California Refinance Mistakes to Avoid!

Mortgage and Lending with CA DBO & NMLS#333440

1. The new interest rate does not justify the refinancing
Before you go ahead and refinance your California mortgage, you have to make sure that the change will save enough to justify the whole process of refinancing. As a rule, if the interest rate does not decrease by at least .0075 (.75 %) to .01 (1%) the refinancing is probably not a good move.

2. Not knowing your real closing costs
Closing your California mortgage is usually a charged service. By law (in the United States), closing costs must be disclosed within 3 working days of the loan application. Each lender has its own way of calculating the closing costs. Initially, your closing cost are an estimate. However, once your specific loan details are known, the closing costs are no more a mystery. Use the worst case scenario, if you still make a profit with that scenario, and if your new interest rate justifies it, you can consider refinancing.

3. Knowing why you are refinancing
A lot of people refinance just to reduce their interest rate. This is not always at your advantage. You have to make sure that you recoup all the cost that are involved in the refinancing operation. Some other reasons might force you to refinance. One of them might be debt consolidation, another one, some home improvements, or another large purchase. Some of these options may offer you some other financial advantages or personal advantages, like using some cash to purchase a car. In some cases you may be able to deduct some of the interest charges on your tax return. Any big decision like this one should always be preceded by a consultation with an expert (accountant or tax attorney).

4. Only listening to the APR advertising
The Annual Percentage Rate (APR) is not everything. Very often brokers will use the APR as a "teaser". This will get your attention, but the refinancing could cost your more than what's advertised. Such low rates are usually calculated by using a 30 year mortgage loan, together with an accelerated bi-weekly mortgage plan. Very often, lenders will let you, AT NO EXTRA CHARGE, select an accelerated bi-weekly mortgage plan. Make sure you know all the facts before you start any California refinance.

5. Not knowing the mortgage broker's plan details
It's simple, you want to do your refinancing in the shortest amount of time, and with as little hassle as possible. Ask your California mortgage broker if he has performance guarantees and service plans. If he does, make sure your California mortgage broker offers the quality of service you need.

6. Not knowing the broker's products
If you don't ask, you won't get. If all the California mortgage brokers were equally created, you wouldn't have to, but it's not the case. You have to know what your broker has to offer you, what loan products are available, the terms and the rates. Sometimes, just what looks like a subtle difference, could save you (or cost you) thousands of dollars.

7. Failure to examine your credit problems
The majority of people have no idea what type of credit they have or how to repair any unfavorable credit which may exist. They fail to realize that credit is one of the key factors in refinancing a current mortgage. Credit problems not only bring down to a crawl the process of getting a loan, but can damage your ability to make numerous other purchases.

8. Not knowing how much money a lender is willing to loan you
If you are planning on refinancing your home, you must be aware that most lenders have strict guidelines on how much money they are willing to lend. The lender's decision is usually based on your loan-to-value ratio. In other words, mortgage lenders have limits on how much money you can borrow based on the value of your house.

9. Failure to find a reputable and experienced California mortgage lender
You must associate yourself with an honest, high quality, and service-oriented California home loan lender. This is probably the most important ingredient in finding good home refinancing. Dealing with the right lender can mean the difference between having your loan refinancing approved or rejected.

10. Lying to your California mortgage loan lender
There is nothing like the truth. If you already owe too much, refinancing might not be the best move. Be ready to give all the information the California mortgage broker requests (income tax information, credit card balances, other loans, current mortgages, etc.)


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Joe Almirantearena

Vice President of Mortgage Lending
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