VA Mortgage Refinance Question

Question

We have paid $400.00 for this refinance with the local bank we continually have our checking account and mortgage with.

We have been waiting for the weather to be above freezing in order for our contractor to do garage door repair and painting required to complete the loan requirements.

Last week we received an email stating that unless the repairs are completed by March 10 we would have to pay extentions of $150.00 per week or forfeit our $400.00 and stop the loan process.

This does not seem like a fair practice especially because we have no control of the weather and we were not advised of all this when we began this process. Is this fair? What can we do? What other options do we have?

Answer 1

Have you tried contacting your loan officer?

My best guess, based on the information you've provided, is that when you first spoke to someone several weeks ago, they locked in your rate for a specific amount of time. This is fairly standard with any mortgage and generally assumes that the loan will be closing by a certain date. If the loan didn't close by the date specified and rates changed, they would need to extend the lock in period or start over when you're in a better position to complete the process.

Additionally, I'm going to assume that the $400 was for an appraisal. That's based on the fact that every time I've paid for an appraisal in my life (half a dozen or so) it cost around $400 (give or take $50).

The bad news: If I'm correct, you can't get your $400 back and the bank probably has good cause to charge you the $150 per week to continue the loan process.

The good news: If it's going to be a while before the weather allows your contractor to do the work, the appraisal doesn't need to be redone (this next part is important) assuming the comps listed don't age beyond six months between now and then.

What you should do

Don't assume I know what I'm talking about. I'm guessing based on past experience and what you've told us. Call your loan officer at your earliest convenience and verify what you've paid for, what you will be paying for (if you elect to pay the $150) and what you will have to pay for in the future if you don't pay for the extension.

Whether or not you should pay the $150 per weeks depends, primarily, on two factors.

1. The weather: If you live in Northern Montana and it's not going to warm up for another 2 months, I'd consider letting it lapse. If you live in South Carolina, it's above freezing today so write a check and call your contractor.

2. Interest rates: I don't know what they're doing right now but your loan officer will. If you have a vague target of when the work can be done, he or she may be able to tell you what they expect rates to look like at that time. Based on that, you can make a better decision as to whether or not the $150/week is a worthwhile investment to keep your current terms intact.

Answer 2

A couple of points on this:

First, I just want to say that I've been a mortgage originator for over 12 years, and have worked with almost every major bank (minus BOA), so I know the nuances between organizations.

1. It seems to me the $400 was an application fee. If it was, that's mistake #1--NEVER pay application fees, they're BS. I run my own branch, and I can literally make up any fee I want, including the amount--I don't, but if I did, and you agree that's your problem. The application fee is simply the bank being greedy--trust me on that. If someone says, we'll you need to pay $XXX application fee, the response should be fairly straight-forward; it goes a little like this: "I'm not paying that fee, neither now, nor at closing; you can either waive it, or I will take my business elsewhere." Then make good on your word.

2. If I'm wrong on this, and the $400 was for an appraisal, then that's just fine. The VA requires lenders to share appraisals. If they start messing around with adding fees, just go to a competitor. The appraisal will be logged into the VA system, and any other VA lender can use it--In fact, MUST use it.

3. It is likely that the added fees are extension fees. If they are extension fees, there should be an option to extend for longer, or even allow your lock to expire and then relock without fees. Be careful, and make sure you know all the rules before making a decision on this, there are some pitfalls depending on your banks rate lock policies.

Hope this helps.