When the expanded guidelines of the Home Affordable Refinance Program (aka HARP 2) were released late last year, they announced that loan to value (LTV) restrictions were being removed. It all sounds very simple however, no big surprise here, there’s a little more to it.
In years past, refinancing was a fairly simple task. Homeowners would contact me wanting to restructure their mortgage to either reduce their monthly payments or perhaps to take equity to improve their home or pay off debts. Back then, a 680 credit score was considered decent (anything over 720 was great) and people had a good idea of what their homes would appraise for and if they didn’t, I could usually determine a value by obtaining sales comps from a title insurance company. It’s just not so anymore. Refinancing can be trickier because there are “wild cards” involved that may not be revealed until you are deeper into the transaction.
Luckily this hasn’t happened often to me…last week we closed a transaction where the appraised value came in lower than the agreed sales price on the purchase and sale agreement. Ugh!
The property is a nice home in south King County that was originally listed for $275,000. Shortly after going on the market, a bidding war commences and my client “wins” the home after it is bid up to $300,000 which includes building in $6,000 of closing costs to be paid from the seller. My client is putting zero down into the transaction (100% loan to value).