Alas, after 8 weeks my primary residence mortgage refinance is now done! It took so long that I actually forgot I was refinancing my mortgage until the bank called to ask when I could meet the notary to sign all the documents.
The process was pretty painless since I refinanced with the same bank. I sent them the general paper work such as my W2, bank asset statements, and pay stubs. They did one appraisal which took all of 20 minutes and all I had to do was wait four more weeks to get it done! The refinance this year was much easier than the refinance in 2010, boding well for the thousands of others out there who are also looking to refinance their mortgages.
I learned some new things beyond the basics which you might find useful in your mortgage refinancing or initial mortgage application process.
MORTGAGE REFINANCE TIPS TO THINK ABOUT
* Try and refinance with the same bank. If you go through the same bank, you might get some extra discounts given you are an existing customer and they want to keep your business. In my case, they gave me an extra 3/8 credit and waved the $750 home appraisal fee so that there were no out of pocket expenses. Furthermore, they had all the basic paperwork already and just needed some updated forms. Staying with my existing bank made things much easier.
* You have one free pass. Even after you “lock” in your mortgage, once your application gets approved you are able to ask for a lower rate if rates decline in the application approval process. When I locked my 3.25% 5/1 ARM rate, the 10-year yield was at 2.1%. Not bad I thought. In the next two weeks, the 10-year yield plummeted to as low as 1.75%, or a full 35 bps lower. Rates were very volatile and settled somewhere around 1.88% when I asked if they could lower my rate further. They said yes, and lowered my rate to 3.125%.
* ARM loans are assumable. Let’s say I want to sell my primary place in two years and 5/1 ARM rates rise to 8.125% due to inflation and a recovery in the economy. If the buyer qualifies, s/he can assume my 5/1 ARM at 3.125%, thereby saving 5% in interest expense! A lower mortgage rate is a huge benefit to the buyer because it allows the buyer to pay more or get more home. In effect, you have shorted a bond in the amount of your mortgage and will capitalize on the gain.
* Title insurance is extremely important. In fact, title insurance is like the bible for your property. A title insurance policy is a contract of indemnification for loss by encumbrance, effects in the title, or invalidity, or adverse claim to the title to the real property that may occur prior to the effective date of the policy. In other words, the title company guarantees the veracity of the property you are purchasing or selling. If there are any discrepancies or disputes, the title insurance company will fight for you. Make sure you keep a copy! You never know who will try and make an adverse claim on your property 30 years from now.
* Leverage the internet. The internet has made finding the best home mortgage rates easier than ever. It’s like going to Best Buy and checking out the products but buying them online for cheaper. Online mortgage firms like Quicken Loans have much smaller overhead costs compared to bricks and mortar banks. As a result, they can pass on their savings to their consumers.
If you haven’t considered refinancing and can, please do so. Rates from all along the curve are down by at least half a percent since 2010, which is the minimum spread you should consider before refinancing. You must take advantage of the Federal Reserve’s policy of pushing rates lower. Improving your cash flow is what it’s all about in personal finance!
Recommendations For Protecting Your Assets And Saving Money
* Check Your Credit Score: Take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance! The average credit score for rejected mortgage borrowers has risen to 722 due to more stringent lending requirements. Do you know what your score is? If you don’t want the credit monitoring service, simply cancel before the grace period is up.
* Manage Your Finances In One Place: The best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing and how my net worth is progressing. I keep track of all my properties with their easy to update net worth dashboard. The best tool is their 401k Fee Analyzer, which is saving me $1,700 a year in fees I had no idea I was paying.