How to refinance your mortgage during the coronavirus pandemic

The woman who approached our doorstep Monday morning was wearing a mask, her eyes doing their best to smile a greeting. She was hugging a folder and a bundle of papers.

I held the door open for her but didn’t extend my hand for her to shake. Nor did she, as she introduced herself.

“This must be so weird for you,” I said. My voice felt muffled by the cloth covering much of my own face.

A loan closing agent, she was at our house so I could sign the many documents needed to wrap up refinancing our mortgage. I had applied a lifetime ago — Feb. 27 — via Quicken Loan’s Rocket Mortgage. Exactly two months after my application, the process was coming to an end in a coronavirus-esque way: Masks on, extra space between the agent and me. 

While I worried periodically over the last 60 days that the country’s economic woes or lenders’ tighter standards would somehow upend a four-year-long goal of refinancing our privately held mortgage, it didn’t go down that way.

Closing was successful (more on that farther below). And I’m glad the refinance is finally done — my husband and I will save nearly $450 a month.

The process was stretched out due to some hiccups along the way, including the challenge of getting documents and information from our private mortgage holder, who had recently moved overseas.

Also unexpected: My employment was reconfirmed shortly before closing. Bill Banfield, Quicken’s executive vice president of capital markets, told me that’s due to the current economic environment.

“We’ve had 26 million people file for unemployment over five weeks,” Banfield said. “Every lender, including us, wants to help people take advantage of today’s low rates, but we need to validate as close to closing as possible that people are still employed.”

(Note: I chose Quicken randomly from a list of online mortgage lenders such as SoFi or Bank of America. And, no one at Quicken knew I was planning to write about my experience. Banfield and I spoke several days after the loan closed.)

I also ran into some other things that are worth sharing with anyone who explores an online mortgage or refinance.

There are sites that let you enter your credit score to see what type of refinancing terms you may qualify for. However, unless you input your “classic” FICO score — which most mortgage lenders use in their decision-making — the output may not really be applicable to you.

Generally speaking, the score tracked by many consumers is not that classic FICO score. This means there could be a difference between the score you follow and the one used by your lender. While I’ve known about this phenomenon, I didn’t know whether I’d see a big disparity.

In my case, my VantageScore (available on Credit Karma) was approaching 800. The actual score pulled by Quicken was just shy of 750. While I can’t say with certainty how much it affected the terms of my refinance offer from Quicken, excellent credit scores — 760 or higher for mortgages — typically snag the best offers. We locked in at 3.5%, although we also paid two discount points to do so (one point is equal to 1% of the loan).

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Additionally, when you start the application process, the lender will ask to make a hard inquiry on your credit report. That action may hurt your score temporarily. The good news, though, is that you get 10 days to apply for better terms elsewhere without additional inquiries dinging your score further.

I did not see better offers elsewhere — in addition, the U.S. was beginning its slide into economic uncertainty and I was fearful of starting the process over — so I stuck with Quicken.

The faster you can provide your new lender with all the documents requested, the faster you can go to closing, even in these odd times.

The 60 days that it took for my loan to close is unusual, Banfield said. “Once you give us the documents we need, it’s taking an average of 27 days,” he said. “And 35% of refis are happening in less than 15 days.”

The documents Quicken asked for included my two most recent pay stubs, a copy of my homeowners insurance declarations page, my 2019 and 2018 W-2s (which shows income I earned from my employer), as well as proof of one year’s worth of payments to my current lender.

Generally speaking, you’ll pay private mortgage insurance, or PMI, on loans that are for more than 80% of the home’s value. When you have at least 20% equity in the home based on its then-current value, you can stop paying PMI.

Due to a slightly lower-than-anticipated appraisal on our home and a miscalculation on my part about rolling closing costs into the new mortgage, we have to pay about $16 a month in PMI. Closing documents show that we’ll be able to ask in December for that fee to be canceled, as long as we get another appraisal (which will cost money) and it comes back showing at least the same value used for the refinance.

In some cases, depending on how long that PMI is anticipated to last, you may be able to prepay it at closing and avoid the process of getting it removed down the road, said Al Bingham, a credit expert and mortgage loan officer with Momentum Loans in Sandy, Utah.

“See if you can buy it out,” Bingham said. “Depending on the monthly cost versus the one-time cost, it might make sense to do that.”

Every time I communicated with Quicken with a question about my refi, a response was provided fairly quickly. However, it was a different person responding each time. This didn’t bother me, generally speaking. If you’re counting on some relationship-building, however, don’t go the online route.

I also preferred to communicate via email instead of phone so I could avoid a call that could be time-consuming or ill-timed. And, except for perhaps some miscommunication errors, this method suited me.

Depending on where you live, you may be able to do some or all parts of closing online, said Banfield at Quicken. In some states, though, holding any kind of closing may at all may be harder due to coronavirus-related shutdowns.

In my case, all documents were signed in person, at my kitchen table. Both the closing agent and I remained masked through the process, as we went through the pages and I signed or initialed where required.

I had received an electronic copy of the closing documents, so the previous day I looked through them, closely reading certain parts to make sure I knew what to expect. (It’s also where I learned about the process involved to get rid of PMI in December.) 

Once all the documents were signed, the agent gathered her things. When she reached the door, I noticed she had a disinfectant wipe in her hand. I watched her carefully turn the knob and pull open the door.

And suddenly I thought about how not just “weird” it must be for her — my initial reaction when she first arrived — but downright scary.

As she went through the doorway, I told her I appreciated her willingness to continue working through the coronavirus pandemic and doing her part to keep everything moving. That I can only imagine how hard it must be for her and her peers.

She seemed genuinely appreciative. We chatted through our masks from at least 10 feet apart for a moment longer, the chirping birds seemingly indifferent to the strange human interaction in their midst.

Although the agent and I had sat across from each other for about 30 minutes at the table, I’m not convinced we’d recognize each other if we were ever to cross paths again.

After she left, I took off my mask and washed my hands. Then I went to share the good news with my husband: We finally had successfully refinanced, despite Covid-19.

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