You put your home on the market in the hopes of selling it. After a few months with no bites, you decide it is time to stop. The hassle of having it on the market is not worth it to you. Instead, you decide to try to refinance in order to save money. However, most lenders will not refinance your loan when you recently had your home listed on the MLS. In general, you must wait six months, but there are lenders who grant exceptions.
Your Future Plans Affect Your Eligibility
There are several reasons lenders care whether your home was recently on the MLS. First and foremost are your future plans. If you had the home on the market, you obviously want to move. What will stop you from doing so in the near future? This hampers the lender’s ability to make a profit on your home. They make their profit not only on the points they charge at the closing, but also on the interest you pay. If you only keep the loan for a few months or even a year, they do not make much on your loan. This makes it not within their best interests do lend you a new loan.
Is it Your Primary Residence?
Most loan programs pertain strictly to the primary residence. This is usually not hard to prove unless you recently listed your home for sale. Even if you pulled it off the market, the suspicion might still exist that you have another property. You will have to prove to the lender that you do intend to use the property as your primary residence. For example, if the appraiser showed up at your residence and you had boxes in the closets or rooms without furniture, it could be a sign that you still plan to move. The lender would become extra suspicious at this point and may hesitate to refinance your loan.
What was Your MLS Listing Price?
You might be shocked to learn that the MLS listing price you had going is not what the lender uses for the value of your property. This is for several reasons. Typically, lenders get suspicious when a home does not sell. Let’s say your home was on the market for 3 months at a specific price. It did not sell. There has to be a reason for it. Now you want the lender to use that value to refinance your home. They may wonder why you did not get that value. Is it priced too high? Is the home in poor condition? Is there something wrong with the area? All of these things factor into your ability to refinance.
How Long Must you Wait?
Here’s the tricky part – every lender has different rules regarding how long you must wait for a home to be off the MLS. In general:
- Fannie Mae rate/refinances do not have a minimum period your home must be off the market. As long as it is not actively for sale on the date your loan disburses, you are clear to close.
- Freddie Mac rate/term refinances require the home to be off the MLS before you apply for the loan.
- Both Fannie Mae and Freddie Mac require you to wait at least 6 months after your home is off MLS to apply for a cash-out refinance. In addition, Freddie Mac requires a maximum 70% LTV for homes on MLS within the last 6 months.
Any loans not owned by Fannie Mae or Freddie Mac are up to lender discretion. Some lenders do not care if your home was on the market, while others won’t touch it for six months or longer. The same is true for FHA-backed loans. The FHA does not have a stance one way or another on MLS listings. As long as your home is not on the market when you close and you sign the document stating you will live in the property for at least one year, you may refinance. Again, it is up to lender discretion.
Have an Explanation Ready
The easiest way to get around any MLS requirements is to have a written explanation handy for your lender. You want to be upfront and honest with them right away too. Let your loan officer know the exact dates you had your home on the MLS and the reasons why. Was it because you thought you could make a good profit right now? Maybe you have to move because of your job or you have another personal reason. This will help the lender decide whether they want to refinance your loan or not. They want to see longevity in your home now. If you state you have to move for work but were unable to sell your home, your longevity is not very likely. This may make a lender decline your intent to refinance. On the other hand, if you say you were moving strictly because you thought you could make a decent profit, but changed your mind, you might have an easier time.
Having your home listed on the MLS may not kill your ability to secure a refinance, but it may delay it. Talk with several lenders to see their position on refinancing after your home was on the market. If you need a loan backed by Fannie Mae or Freddie Mac, the lender has strict requirements to abide by, but if you can go around the conforming loans, you may find a little more leniency in the process.