For the best refinancing deal, do your homework By Ilyce Glinkand Samuel J. Tamkin Friday, March 4, 2011; 11:36 AM Q. My wife and I are thinking about refinancing our house. We are considering using a particular mortgage broker, but they have had a number of complaints with the Better Business Bureau and have a B rating. So how do we decide whether we should refinance with them? We currently have a fixed 30-year mortgage and a rate of 6.375 percent, but we think we can get a rate around 5 percent. My wife and I both have excellent credit. We are looking for another 30-year fixed with no prepayment penalties. A. Why would you work with a company that has a less than stellar rating with the BBB and has lots of complaints? Why wouldn't you look at four or five different lenders, including national banks, credit unions and another mortgage brokerage firm? You should be working with each, getting their best offer, and then pitting them against each other so that you're negotiating a tough but very fair mortgage offer. Sounds to me that you aren't really doing enough work to know if you're getting a good deal - and that tells me that you're not ready to refinance. With hundreds of lenders out there, you may be able to find a lender with a better rating. The Better Business Bureau rating is only one consideration you should use when choosing a lender. However, if the company doesn't have a stellar rating and many of the complaints are from the office you plan to use, are you willing to become a borrower that has to complain to the Better Business Bureau and lose whatever rate you locked in because you chose poorly? You may find that the larger the lender, the more complaints that they receive. And you should use that information when comparing lenders and consider the size of the lenders. However, the lower rating by the Better Business Bureau may indicate that some complaints may have been unresolved. Take a look at the Better Business Bureau Web site and determine whether there is a pattern or problem with this lender. Also, if the lender is national, you may find that the grade this lender gets is for their complaints across the country. Finally, type the name of the lender and the word "complaint" into Google's search engine and see what comes up. Q. You have written,  . . . When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes. My ex-wife and I were married when we purchased our home 18 years ago; we divorced one year ago. I live in the home, but we both still own it. We are planning to sell the property. Can we still receive the $250,000 per person exemption? A. You live in the property, so you would get the $250,000 exemption. If she lived there for two of the past five years as her primary residence, then she would be entitled to take the exemption as well. Since you are divorced and file separately, you would each exclude up to $250,000. However, nothing is that clear-cut when it comes to the IRS. There are a number of issues that go into determining whether you and your ex-wife would be entitled to the exemption. It would seem that you should be able to get the $250,000 exclusion. But if you are expecting to file your own tax return and get a bigger benefit, you won't. If you file separately - and I assume you now file separately, as you are divorced - you would be limited to the deduction for a single individual. Please consult your tax adviser for more details. Q. I currently have a mortgage with one of the big banks, the ones you call "big box lenders." I consider myself an average, working American struggling to keep her head above water in this economy. I have owned my home since 1997, and with the recent low refinance rates I decided to try to lower my current 6.75 percent interest rate. I started this process in September, and now am no closer to a closing date. My loan officer kept telling me throughout this process that there was nothing to worry about and there were no problems with my application, although the original agreement in writing has long expired. After all the additional paper work and mental exhaustion through the process, my loan officer has come back and advised me that my application is considered incomplete and the lender needs more information. Now they want me to close two of my major credit card accounts. I can't just pay off the balances; I have to close out the accounts, and I have to do it immediately. Can you believe this? I am entirely uncomfortable with this requirement because with the economy the way it is, it would be difficult to get new credit card accounts, and I have had these open for several years. Why are they giving me this ultimatum after many months when I wasn't advised of any problems? They won't guarantee my original interest rate of 4.375 percent, and won't tell me what interest rate I would qualify for even if they do approve the refinance. I feel like I have been swindled. Is this usual mortgage practice? If so, there should be a law against it. A. It may be hard to hear this after all you've been through, but the truth is these folks just don't want your business. They aren't trying to keep you as a customer. They've strung you along and now want you to give up your credit accounts. It doesn't sound right to me. You should abandon this lender and talk (but don't apply) with at least one other mortgage lender, mortgage broker and a credit union, if you are a member of one. If you talk to some of these lenders, you might get a better understanding as to whether the issues you faced with your current lender are real. I'm assuming that nothing in your life has really changed since you applied. Sometimes issues arise that can cause problems, but you should be made aware of them within a couple of weeks, maybe two months, of applying. But it should never take a lender five months to get back to you and tell you there is a major issue with your application. Certainly, if you had failed to cooperate with the lender and get them the information they need, you would be to blame. But if you have given them all the information promptly, the lender is to blame. The process seems to have been mismanaged. If there are major issues that affect your loan application, you should determine what those issues are. If your issue has to do with your credit history, credit problems, too much debt, too much available credit, or income or debt issues, those problems could derail your application with any lender. You will have a real problem refinancing your loan. In some cases when property values have declined, people with good credit have trouble refinancing. Lenders want to see borrowers have a certain amount of equity in a home, a limited amount of debt and a certain level of income. If the amount of equity in a home is low, they will want to see a greater amount of income or a lower amount of debt. You may have fallen into this trap. Still, they should have told you of that months ago. If you bought in 1997, you should have paid down quite a lot of your loan. I'm hoping you have enough equity to qualify for a standard 80 percent mortgage. Get copies of your credit report and home appraisal from your current lender and take them to a different lender. Have the lender go over the information and tell you whether you are a good candidate for refinancing. But don't apply with other lenders yet. When you previously applied, that lender pulled a copy of your credit report. If you now pull another copy, your credit score will take a small hit.You don't need that hit unless you are certain you will apply for the loan. Q. I was surprised that you did not suggest that the 67-year-old man wishing to sell his rental property - which he owns free and clear - sell it as an installment sale. From what I have read of his situation, this would minimize (if not obviate) his potential income-tax liability. My wife and I, both retired, have done this with the rental we no longer wished to own and maintain. A. The question you're referring to was about avoiding paying any taxes on the sale of property. You're right: The reader could sell the property on an installment-sale basis, but if he used an installment sale, he would pay taxes on the money he receives. While in that case his tax burden might be lower, he would also have the ongoing issue of not knowing whether his buyer will make his or her payments, and there would be a risk that he would have to take the property back. Still, an installment sale would have lowered the tax liability on a per-year basis but not eliminate it entirely. Thanks for your suggestion. If you have questions for them, write Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill.