Title-transfer timing key with mortgage in works

Q: Both my daughter and I are named on her mortgage loan and title to her property. My daughter is going to refinance the loan in her name only.

I have filled out a quitclaim deed form to transfer ownership to her. Now my daughter is telling me that if I record the quitclaim deed before she closes on her refinancing, she might not get the loan. How would that affect the loan?

A: The issue you have is an issue of timing. Lenders have rules in place that cover what happens if the title to a home changes shortly before a loan closing. Many lenders look back a year or two to see when the last transfer of title occurred.

In your case, when your daughter’s lender ordered a title report on the home, the home showed you and your daughter as owners without any issues. If you record the deed now, the title report would be in error, and for your lender’s purposes, they would show a sale of the property shortly before the loan closing.

The lender might have to send the loan back into underwriting to clear the sale so close to closing.

For this reason, your daughter’s lender is saying don’t do it.

Having said that, the lender doesn’t mean you can’t ever do it. The best way these things usually get done is at settlement or at the loan closing.

When your daughter goes to close on her loan, she will be on the loan without you. At that time, the lender will need and expect to have you taken off the title to the home.

If you deliver your quitclaim deed to the settlement agent and have the agent record it as part of the loan closing, the recording will go hand-in-hand with the refinancing. We’ve never seen lenders have an issue with doing it this way.

In fact, we think you will find that the closing agent or the lender will be happy to assist you in order to get your daughter’s home refinanced.