4 mortgage refinancing blunders to elude

April 08, 2013   Written by Administrator

Refinancing your mortgage could be the best thing to make the most of the historic low interest rates. Refinancing helps you to save your precious money that is being wasted in the high interest rate.

However, very few homeowners accomplish in making the most of their refinancing. Why only few homeowners accomplish in getting maximum output of their refinancing? It is because most of the homeowners do not follow the guidelines and, made some severe mistakes which affect their refinancing process.

 

Following are the four most common and deadly mistakes that should be elude to get the maximum result of mortgage refinancing.

1. Handing over the wrong account information:
When you go to your lender to refinance your mortgage, he will ask for your financial documents especially your bank statement. This is where most of the homeowners betray their lender by providing the bank statement of another account from which they are not going to use money for refinancing process. This jeopardizes their mortgage refinancing. According to Bill Rayman –a mortgage consultant with Mortgage Capital,

“This is a mistake that often comes up during a loan process. I've had clients give me checking and savings account information indicating they have the money to close their refinance. But when we get to escrow, they bring the money from a money market account.”

2. Hiding your general information:
Another worst mistake that most of the homeowners commit is not telling general information to their mortgage broker. Here, all means all. Some of the refinancers provide the right financial documents and information but, hide their other general information like their divorce, another home in same or any other state or some other general information that should be provided to your mortgage broker.

It is important because all of your information either financial or general is required for calculating your loan terms. According to Rayman,

“Let's say someone's getting divorced. Maybe they're embarrassed by the truth, or maybe they don't think it matters - so they don't disclose it. But lenders base their calculations on the information you provide, if any of it turns out to be false or not-the-whole-truth, your chance of getting a loan can plummet”

3. Estimating the ideal mortgage rate:
Most of the homeowners assume that they will be going to have lowest possible mortgage rates after refinancing. However, it is just an ideal estimation that you may not get because, the lender will be going to evaluate all your credit history before locking you on any particular interest rate and, rate may go high before your lender locks the rate on which you are going to pay your new mortgage loan. Therefore, does not estimate lowest possible interest rate before you get a rate-lock from your lender because; these numbers change time to time.

4. Purchasing something expensive before your loan locks:
Keep patience while refinancing your mortgage especially when it comes to buy something which is expensive. Refinancing could be a long process and usually, it takes almost two months. It might be possible that you find a deal that you have been looking for a long time but, you must refrain yourself from buying that deal.

Why? Because, when you are refinancing, your lender will calculate your debt-to-income ratio to evaluate the amount that you can get and, buying something expensive will sky rocket your debt. As a result of it, the lender might be afraid that you will not be capable of making monthly payment of loan and, turn down your loan approval.

 

Are the Harsh New Mortgage Rules Justified?

February 25, 2013   Written by Administrator

The Consumer Financial Protection Bureau (CFPB) has revealed new mortgage lending rules to manage the mortgage industry. The rules were set up in response to the insecure lending of mortgages which resulted in foreclosures, bankruptcy and frequent break down of mortgage industry. The aim of the new mortgage rules initiated by CFPB is to provide safe and straight-forward financial products for consumers. These new and safe mortgage rules are known as “qualified mortgages”.

The following are some factors that will justify the new mortgage rules.

1. Potentiality To Pay:
The new mortgage rules by CFPB are also known as “Potentiality to Pay” rules. This is because they are focused on trying to ensure the borrower is able to repay the principal loan offered by the mortgage company.

According to a survey by CoreLogic, “12.8 percent of new mortgages in 2012 didn't meet the "qualified mortgage" standard”

In the past lenders were offering loans to borrowers without determining the state in which the loans would be repaid. The bottom line was they just wanted to make money through transaction fees, and other upfront fees. However, with the establishment of the new rules every lender is required to make a legit assurance of the ability of borrower to repay the loan.

2. Let Borrowers Know Their Rights:
In the past there were instances where the borrower claimed that they had sent payments, or updates while the lender maintained the documents were never received. The new rules are also focused on educating the borrowers on their basic rights. Borrowers will also be entitled to a periodic report which will help both the borrower and service provider- to maintain a record of payments made and, any changes in contract.

3. Protection From Borrower Lawsuits:
Borrowers are protected from lawsuits now because, the new mortgage rules ensure that no approval is given to a borrower who would not be able to repay the amount owed. Therefore, if any lender neglects to meet the guidelines and, approves a loan that is not repaid, the borrower is free from liability. According to Alba of ABA,

”I think this rule what it attempts to do is to lock down today’s conservative underwriting standards and say, this is safe. Let’s avoid the excesses of the past. It’s not trying to constrain credit more, but to avoid slipping back to the excesses of the past.”

4. Less Interest-Only Loans:
Borrowers who long for interest-only loans will feel a change because, after the implementation of the new mortgage rules, it is hard to find interest-only loans. Why? The reason is that the loans that do not require the borrower to pay a principal amount of the loan are not considered as “qualified mortgages”.

5. Limited Fee Charging:
The CFPB has suggested that the lender can only charge the fee that is defined under the new mortgage rules. Therefore, the lenders who used to charge extra fees that were hidden in the contract cannot do so anymore.

Bottom Line:

All in all, the new mortgage rules initiated by CFPB may seem harsh to many borrowers. However, the new mortgage rules are focused mainly to make the mortgage lending process safe and, keep the real estate market stable. According to Central Coast Lending owner Dan Podesto,

“My initial response is that the rules are very general, and describe the lending standards that borrowers have been subject to for the past 4-plus years. This announcement will have little to no impact to lending today, but may prevent problems in the future when appetite for risk grows”

 Read Top FAQ’s on New Mortgage Rules By CFPB