high. We just got 2 1/8% on 10 or 15yr. 30 yr was 2.25%.

Go to a Mortgage company, "banks" are notoriously high.

Yep. Welcome to Seattle, were a rat infested crack house is $700k. So jumbo territory, plus a cash-out refi situation. We also locked in on our rate just as rates spiked a bit in early April. Hit it at just the wrong time. We will only be in this loan for 18 to 24 months as we will have a construction loan that converts to a mortgage on the house we will be building. The only reason for this refi was to consolidate the current mortgage, HELOC, and pull some cash out for soft costs. it also drops our monthly significantly so that we can hopefully qualify for the construction loan without selling the current house and having to rent while building.

[DETRoadster]

The bank stepped up and kept the original rate, without the points. We signed and moved on. We wont be going through them again for any loans or banking needs in the future.

[Multimodal]

3.375% is a terrible rate. I just closed 2.625% fixed for 30 years in a jumbo loan (SFH in San Francisco). I would use the bait and switch as a reason to find another cheaper lender.

[DETRoadster]

Originally Posted by Mr. Maboomba

3.375% is a terrible rate. I just closed 2.625% fixed for 30 years in a jumbo loan (SFH in San Francisco). I would use the bait and switch as a reason to find another cheaper lender.

Was it a cash out Refi consolidation of a 30'year fixed, HELOC, and cash out?

[Multimodal]

Mine was a rate/term refi of a 30 year fixed. My lender (AIG via Canopy Mortgage) wasn't willing to do a cash-out so I could consolidate my HELOC. So fair play that's a unique product. Reading the thread now I see the deal is done - congrats. Mortgage loans are a pain in the butt and I'm sure you're glad to have it done.

[DETRoadster]

Originally Posted by Mr. Maboomba

Mine was a rate/term refi of a 30 year fixed. My lender (AIG via Canopy Mortgage) wasn't willing to do a cash-out so I could consolidate my HELOC. So fair play that's a unique product. Reading the thread now I see the deal is done - congrats. Mortgage loans are a pain in the butt and I'm sure you're glad to have it done.

Yeah, not the same product. You definitely pay more for the cash out consolidation. We played this "We are going to sell and buy a different house" game for 2 years so I never bothered to refi as it seemed we were always on the verge of selling. Because of that we were sitting at 4.5% for ages while rates were 2% lower. It killed me, but my wife was convinced we would find the "perfect" house and sell ours so it didn't make sense to refi, pay all those fees, and then sell a few months later. it barely made sense to do this refi, and may cost us more in the log run, but it lowers our monthly pretty significantly which then helps with our borrowing power for the construction loan. it's a calculated gamble.

[DETRoadster]

Well we aren't out of the woods yet. The loan is supposed to close this week. We've signed everything as of last week. Underwriting just came back wanting MORE details and documentation on my wife's business before they will sign off.

It's crazy to me because if you take all our debt and only use my income, completely writing off my wife's income, we have a debt to income ratio of 19%. Their limit is 43%.

My wife and her business partner took out a government backed small business loan at the height of COVID, didnt need a penny of it, and paid it all back 4 months later. That's somehow reflecting poorly on the business in the eyes of underwriting.

I just dont understand thee guys. God help any of you who are self-employed and trying to get a home loan or refi. What a nightmare.

[TheWatchGuy]

Originally Posted by DETRoadster

Well we aren't out of the woods yet. The loan is supposed to close this week. We've signed everything as of last week. Underwriting just came back wanting MORE details and documentation on my wife's business before they will sign off.

It's crazy to me because if you take all our debt and only use my income, completely writing off my wife's income, we have a debt to income ratio of 19%. Their limit is 43%.

My wife and her business partner took out a government backed small business loan at the height of COVID, didnt need a penny of it, and paid it all back 4 months later. That's somehow reflecting poorly on the business in the eyes of underwriting.

I just dont understand thee guys. God help any of you who are self-employed and trying to get a home loan or refi. What a nightmare.

its cause her name is on the loan. if you take her name off the loan, they dont need that info.

ive dealt with similar issues when getting a mortgage and refi because my wife was PRN, but my income was more than sufficient. Needed all kinds of things from her employer stating she is guaranteed x amount of hours a week and a lot more pay records than I did.

I've just stopped having her on the loan to make it an easier process.

[DETRoadster]

Originally Posted by TheWatchGuy

its cause her name is on the loan. if you take her name off the loan, they dont need that info.

ive dealt with similar issues when getting a mortgage and refi because my wife was PRN, but my income was more than sufficient. Needed all kinds of things from her employer stating she is guaranteed x amount of hours a week and a lot more pay records than I did.

