Many mortgage service companies are beginning to refuse subordinations. When you have a second mortgage or home equity line of credit, that mortgage lender has approved a first mortgage refinance. In the past, this used to be no big deal. However, now that values are falling and second mortgage lenders bear most of the default risk, they are refusing to subordinate to a new first mortgage even if a refinance of the first mortgage is less risky than the original mortgage!! We are finding that very few mortgage lenders will subordinate a 2nd mortgage if the combined loan-to-value is above 85%. I wrote about this practice earlier this year.
Mortgage lenders will likely always put a heavy weight on credit scores. It’s no secret that the low teaser rates that home loan lenders advertise typically require a fico score above 720. Let’s face it having a 719 fico is still great, but it could cost you .125 to .25 on your interest rate. Over a thirty year term that would equate to thousands of dollars. So any way you look at it, credit scores are still important when refinancing to save money.
