1. "How Can I Compare Loans?"
 
It can be very confusing to be presented with various loan options, each with different interest rates and points paid at closing.
 
The easiest way to compare apples to apples is to ask different lenders for exactly the same product, and hold one variable constant - either interest rates or cost.
 
For example, you could ask for a Good Faith Estimate for a 30-year fixed rate loan at a 5.25% interest rate.  The only variable that should differ between lenders would be the cost of the loan that you pay at closing.  This could show up as an origination fee, points paid, or both.
 
Alternatively, you could ask for an estimate for a 30-year fixed rate loan at a cost of $1,000 paid at closing, in which case the variable that would differ between lenders would be the interest rate.

 

While some loan officers have access to loan products that others do not, using the method above at least gives you a benchmark by which to determine where you are likely to get the best deal.

 

 
2. "When Is It Worthwhile to Refinance?"
 
The answer to this question depends so much on your individual circumstances that it's really up to a good lending professional to give you the exact answer.  However, here are some reasons why people typically refinance:
 
1. To switch from an adjustable rate mortgage to a fixed-rate mortgage.
 
2. To consolidate a first and a second mortgage into one single loan.
 
3. To save money with a lower mortgage interest rate.
 
Here are two online calculators that might be helpful in assessing your situation:
 
1. The Wall Street Journal's Refinance Worksheet 

2. The Mortgage Professor's Refinancing from One Fixed Rate Mortgage to Another Calculator

 

The second one takes into account the income your money generates when it is not used for your mortgage.
 
The Mortgage Professor site contains a lot of interesting information, including this article on the break-even period of a refinance.  However, please remember that no online source can replace personalized advice, and always check with your trusted lending professional before making decisions related to your home financing.
 
 
 
3. "Where Should I Go to Check My Credit Report?"
 
Any loan officer can pull your credit report for you if you give them some basic information; however, you may find it convenient to check it yourself first.
 
If that's the case, head over to www.AnnualCreditReport.com.  This is a website jointly operated by Experian, TransUnion and Equifax in order to comply with federal legislation requiring a mechanism through which American consumers can receive a free annual credit report.
 
Don't be fooled!
 
There are a number of websites with confusingly similar names, such as 'FreeCreditReport.com' and 'FreeAnnualCreditReport.com.' If you sign up for a free membership at FreeCreditReport.com (which is run by Experian) you will be charged $14.95 a month after your 7 day trial period ends.  So remember, www.AnnualCreditReport.com is the place to go for a free report with no obligation.
 
If you prefer, you can stagger your requests and pull one credit report from each of the three agencies at different times throughout the year.
 
Note:  To see your actual credit score you will need to pay a small fee to each agency.  Currently the fee is $7.95 at TransUnion and Equifax, and $5.95 at Experian.
 
 
 
4. "What Potential Problems Should I Be Aware Of?"
 
1. Property value can be an issue.
 
Recently it has become more common for people to run into the problem of not being able to refinance because their property value is not high enough to create a desirable debt to equity ratio.

 

If you are considering a refinance, please contact me first. I'll be happy to give you my opinion of the price range within which an appraiser would be likely to value your home.  (While I can't guarantee that my numbers would be close to an appraiser's, having my estimate at least reduces your risk of paying for an appraisal unnecessarily.)
 
2.  Pre-payment penalties on a current or new mortgage.
 
Many loans taken out over the last five years contain pre-payment penalty provisions.  This means that if the loan is paid off before a certain period of time (including through a refinance) the lender charges a penalty.  A pre-payment penalty period is typically between one and three years.
 
Tip:  Check your Deed of Trust to see if there was a Pre-Payment Penalty Rider recorded with it, and be extremely cautious if you are considering a new loan that contains a pre-payment penalty provision.
 
 
 
5. "What If I Have a Home Equity Line or Second Mortgage?"
 
 
1. If you want to refinance your first mortgage and you have a second loan (either a HELOC, which is a home equity line of credit, or a second mortgage) the second lender will have to agree to be subordinated to the new first mortgage before you can complete the refinance.
 
If the second lender refuses, you will not be able to refinance the first mortgage.  If they agree, just be aware that the subordination process can add days or weeks to the closing period.

 

Note: It's very important to take this time frame into consideration when deciding on your interest rate lock period. 
 
2.  If you want to refinance both loans by consolidating them into one single loan, the second lender does not need to agree to subordination because you are paying off that loan through the refinance.

 

 

*  One more time, for the lawyers...:) The information above is not professional financial or legal advice.  Please always consult a qualified professional when making decisions about your finances.
 
 
 

 

Links that Make Life Easier 

 

Need something to take your mind off of the economic news?  Try this unusual video from the BBC website.

 

It shows an enormous flock of starlings engaged in what they call an "aerial ballet."  The thousands of birds swooping together looks like a huge column of smoke, and the video is well worth watching.

 

Click here to link to the BBC article, then click the play button on the video at the top of the page.  (You will not have to sit through an advertisement first, the video starts right away.)