This could be a great time for refinancing your home in Seattle, WA. What common refinancing mistakes should you make sure to avoid in the process?
Home loan refinancing can be an incredibly valuable financial and life move when done right. It can improve your overall financial situation, empower your goals, lead to saving thousands of dollars, and even help you overcome tougher times.
Though it can also be a frustrating and expensive experience if you make these blunders. Make sure you know them, and how to optimize your mortgage refinance.
1. Being Blinded By The Rate
All too often consumers have been trained to just focus on the advertised interest rate. They’ll hop from website to website or call around just to find who will promise them the lowest interest rate.
Interest rates do matter. In many cases they are a significant part of the equation and whether it makes sense for you to refinance, and the real benefits.
However, there is a lot more to a loan and getting the best mortgage deal than just the advertised or initially quoted rate.
Being too focused on the rate definitely tempts being victim of bait and switch. Some desperate loan officers and banks will promise to beat any other rate you are quoted to lock you in. The rate you end up with at the closing could be far higher than any other quotes you got.
The interest rate is also only a part of the math as to how expensive or great of a deal this loan offer is. Always ask for the APR.
The APR factors in the fees and the rate to show you exactly how much you are paying in effective interest for this loan. So, while one lender may quote a very low rate, their junk fees may be so high that you are actually paying a lot more than another quote with a slightly higher advertised rate.
The APR will give you an apples to apples comparison of which is the cheapest versus most expensive loan.
Which combination is best for you is also unique to your situation and personal goals. You may be happy with more fees or ‘points’ in exchange for a lower rate and payments, with more long term savings. Or you may want to minimize fees to take out the most cash, or lower costs now. Ask your mortgage broker what your options are.
The terms can also be very important.
2. Not Asking About Loan Options
Most borrowers just take the loan offered as it is handed out to them. However, there are many loan programs and loan features to choose from.
If you let them, a great Seattle mortgage broker will help you understand and select the loan terms and features which help you get what you want most and is most important to you.
This covers everything from customizing loan terms and length, to prepayment penalties (or not), monthly payments, escrows, and much more.
3. Not Telling Your Seattle Mortgage Broker Everything Upfront
Sooner or later underwriters or quality control or the closing team is going to find out.
Many borrowers seem to believe that withholding any information that they think may be negative will help their mortgage loan application skate through. That is rarely the case. Even if it does, it can bite you back days, months or years later.
It is far more likely that it will be discovered the day before closing. Right when you were counting on the financial help coming through. At best your loan request while it is re-written. Or it may just be denied. Either way, it won’t be fun or fast.
Instead, tell your mortgage broker everything upfront. Especially if you think it may be an issue. Like you recently changed jobs, may have a tax lien coming, or you lost paperwork and can only provide one year of tax returns.
Then they can help get you into the best fitting loan program, and it may be an even easier and faster process than you anticipated.
4. Waiting Too Long To Refinance
Timing can be important. There are several factors which can make it a better or not as good time to refinance your home in Seattle. Such as your credit and personal finances, current mortgage rates, how eager lenders are to make your type of loan, how long you’ve owned your home, and its value.
However, if it makes sense to refinance now, and the numbers are fair, you can face losing a lot more by waiting. Interest rates can change by the hour. A couple of percentage points difference could mean paying tens and hundreds of thousands more for the same loan by the time you pay it off.
5. Not Questioning Your Credit Score & Report
If your loan officer comes back to tell you that your credit score is much lower than you thought, or there are negative items showing on your credit report, it pays to find out why.
It may or may not negatively impact your loan application and interest rate. Though, if there are mistakes which can be fixed quickly, then you could qualify for a better loan and mortgage deal.
6. Not Thinking Far Enough Ahead
Some homeowners need to refinance for urgent financial reasons. Perhaps you absolutely must reduce your monthly bills before your next house payment is due. Or you may need cash out right away to cover emergency medical expenses, legal fees or other things.
For those who aren’t under such pressure, then it is wise to not only think about next month’s mortgage payment, but the longer term and big picture as well. Balance your immediate versus longer term goals, and your musts versus needs.
For example, is a lower rate adjustable rate mortgage best, or should you be looking for a 30 year fixed rate mortgage? Will lower closing costs or a lower rate actually save you the most money in the long term?
7. Choosing The Right Seattle Mortgage Broker
Above all, borrowers should be prioritizing finding a mortgage broker with a strong reputation for integrity, transparency and getting loans closed.
8. Sabotaging Your Own Application Mid Process
The last thing you want is to derail your own loan application. Specifically avoid any other credit pulls, quitting your job, or skipping mortgage payments.