Can I Refinance My Home Loan If My House Is Listed For Sale?
Can homeowners qualify for refinance loans if their properties are listed for sale?
There can be many quirks to refinance loan underwriting guidelines and processes that homeowners and mortgage borrowers may not be aware of. Some of these can revolve around property listings, especially if homes are listed on the Realtor MLS system.
Some refinance loan programs and home loan lenders will not approve mortgage applications if properties being financed are listed for sale on the Multiple Listing Service. Some will go even further and look back several months to see if properties were listed for sale over the past few months.
While this might appear to be just another frustrating quirk to homeowners looking to refinance, home loan lenders do have their reasons. The most obvious is perhaps ensuring profitability. Home loan lenders make the bulk of their money over the long term on interest. It costs them a lot upfront in originating loans, and they also have to maintain reputations with shareholders and secondary market investors. If borrowers are simultaneously trying to sell their properties chances are the loan could be paid off soon, erasing margins for home loan lenders.
Property listings can also raise a variety of other red flags with underwriters. If a home was listed and didn’t sell the assumption is that it must have been undesirable for some reason. Long listing times, and price reductions could create fear of a depreciating asset and loan collateral. Listing prices below what a borrower claims their home is worth might reduce the value a lender would place on the property. This can also be a window for home loan lenders to discover other issues. If the property was advertised as a site for redevelopment they might be worried the property they are loaning on could be torn down, eliminating the security they need to make the loan.
This may not be an issue with all mortgage lenders or on all refinance loan programs, but it clearly makes sense for owners to think before they list, and ask questions before they apply for a loan.