REFINANCING

Did you know that the first mistake in refinancing is refinancing with your existing lender without shopping for the best programs that meet your needs?

Your existing lender may not have the best rates and programs. There is a general misconception that is it easier to work with your current lender. In most cases, your current lender 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. Even if you have made all your mortgage payments on time your, your existing lender will still have to verify assests, liabilites, employment, etc. all over again.

Not doing a break-even analysis

Determine the total cost of the transaction, then calculate how much you will save every month. Divide the total cost by the monthly savings to find the number of months you will have to stay in the property to break even.

Example: If your transaction cost $2000 and you save $50/month, you break even in 2000/50=40 months. In this case you'd refinance if you planned to stay in your home for at least 40 months.

Note: This is a simplified break-even analysis. If you are refinancing considering switching from an adjustable to a fixed loan, or from a 30 yr to a 15 year, the loan analysis becomes much more complex.

Not getting a written Good Faith Est.

To determine the breakeven you must first know the estimated total cost of the loan.It is required by law that you receive your GFE within three days after application.

Providing Documents

Not providing documents to your mortgage company in a timely manner when asked can delay or even prevent the loan from closing. Such delays can result in costly both in rate and fees.

Get it in Writing

When a mortgage company tells you they have locked your rate, get a written statement which includes the interest rate, the length of the rate lock and details about the program.

Getting a 2nd lein before you refinance your 1st

Many mortgage companies look at the combined loan amounts (ie, the first loan plus the second) when refinancing the first mortgage. If you plan on refinancing your first loan, check with your mortgage company to find out if getting a second lein will cause your refinance transaction to be turned down.

Taking Cash Out

In Texas, laws are very specific concerning Cash-Out Refi's. To begin there is a twelve day cooling off period once the application is placed with the lender. The loan may not close/proceed during this time of cooling off. Your rate will be on average a .25% higher than a non cash-out refinance and interest only loans might not be allowed. Once you sign the closing documents you will  have three days to change your mind before the loan funds and you receive your money.

Once A Cash Out Always A Cash Out

Also under Texas law if you ever decide to refinance you must first wait one-calender year. Even if you are not taking cash out this go around you will still be charged the normal cash-out fees and the higher rate. This is in place as long as you own the home. You will receive a special disclosure which outlines the Texas Cash-Out Laws.

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