Local lenders have credit flowing - at a glacial pace

Looking to refinance your current mortgage? Expect delays ahead. Local lenders I've been talking to in the Cincinnati area are all singing the same tune: they are swamped with people trying to refinance their homes, and those that can refinance will have lots of additional scrutiny to get approved.

Several events have mortgage lenders log-jammed:

• Rates have reached historic low levels
  
• First-time buyers are entering the market to take advantage of the $8000 tax credit
  
• Loan guidelines and rules are changing frequently
• The Making Home Affordable program was implemented to help reduce foreclosures
  

One of the areas where the process is particularly backlogged is in underwriting. As housing declined, many of these lenders laid off underwriters and are now understaffed as new loans make their way through processing. Many are scrambling to bring new personnel on board, but training of new staff requires time from the experienced underwriters causing further delays.

In most cases, lenders prioritize new purchase mortgages ahead of refinancing. Even with priority, some new purchases are taking 45 - 60 days to close compared to a typical period of 30 days. Those in position to refinance should also expect far greater scrutiny of their finances before being approved and expect the process to take anywhere from 30 - 90 days - or longer.

Here are some tips you may want to consider should you want to refinance:

• Be sure to have all your financial records in order including 2 years of tax statements, 30 days of recent pay stubs or other income verification, bank statements and documentation of any assets.
  
• Be prepared to explain any extraordinary and undocumented deposits (lenders will want to know the source of any external funds)
  
• Evaluate fees and requirements on different loan types. For example, an FHA cash-out refi requires two appraisals.
• Different lenders have different programs. Do a little homework to find out which program will work best for you.
  

Good luck!