Financing and Re-Financing Tips and Pitfalls
Today’s article is going to involve an ongoing real estate issue that’s the most expensive mistake you can make when buying a home. One of them is lenders using your past credit issues against you and you not knowing what to do about it and the other is charging you a lot more than they should when you refinance a home. A couple of examples brought to my attention last week will hi-light the problem.
The first example is a growing family trying to get a bigger home. They had a bankruptcy in 1996 and some late pays up until 2002 when they decided to beat the problem by having the payments automatically withdrawn from their bank account. They have not had a late pay since, yet when they went to get a car they were charged 13%, and in the process of trying to get pre-approved for a home loan are being told that they are going to have a very high interest rate and high closing costs because of their past credit issues. What an outright lie!!
Our second example is a growing family trying to refinance their VA loan was charged $1000’s of dollars for it even though they had great credit and the lender could have performed what is called a streamlined re-fi and it would have only cost the family around $300. No Kidding.
I could continue to give an endless number of examples of lender indiscretion but I think you get the picture. Here are some thoughts that should help you when you are trying to sort through the financing tornado.
The first example is a growing family trying to get a bigger home. They had a bankruptcy in 1996 and some late pays up until 2002 when they decided to beat the problem by having the payments automatically withdrawn from their bank account. They have not had a late pay since, yet when they went to get a car they were charged 13%, and in the process of trying to get pre-approved for a home loan are being told that they are going to have a very high interest rate and high closing costs because of their past credit issues. What an outright lie!!
Our second example is a growing family trying to refinance their VA loan was charged $1000’s of dollars for it even though they had great credit and the lender could have performed what is called a streamlined re-fi and it would have only cost the family around $300. No Kidding.
I could continue to give an endless number of examples of lender indiscretion but I think you get the picture. Here are some thoughts that should help you when you are trying to sort through the financing tornado.
- The biggest cost to you is incorrect financing decisions, not paying too much for the house. Example: you pay $3000 more than you should for the house. you $18 a month. Let’s say you get the wrong interest rate, 8% instead of 6%. On a 100K loan that will cost you $140 per month. Check out multiple sources for the current market rate for loans.
- The following lender fee’s are negotiable: origination fee, discount points, administration fee, processing fee, underwriting fee, document preparation fee.
- A Chapter 7 bankruptcy will only stop you from getting a good interest rate on a home loan for 2 years from the discharge date of the bankruptcy as long as since the discharge you have paid your bills on time and re-established at least one line of credit, even if it is a secured credit card.
- If you did a Chapter 13 bankruptcy, (wage earners payback plan) you are eligible for a standard home loan immediately upon the discharge of the bankruptcy. That’s right I said immediately!
- If you have a credit score of 570 or above you are eligible for a FHA or VA loan, which presently will give you an interest rate of 5 7/8%.
- If you are refinancing a FHA or VA loan do the streamlined version. It does not require recharging you for the funding fee or upfront MIP insurance lowers your interest rate to market rate and only costs approximately $300.
- The smartest thing you can do is work with a good realtor who is knowledgeable about financing and helps you with it. The reason you get taken advantage of is like all professional fields of work the lending industry is filled with some good, fair and bad people in it, and you have to find a good one. Unlike other fields it takes nothing to be a lender or for that matter to open up a lending company. I know of lending company’s where in the weekly office meeting awards are given out to the loan officers who charged the most fee’s on a loan in the last week. I am a realtor not a lender but I spend more of my time helping my clients get the financing right than I do showing property. A good realtor can save you thousands in the buying and selling process.
The Hall Realty Group, LLC.
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