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Playing by Rules Speeds Refinance Game

June 20, 1993|ELLEN JAMES MARTIN | SPECIAL TO THE TIMES

Are you one of the holdouts who has yet to refinance? Then listen to the sages of the mortgage world and spare yourself wasted time.

"Refinancing your home doesn't have to be a big hassle," says Stephen Brobeck, executive director of the Consumer Federation of America.

All too often, homeowners take a casual approach to refinance--which ends up costing more of their time rather than less, says Alex Peters, a branch manager for American Residential Mortgage, a national mortgage lending firm.

"Like the moon follows the sun, people think a refinance will just happen," Peters contends.

Many are nervous about getting a mortgage when they first buy a home yet imagine refinancing will be easy in comparison. After all, they reason, they already live in the home and simply want to reduce their payments.

Even if your payments are reduced, however, the likelihood is that your mortgage refinance will require an entirely new loan. And the likelihood is also that your new loan is destined for sale to investors in a faraway city. Your lender must be careful to meet all the standards of the investor community or the loan won't sell.

"Usually, the guidelines are just as strict for the refinance as for the first loan," Peters says.

Learn the rules of the refinance game and it will be far easier to play, the experts say. Here are five suggestions to speed the process:

--Investigate the idea of borrowing from the same lender you used when you bought your home.

"Your old lender knows your payment history--how your loan has performed," says John Hemschoot, director of home mortgage standards for the Federal Home Loan Mortgage Corp. (Freddie Mac), one of the nation's largest mortgage investors.

At the minimum, you'll be spared the need to dredge up a lot of information on your current mortgage--since most of that should be in the lender's computer already. If you're very lucky--and your payment record is good--you may be given the rare opportunity to "renegotiate" your current mortgage rate for a small fee. To keep good customers, some lenders are now letting borrowers simply remake their mortgages at a lower rate--without having to go through a full refinance. The catch is that the rate on a renegotiated loan is usually a shade over the current market.

--Ask whether you're eligible for a "streamlined" refinance.

You may well be unable--or unwilling--to renegotiate your old loan. But if you're dealing with the same lender, you could still be eligible for a streamlined loan--a low-cost, low-aggravation way to rush through the refinance process.

"Potentially, you can save three to four weeks in processing time and also the appraisal fee, which runs $250 to $300," Hemschoot says.

Most streamline programs require a clean mortgage payment history for at least 12 months, no decline in the borrower's income, no cash out of the loan and a prospective payment no more than 15% higher than the old payment.

"If you fit the qualifications, you won't have to jump through as many hoops," says Keith Gumbinger, an analyst for HSH Associates, which tracks mortgage rates for consumers throughout the country.

--Gather your papers before your loan application meeting.

Lenders vary in what they want to see--whether it be pay stubs, W-2 forms, tax returns, bank statements or the deed to your home. The trick in quick loan processing is to ask ahead what's wanted and produce as many of these papers as possible when you first apply.

"A loan application is very paper work intensive. But 75% of those who apply come totally or partially unprepared," says Peters of American Residential Mortgage.

--Get to know your loan processor.

Don't be surprised if the individual who took your loan application--usually known as a loan officer, originator or account executive--is tough to reach after the application is submitted. A loan officer is essentially a salesperson--working on commission--whose aim is to make as many good loans as possible. Once your application has gone in, chances are a loan processor will take over and lead your file through the pipeline at the so-called "back office."

By making a friendly call to the processor and cultivating this individual, you enhance your chances for expedited loan processing. "Don't call up with a bad attitude," cautions Gumbinger of HSH Associates.

--Don't procrastinate in your follow-up.

The proper job of the loan processor is to nit-pick your file. It can be annoying to have to respond to requests for information on your savings account, home insurance policy or credit history. Some requests may seem trivial and others, intrusive of your privacy. But chances are, you'll have to cooperate on each one of these requests or your loan won't go through. If you ignore your sense of outrage and respond quickly, your loan will go more quickly, says Peters of American Residential Mortgage.

"Any little detail--like a pay stub not being there or a missing insurance policy--can stop your mortgage from closing," Peters says.

Distributed by Universal Press Syndicate.

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