Many home buyers are put in an unpleasant situation when they encounter problems with the home they refinanced. These problems could have been avoided if only the buyer has taken the necessary steps before signing up for the loan.
Here are the top home refinancing mistakes that every home buyer must avoid:
Refinancing your home with your present lender without considering other home loan lenders. Some home buyers think that their present lending company will always give them better rates. However, it is possible to get better rates if you shop around from other lending companies.
Not asking for the written good-faith estimate of your loan costs from your lender. The written good-faith estimate should be given at least a week or days before the day of closing.
Hiring a home appraiser even if the value of your home is too low. Your loan officer should be able to give you an estimate if your home will be worth a full appraisal.
Thinking that the market value of your home will be based on your county tax-assessor’s assessment. Your county tax-assessor’s assessment can be different from the actual market value of your home.
Not reviewing your home loan contract. This is the biggest mistake that home buyers sometimes make. Simply signing their loan contract without reading and understanding the terms and conditions of the loan. There could be hidden clauses included in the contract that can surprise you in the middle of your loan’s term.
Not submitting your loan documents on time. If you want to get a fast approval on your loan, be sure to prepare all the necessary loan documents in advance and submit them to your lending company on time.
Not making sure that your loan has rate lock. A rate lock is very important because it protects you from sudden changes on your loan rates. If your lender assures you that your rate has been locked, make sure that there is written document signed by your lender to prove this.
Relying on verbal agreements. It is very important that all verbal agreements between you and your home loan lender will be put into writing. Verbal agreements can just as easily be overlooked or dismissed. Your loan’s written contract is the only document that binds both you and your lender to your agreement.
Signing up for a lender just because of cheap rates. Yes, it is important to shop around for a loan with a low interest rate. However, keep in mind that there are other fees that are included in your loan. A low interest rate doesn’t necessarily mean that the total cost of your loan will be reasonable. Instead, compare the Annual Percentage Rate of the company since the APR includes the rate of interest, loan fees, discount, origination points and other fees as well.
Applying for a second mortgage right away before refinancing your first mortgage. Lending companies will refinance your first mortgage based on your first and second mortgage. Make sure that your lending company will allow you to refinance even after getting a second mortgage.