About 2 weeks ago, I received a frantic call from my sister, who is out of state.  She informed me that she had just received a bill from her insurance company for her yearly insurance premium.  She contacted the insurance agent about the bill to inform him that she had escrowed for her taxes and insurance and that the bill should have been paid by her mortgage company.  The agent informed her that in-fact it was NOT!

Her call started with, I'm embarrassed to tell you this and I hope your not mad.  She explained the conversation she had with the insurance agent and also that she had contacted her lender to get the paperwork from her refinance several months ago. 

Now, I'm sure your thinking, why did she use another lender?  At the time she was going to refinance, we were not licensed in her state.  She had already contacted her bank, in which she has had a long time relationship.  We went over all the details, gave her all the questions to ask, and made sure that it made sense for her refinance, given the rate and closing cost options she was offered.  It DID! 

The Branch manager of this (large-well know BANK) came to her house for the closing, she again thought she had asked all the right questions, paid attention to all the documents she was signing and was told she would receive a copy of her paperwork within a few days.  As life takes over, sometimes you forget about the paperwork.  This is what happened in her case. 

Now she is freaking out because in fact her taxes and insurance are NOT escrowed, her loan is a Line of Credit for a 1st mortgage, and her payment is currently I/O.  WHAT?!?!   I thought we talked about this, and you asked all the questions?  Her reply, I know, I thought I did too!

After calling the bank where this loan originated, and after pulling a few teeth, she was told she would receive a copy of her paperwork from the closing in a few days.  A week later, still no copies.  Another phone call and obvious irritation from my sister and brother in law to the branch manager, the paper work will be available for pick up the next day.  After receiving the paperwork, there is a PRE PAYMENT penalty!  WHAT?!  We talked about this!

The pre-payment penalty, thankfully is minimal so we will continue with her refinance.  She will actually have approximately 100.00  less payment escrowing her taxes and insurance on a 30 year fixed rate.  The loan with the bank was a 20 year loan.  She is getting a lower rate, the security of a fixed rate, no pre payment penalty and taxes and insurance escrowed with her payment.  She will pay approximately 120.00 a month extra towards her principal balance and have the loan paid off in about the same time had she stayed with the 20 year loan. 

Understanding mortgages is not for everyone.  Asking the right questions and reading all the documents can still get you into something you didn't bargain for.

Working with the right Mortgage Professional is KEY!

Know what your getting into.  Get as much information as you can.  Have your documentation reviewed before funding.

Kim Murphy| Providing Home loans for over 10 years!