It may be a good idea to refinance your current mortgage in search of a better mortgage loan rate. Just make sure you dont fall for the common mortgage loan refinancing mistakes many others have. The following article contains 9 common refinancing mistakes that are pretty commonplace, and how to avoid them when refinancing a mortgage.
Not doing thorough research on lenders.
Most people are comfortable with their current bank or mortgage lender. This is a bad practice to become comfortable with. You should always shop around for the best rates. If you have a current mortgage lender you prefer you should still shop around and show them your offers and see if they will match, or better yet, beat it. Just like a big purchase, it pays to shop around. You will guarantee this way that you did get the best available mortgage refinancing rate you can. Also make sure to be aware that when you apply for the mortgage refinancing, even if its the same lender you currently use, you will need to re qualify for the loan.
Know when you will start to break even after you refinance
When you decide its time to refinance your mortgage, I can almost promise you will have to pay closing costs. These costs could negate any or all savings you received through the refinancing, at least initially. Calculate the costs of the closing fees and your new refinanced mortgage rate and see when your break in period is. This is when you are done paying any closing costs that have been added in due to the refinancing.
You have not received a Good Faith Estimate from your lender
Any potential mortgage lender should be able to provide you with something called a Good Faith Estimate. This is a estimate that covers the closing costs, any “hidden” fees, and any other fees associated with getting a mortgage refinance. This should be given to you within 3 business days but there is no reason your lender cant give you one earlier if you ask for it.
The Assessed Value of Property should not be considered
The assessed value of property is determined by the local county tax assessor. Your loan amount will not be based on this assessors value. Your property will be valued using another approach called the, sales comparison approach, also known as the cost approach.
Getting an appraisal for a home with low value
If you know that your home is not that valuable, you should not pay to have its value assessed. You should ask your mortgage lender to appraise your house for you using the AVM model (automated valuation model) this method uses other houses in the neighborhood to find a good average house price in any given area.
Do not sign anything without properly reviewing it
Make sure to check, and double check all the loan documents before you sign them. Carefully, read all the terms and conditions of your possible loan before signing. If you can, ask for a copy of the loan documents a few days before the official signing so you can review them on your own time.
Not providing the necessary documents in a timely manner.
Stop unnecessary delays in the closing process by having all the proper documents ready to submit when the lender asks you too. If you delay too long with this, the rates on your loan may go up by the time you are ready to sign.
Not getting it in writing
Sure, there are trustworthy people in the mortgage lending industry, but surely when it comes to this much money, make sure everything is in writing. Often, your lender will give you an initial verbal agreement about your rates. Get him to put those on paper. If its not on paper, its not official.
Using your heloc prior to refinancing
If you have taken out any kind of home equity loan of credit, for anything but home improvements or repairs, do not immediately apply for refinancing. You should wait at the minimum 6 months before approaching a mortgage lender about refinancing. This is the same as taking out more credit, and will be viewed as such when applying for the refinancing.
Making a mistake during the long refinancing process can cost you thousands of dollars, let alone time wasted. Make sure you do all the research you can before entering the mortgage refinancing world.