You have listed your house for sale. It sat on the market for two years. You cannot stand it anymore and decide to stay and do a little work.  You go to a local lender and apply to refinance your loan.  You are happy. You will consolidate your first mortgage, your line of credit and pull out 50,000 to redo the kitchen.  This will make you feel better and forget that you cannot sell your house and you are compromising. 

You, are perfectly “clean” borrower and post a credit score of 695, make a decent salary and have a few hundred thousand in your 401k.  Bravo! 

After the appraisal is completed and the bank reviews it, you get a call from the loan officer, that the lender has REJECTED your loan!  Why? Why? WHY?  You said I was perfect – a slam-dunk.   

What happened is, that you did not tell your loan officer that your house was recently listed for sale.  We could not sell it! We had it on the market for two years. The banks do not care.  The philosophy is that if your house is listed or has recently been taken off the market, you are still trying to sell it.  Therefore, the work and loan will be a bad investment for the lender, because they will be paid off as soon as you can sell it.  

In light of the fact that the real estate market sucks and people cannot sell, the lenders have loosened up on the rules. FNMA now says, if your house was listed within the last 6 months, you can refinance but the listing had to have expired or been removed for 30 day.  

Previously, the house had to be off the market for 6 to 12 months depending on the lender. For Jumbo loans (over 417,000), the listing has to be over 90 old. Banks will no longer do home equity loans on properties that were previously listed.  

Of course, this is case by case as the lenders put it. The thing is tell someone that your house was listed before you bother. Do not think that pulling the sign out of the front lawn is going to fool anybody either.  They have ways……. 

– Dale Siegel