Tag Archive | “Refinancing help”

10 most common mistakes that people make when refinancing their home

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  1. Refinancing with your current lender without searching for available options.

    Trusting your lender blindly can cost you dear. One of the most crucial mistakes that many people make is that they trust their lender too much at times. Your lender may not always have the best rates and programs. Many believe that it would be easier to work with current lender, which may be totally incorrect. This is because they’ll require the same documents as other lenders and mortgage brokers.  No matter what you do, your lender would still have to process the document verifications all over again.

    refinance home

  2. Not doing a break-even analysis.

    Pre-determine the total costs involved and how much you’ll save every month by lowering your monthly mortgage payment.  Divide the total transaction costs by monthly savings to get the number of months you’ll have to stay in the property to recover your refinancing expenditure.
    For example, if the costs of refinancing total $3000, and you save $50 per month, you break-even in 3000/50 = 60 months.  In this case, you should only refinance if you plan to stay in the home for at least 60 months.


  3. Getting a written good-faith estimate of closing costs.

    Your mortgage company should provide you with a written good-faith estimate of closing costs, usually within 3 working days, after receipt of your completed loan application.


  4. Paying for a home appraisal when you think the appraised value may be too low.

    The evaluation company should carry out a Desktop/drive-by assessment and provide you with a choice of possible values. Your mortgage company can ask an evaluator to do this for you.
    Do not waste your time and money on a complete evaluation if you believe the home is unreasonably priced.


  5. Using the county tax assessor’s value as the market value of your home.

    Mortgage companies, like estate agents, usually use the sales comparison (market data comparison) approach instead of using the county tax assessor’s value to help determine if they’ll originate your loan.

  6. Signing documents without reading them.

    Always take your time in properly reading and assessing the outcome before signing any document. Carefully review all the documents, including copy of all loan documents.  This way, you can review them and get your questions answered in an appropriate manner.  Concentrate on reading only the important/related documents because you won’t have a lot of time to do so.


  7. Not providing your mortgage company with documents in a timely manner.

    You should always keep the additional paperwork prepared for submission (to the mortgage company). If the mortgage company asks you for additional paperwork, you should not waste a day. They’re trying to get you approved!  So, If you don’t quickly respond to your broker’s request, you could end up paying higher rates especially if your rate lock expire.


  8. Not getting a rate lock in writing.

    Always ask for a written statement detailing the interest rate, the length of the rate lock, and other particulars from your mortgage company.

  9. Drawing against your home equity credit line before you refinance your first mortgage.

    If you draw against your credit line for anything other than residence development, lenders will consider your first mortgage refinance transaction a “cash-out” refinance.  This can creates stricter lending requirements and can also affect your deal.


  10. Getting a second mortgage before you refinance your first mortgage.

    It is always advisable to check with your mortgage company if having a second loan will cause your refinance to be turned down. This is because many mortgage companies look at the combined loan amounts (i.e., the sum of the first and second loans), when you are refinancing only your first loan.

 

September 2011
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