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Friday, February 15, 2013

Six Ways To Avoid Big Blunders When Refinancing Your Home

1.Ignoring The Age Of Your Old Loan If you are 10 years into a 30 year mortgage when you refinance to a new 30 year loan, you will have to make 10 additional years of  payments to pay it off.  Unless your goal is to free up cash, you should consider getting a mortgage shorter than 30 years when you refinance. That will reduce your monthly  payments without extending your loan payments.

2. Buy A Car Or Changing Jobs The loan approval process doesn't stop when your mortgage is approved. Your lender is likely to reconfirm your employment and financials in the week before your loan closes. So your lender might back away from your if he discovers you changed jobs or incurred more debt.
So don't do anything that will significantly alter your credit score until after the mortgage closes.

3. Assuming The Lowest Advertised Rate Is The Best Deal You really can't compare mortgage offers just by comparing rates. A lender could quote a low rate and and jack up the closing costs. When calling lenders, don't ask , "What's your rate?" Ask instead, "Whats your 30 year fixed rate with zero points if I lock it in for 60 days?"  Phrasing the question that way compares apples to apples even if it isn't exactly the mortgage you end up choosing.

4.Allowing Rates To Float Too Long Before locking in a rate, ask the lender what your options are if you over-run your lock up period. Also ask if it's possible to initially allow the rate to float, then later lock it in a few weeks down the road.

5. Letting A Lender Charge You Hidden Points Just because a lender tells you that a mortgage has low or no points does mean it has low or no fees. Points are a type of fee charged as a percentage of the loan. some lenders instead charge steep flat fees so they can tell borrowers  that their loans have low or no points without technically lying. So when a lender quotes you a loan ask if there's a "discount fee", "origination fee" or a "broker fee." These are terms lender use to hide points in the form of flat fees. Also, immediately ask for a written good faith estimate of the mortgage terms. Lenders are required to provide these within 3 days after receiving the loan application. Read it to make sure there are no steep undisclosed fees.

6. Choosing An ARM Because You Expect To Sell Before Rates Reset Always choose a fixed low rate mortgage and lock in today's rates even if you expect to move before an ARM's rate resets. ARM's or ajustable rate mortgages,  are not worth the risk if there's a chance that you will still own the home after the loan rate resets.


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