Refinancing is possible even when the timing is tricky

Mortgage broker: Liz Bayer, ProMortgage.

Property type: Single-family home in Vacaville.

Appraised value: $1.725 million.

Loan amount: $1.2635 million.

Loan type: 30-year fixed.

First note rate: 7.375%.

APR: 7.659%.

Backstory: I was approached by a San Francisco Chronicle reader who wanted to refinance his home into a lower rate, and we were able to drop his rate by more than 1% to lower his monthly payment by over $500 per month.

At this time of year, it can be tricky as it relates to timing because we were approaching the income tax deadline of April 15, which means it can take three to six weeks to obtain tax transcripts from the IRS once the return is filed if we had needed that income to qualify.

In our case, however, we were not relying on his 2023 taxes to qualify, as this was a loan where we used his 12 months of bank statements toward to qualify his income.

Where we did run into a snag, timing-wise, was that shortly before we had started the loan process, the borrower’s current lender had notified him of a servicer change. And my borrower had an escrow account where the lender collected monthly for the property tax and insurance.

The timing of this change happened to also be right before the homeowner’s insurance renewal was due and also right before the second installment of property tax was coming due. I asked my borrower to reach out to the new servicer to confirm that both had been paid, and we learned that neither, in fact, had been paid.

The issue here was that we could not close on our new loan unless these had been paid, either prior to our closing or through the closing.

If paid through closing, then my borrower would have to pay these and then wait to be refunded by the insurance company and the county or the servicer, which could take 30 days before my client would receive the refund back. Not great!

So, while we were ready to close, my client preferred to wait until the payments posted. Unfortunately, we ran out of time before the rate lock expired, and so my client ended up paying for the renewal and tax installment, and will be refunded for this.

» “At this time of year, [refinancing] can be tricky as it relates to timing because we were approaching the income tax deadline of April 15, which means it can take three to six weeks to obtain tax transcripts from the IRS once the return is filed if we had needed that income to qualify.”