I've just stopped having her on the loan to make it an easier process.

100%. We did that for our first 2 houses and a couple refis over the years. But at this point in our life we are late 40s and my wife is a successful doctor and business owner. I'm proud of her. She's worked her GD ass off and to have to be removed from the loan so that I can ride in with my income and make it all work without her is such a slap in the face to her and all she's accomplished. Don't get me wrong, you're 100% correct and it may come to that. But after 20+ years of being told she's a financial boat anchor by the banks I was really exited for her to truly be a partner is this one.

[Multimodal]

If you haven't closed yet and want to talk to my broker at Canopy Mortgage, PM me.

[DETRoadster]

Originally Posted by Mr. Maboomba

If you haven't closed yet and want to talk to my broker at Canopy Mortgage, PM me.

Thanks but I thought you said they weren't offering cash out refis.

[Multimodal]

They have multiple investors and policies change. Worth a call...

[dreamingat30fps]

I think I may be in a similar situation soon. Suppose to close on house next month, made cash offer because everything else was basically being rejected. Going to refinance after closing to get some of that cash back. I'm assuming that's a cash out refinance?

I contacted several banks and lenders and it was a huge pita being self employed. I only found one lender that would work with me and pre-approved me for up to like $400k. Luckily we found a much more affordable home so I won't be needing all that but the process has really been pretty crappy because I'm self employed.

It's funny because back when I bought our current home I also owned a condo and was making significantly less than I make being self employed, however I had no issues getting a mortgage then.

[RickFLM4]

Originally Posted by dreamingat30fps

I think I may be in a similar situation soon. Suppose to close on house next month, made cash offer because everything else was basically being rejected. Going to refinance after closing to get some of that cash back. I'm assuming that's a cash out refinance?

I contacted several banks and lenders and it was a huge pita being self employed. I only found one lender that would work with me and pre-approved me for up to like $400k. Luckily we found a much more affordable home so I won't be needing all that but the process has really been pretty crappy because I'm self employed.

It's funny because back when I bought our current home I also owned a condo and was making significantly less than I make being self employed, however I had no issues getting a mortgage then.

I’m self employed and just closed a couple of weeks ago on a refinance of our primary home in FL with an internet lender who will end up selling the loan (Sebonic / Cardinal). Not too big of a deal, other than some inefficiencies on their end, but nothing too bad. I was on a parallel track with the same company to refinance a vacation home in NC (so different team) and that was a mess. Constant requests for documentation and dumb questions that told me they didn’t know what they were doing. It was taking so long and then they started asking for documents I already provided so I pulled the plug on it. They seemed to outsource the info gathering to international markets. Fortunately, there was no appraisal so no lost money by pulling the plug.

[Our03z4]

My wife and I both own small businesses so I feel your pain. Luckily I've been dealing with the same very small bank (just a handful of branches) since I was 16. Did a refi last year and it was smooth sailing, nothing additional was asked for. They may not have the newest tech and a little higher rate but there are perks to small banks when you own businesses.

Wish the best of luck to you! Hopefully your wife doesn't take it personally if you need to remove her from the loan. She just needs to realize that the harder you work the more you are penalized, crazy times we live in.

[DETRoadster]

Originally Posted by RickFLM4

I’m self employed and just closed a couple of weeks ago on a refinance of our primary home in FL with an internet lender who will end up selling the loan (Sebonic / Cardinal). Not too big of a deal, other than some inefficiencies on their end, but nothing too bad. I was on a parallel track with the same company to refinance a vacation home in NC (so different team) and that was a mess. Constant requests for documentation and dumb questions that told me they didn’t know what they were doing. It was taking so long and then they started asking for documents I already provided so I pulled the plug on it. They seemed to outsource the info gathering to international markets. Fortunately, there was no appraisal so no lost money by pulling the plug.

OMG, YES! That's the Hell we are trapped in. Luckily I have a folder on my desktop with all the documents they've asked for over the past month so when they want one again it's an easy find.

Last night the loan officer's little assistant guy reached out and asked my wife a bunch of questions. The best of which was "Is there anything else you can tell us about your business that might help us get through underwriting?" Like the 24 months of financial records aren't enough? Now you want color commentary to seal the deal? So is underwriting not convinced by the documents but will suddenly say "Oh, well, now that's she's finally explained by e-mail, in her own words, that the business is super awesome, we will fund this." What specifically are you guys looking for her to add? That the clinic has bamboo floors and one of the doctors cant seem to wash her lunch dishes in the break room? What a shit-show.