7 Most Common Mistakes Made Associated With Refinancing Your House
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7 Most Common Mistakes Made Associated With Refinancing your house. The seven most common mistakes are.. 1. Refinancing with your existing lender without shopping around. Your existing lender may not have the best rates and programs. There is a general misconception that it is easier to work with your current mortgage company. In most cases your current mortgage company will require the same documentation as other companies. This is because most loans are sold on the secondary market and have to be approved independently. So even if you have been very good at making payments to your existing lender, they will still have to do their verifications all over again.
2. Not completing a break-even analysis. Find out what the total cost of the refinance is, then figure out how much you will save every month. Divide the total cost by the monthly savings to get the number of months you will have to stay in the property to break-even on your refinancing costs. Example: if your refinance costs $2000 and you save $50/month your break-even is 2000/50 = 40 months. You should refinance if you plan to stay in the house for at least 40 months.
3. Not getting a written good faith estimate of closing costs. Your mortgage company is required to provide you with a written good faith estimate of closing costs within 3 working days of receiving the application. 4. Using the county tax assessors value as the market value of your house. Mortgage companies do not use the county tax assessors value to determine whether they will make the loan. Instead they use a market value appraisal which may be very different from the assessed value.
5. Not providing documents to your mortgage company in a timely manner. When your mortgage company asks you for additional paperwork- jump on it! Do not complain. They are trying to get you approved, not trying to hassle you unnecessarily! Jump through the hoops as quickly as possible. Many borrowers do not respond to documentation’s need quickly and can wind up paying higher rates if the rate lock expires. 6. Not getting a rate lock in writing. When a mortgage company tells you they have locked your rate get a written statement which details the interest rate, the length of the rate lock and details about the program. 7. Getting a second mortgage before you refinance your first mortgage. Many mortgage companies look at the combined loan amounts (i.e. the first loan plus the second) even when they are refinancing the first mortgage. If you plan of refinancing your first, check with your mortgage company if getting a second will cause your refinance to get turned down.
The loan professional that has made this information available to you specializes in assisting those individuals with obtaining a home loan whether for purchase or refinance. Your loan professional in most cases can advice you on the best approach and help you with your specific loan requirements.
