Refinance a Mortgage: Pitfalls

Fair Lending Is Required by Law. The Equal Credit Opportunity Act prohibits lenders from discriminating against credit applicants in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, whether all or part of the applicants income comes from a public assistance program, or whether the applicant has in good faith exercised a right under the Consumer Credit Protection Act. The Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status, or national origin. Under these laws, a consumer cannot be refused a loan based on these characteristics nor be charged more for a loan or offered less favorable terms based on such characteristics.

Buying or refinancing your home may be one of the most important and complex financial decisions you’ll ever make. Many lenders, appraisers, and real estate professionals stand ready to help you get a nice home and a great loan. However, you need to understand the home buying process to be a smart consumer. Every year, misinformed homebuyers, often first-time purchasers or seniors, become victims of predatory lending or loan fraud.

In communities across America, people are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who:

-Sell properties for much more than they are worth using false appraisals.
-Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.
-Knowingly lend more money than a borrower can afford to repay.
-Charge high interest rates to borrowers based on their race or national origin and not on their credit history.
-Charge fees for unnecessary or nonexistent products and services.
-Pressure borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.
-Target vulnerable borrowers to cash-out refinances offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.
-“Strip” homeowners’ equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.
-Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.

Remember: If a deal to buy, repair or refinance a house sounds too good to be true, it usually is!

Refinance a Mortgage – Five Things You Need to Know

Shop Around for the Best Mortgage

Shopping around for a home loan will help you to get the best financing deal. Any mortgage, whether its a home purchase, a refinancing, or a home equity loan, is a product, just like a car, so the price and terms may be negotiable. You’ll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars.

Obtain information from as many lenders as possible. Home loans are available from several types of lenders: thrift institutions, commercial banks, mortgage companies, and credit unions. Different lenders may quote you different prices, so you should contact as many as possible to make sure youre getting the best price. You can also get a home loan through a mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they find a mortgage lender for you. A broker’s access to several mortgage lenders can mean a wider selection of loan products and terms from which you can choose. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you unless they have contracted with you to act as your agent. Consequently, you should consider contacting more than one mortgage broker, just as you should with banks or thrift institutions.

There’s no harm in asking mortgage lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere. Once you are satisfied with the terms you have negotiated, you may want to obtain a written lock-in from the mortgage lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid. A fee may be charged for locking in the mortgage rate. This fee may be refundable at closing. Lock-ins can protect you from rate increases while your loan is being processed; if rates fall, however, you could end up with a less favorable rate. Should that happen, try to negotiate a compromise with the mortgage lender or broker.

Use the Internet to get mortgage lenders to compete for your business. There are several sites on the web you can use to do this. Be careful using sites that ask for your Social Security Number. Make sure the sites use Secure Socket Layer (SSL) when entering your information. Many only ask for your contact information and doe not require a Social Security Number.

You should fill out the contact forms located on each of these sites to receive as much information and as many offers for your mortgage as possible. To read more about shopping around sign up for our free guide using the link below.

Up Next: Common Pitfalls and how to avoid them

Refinance a Mortgage – Five Things You Need to Know

Refinance a Mortgage with Poor Credit?

Gone are the days when if you had a credit score less than 600 you could not even dream of getting a mortgage. Today times have changed and for the better. Imperfect credit scores are not proof of an individual’s credit worthiness. Bad financial times can happen at any time to anyone. This one cannot stop anyone from getting a house. Bad Credit Mortgages come in various forms:

Sub-prime mortgage loans
B, C, D, E mortgage loans
No-documentation mortgage loans
Credit-challenged mortgage loans, etc.

It was once considered degrading to opt for a bad credit mortgage earlier and there were certain factors which made borrowers leery of this concept as well. There are many myths associated with bad credit loans. First, the interest rates are sky high. Actually today the mortgage rates have become affordable. But then they are comparatively higher than the conventional mortgages. After all you are credit risk to the lender. Second, too many points are charged. This is absolutely false, as people with credit scores as low as 580 are getting loans with no points upfront. Some mortgage brokers charge five to ten points extra, but all of them do not reach the lenders. The mortgage brokers sometimes pocket some amount of it. You should bear in mind that if the amount borrowed is less, even ten points is very less an amount. Third, you might require a huge down payment. It depends on the lender who is processing your loan. You might very well get a lender who will write the mortgage loan for you with just 20% down or even less. The underwriting guidelines for sub-prime loans are expanding to cover more people.

Last, you will not be able to cash-out. In case of a home purchase chances are one in a hundred say. But if your aim is to refinance a mortgage, then you can get through. With a bad credit mortgage you get an opportunity to clean up your bad credit. Even if you have filed for bankruptcy, you can still get a mortgage and at an affordable price too. The interest rates can be limited to suit your present financial condition by introducing a rate lock. Some lenders even give you an opportunity to finance 100% without any down payment. With sub-prime loans being processed by the lenders who write A- paper loans and the Alt-A market really coming up; more and more people with a flawed credit can get respit.

Refinance a Mortgage – Five Things You Need to Know