Minnesota Mortgage Blog - MN Mortgage and Real Estate News

TOP REFINANCE MISTAKES

Minneapolis, MN: Mortgage interest rates are great, and everyone is thinking "should I refi" my home mortgage loan? For most people, a home is the biggest investment they will ever make. However, few people do the research necessary to make a good buying decision. The home-purchase process is extremely confusing for most people. With a little bit of homework, and some advice from family and friends who have been through the process before, you can make this a little easier on yourself. There is no substitute for taking the time to educate yourself before you buy or refinance a house, which typically costs you 25% to 40% of your gross income!

#1 Mistake: Refinancing with your current lender without shopping around. Your current 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, this is NOT the case, and 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. Your current servicer / lender also knows you automatically think they are a good place to call, and probably didn't shop around. They clearly take advantage of that. Every single customer I talk with today, I can offer them a better deal then their current lender.

Also be aware that your current lender may appear to cost less because they say they have no, or very low closing costs. When you calculate the higher interest rate vs. closing costs with a new lender, the new lender with lower rates almost always wins. Remember that there is no such thing as a free lunch. Click Here for Closing Cost Information  

#2 Mistake: Choosing a lender just because she/he has the lowest "quoted" rate or cost. Quoting is easy. Anyone can quote. Actually being able to deliver on that quote is something completely different. While rate is important, you have to look at the overall cost of your loan. This includes looking at the APR, the loan fees, as well as the discount and origination points. Some lenders include origination points in their quoted points, while other lenders add an origination point in addition to their quoted points. So when one lenders says 2 points they mean 2 points, whereas another lender means 2 points plus 1% origination. Click HERE for closing cost information.

Other Mistakes:
Not doing 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. Use our Mortgage Refinance Breakeven Calculator

Note: The break-even analysis only works if you are refinancing to save money. If you are refinancing to switch from an adjustable to a fixed, get cash out, or from a 30-year loan to a 15-year loan, it is much more difficult to perform a break-even analysis.  

Thinking you don't qualify: Many people think they can't qualify, and I don't blame them with all the news about today's lender requirements. Take a few minutes, fill out an online mortgage application, and let a professional Loan Officer make that determination. I do this full time 50-hours a week for 20-years, and even I have a hard time keeping up with the rules!

Thinking the county tax assessor's value is the market value of your house. Mortgage companies do not use the county tax assessor's 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.

The cost of the mortgage, however, cannot be your only criteria. There is no substitute for asking family and friends for referrals and for interviewing prospective mortgage companies. Learn how to Pick a Good Lender. You must also feel comfortable that the loan officer you are dealing with is committed to your best interests and will deliver what he/she promises. Often, the company that has the absolute lowest quoted rate (far from everyone else) may not be telling you something. It is hard to compare apples to apples, when someone is slipping you an orange. Also, be sure to read our article "Beware of the BAD, Good Faith Estimate"

BANK LOAN OFFICERS REQUIRED TO REGISTER

Loan officers at banks will now be required to register, and provide their names and fingerprints to a national loan officer database as part of an effort to crack down on shady operators who were part of the mortgage meltdown.

The new requirements were actually mandated by a bill passed in congress over two years ago, but Federal regulators just approved them yesterday (Wed July 28th). The rules apply to employees of banks regulated on both the state and federal level. Mortgage brokers and non-bank lenders are already required to be licensed by the system.

The new bank registration requirement stills leaves a major gap in loan officer licensing. While banks, brokers, and non-bank lenders will all now be registered in the system, only brokers and non-bank lenders (typically called "Direct Lenders") are also required to also have mandatory education, including pre-license education and yearly continuing education.

Mortgage brokers and non-bank lenders are also currently required to take mandatory federal and state tests to obtain their individual license, have criminal background checks, and their personal credit reports reviewed, while bank loan officers do not.

The banking industry fought hard to avoid having their loan officers meet the education and testing requirements, while the broker industry has applauded the requirements, pointing out how brokers will clearly be the lender of choice for smart shoppers wanted good information from educated loan officers.

The gap in knowledge and education between banks, brokers, and non-bank loan officers is expected to grow even greater, as non-bank and brokers who are unable to pass the stringent new testing requirement flee to positions at banks that do not require education and testing. All loan officers perform the same tasks.

The registry is expected to start accepting bank loan officer applications by the end of January 2011.

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We lend in MN and WI ONLY

(c) 2010 - Joe Metzler - Mortgages Unlimited, St Paul, MN: National Loan Officer Lic#274132

Mortgage Interest Rates Hit New Lows

St Paul, MN: Mortgage interest rates fell again last week to the lowest point since the early 1950's, when long-term loans were for just 20 or 25 years, not the 30-year loans that are so popular today.

The rates listed below are the average for last week, and are the lowest since Freddie Mac began tracking rates in 1971.

LAST WEEKS National Average Mortgage Rates WITH POINTS As compiled and reported by: Freddie Mac
For Week Ending: 07/08/2010
Mortgage	Rate	Points
30 Year Fixed	4.57	0.70
15 Year Fixed	4.07	0.70
5 Year Adjustable	3.75	0.70
1 Year Adjustable	3.75	0.60
IMPORTANT: Don't automatically trust lender paid web sites like Bankrate.com and Interest.com for accurate rate information. It is very biased information. Rates are uploaded to the sites directly by lenders who PAY to post rates. Rates there are designed to capture your attention with little to no regards to being factual or applying to your exact personal situation.