10 mistakes people make when refinancing their home.

1. Drawing on Your Home Equity Credit Line Before Refinancing.

Many lenders have "cash-out" seasoning requirements.  This simply means that they want to see a set period of time elapse once you’ve withdrawn equity from your home prior to issuing a new mortgage loan .

Cash-out followed by refinancing may represent a pattern of irresponsible credit use; a red flag for any lender. This can lead to stricter requirements, and a possible rejection of your mortgage loan . A typical seasoning requirement is 6 months.

If you draw money from your credit line for anything other than home improvements prior to refinancing the lender may consider your first mortgage  loan transaction a "cash-out" refinance – simply because you accessed your credit line! “Cash-out” requirements are stricter than other types of refinance mortgage loan transactions and these tighter guidelines can reduce the benefit of a new mortgage loan considerably through higher costs and interest rates.

2. Taking on a Second Mortgage Loan  before Refinancing Your First Mortgage Loan.

Many mortgage loa n companies look at the combined mortgage loan amounts (i.e., the sum of the first and second loans) even when you are only refinancing your first mortgage loan . If you plan on refinancing your first mortgage loan  the lender may require you to pay off both your first and second mortgage loans . Check with your lender to see if having a second mortgage loan will cause your refinance to be impacted or turned down.

In some instances lenders may allow you to keep your existing second mortgage  loan while refinancing your first mortgage loan . This is done by obtaining a “subordination agreement” from the lender who provided you with your second mortgage loan . Talk to your mortgage loan  company if you are interested in keeping your second mortgage loan  while refinancing your first.

3. Not Doing a Break Even Analysis.

Don’t be like so many people who fail to evaluate the money you will spend to refinance when determining whether or not to obtain a new home mortgage loan . It is important to compare your total transaction costs with how much you'll save each month by lowering your monthly mortgage loan  payment. Simply divide the transaction costs by your anticipated monthly savings to determine the number of months you'll have to stay in the loan to recoup your refinancing costs. Or contact Platinum Funding for a free Break Even Analysis.

For example, if the costs of refinancing total $2000, and you save $50 per month, your break-even point is 2000/50 = 40 months. In this case, you should only refinance if you plan to stay with the new financing for at least 40 months.

Note: The above example is suited to comparing two similar  mortgage loans when the intent is to lower your monthly payment and recoup transaction costs relatively quickly. Other refinancing transactions require different kinds of analyses which are beyond the scope of this document. Fortunately, there are many online tools and resources which can help you weigh various mortgage loan options. These types of refinance transactions include switching from a fixed rate mortgage loan  for to an adjustable rate mortgage loan (ARM), or shortening the mortgage loan term by exchanging a 30-year mortgage loan  for a 15-year mortgage loan .

4. Paying For an Appraisal When You Think the Appraised Value May Be Too Low.

Don't pay for a formal appraisal if you think that the home has a low appraised value . Home value is determined by many factors, including location of the home. Lenders use a market analysis based on the value of homes in your area to determine value.  Contact Platinum Funding for a FREE Property Value Check .   It takes into consideration the value of homes like yours in surrounding communities. Avoid the high cost of formal appraisal by utilizing this approach.

Taking this first step will allow us to provide you with a range of possible values. This will allow you to determine if your home is priced within the expected parameters of the financing you are seeking. Especially in today’s market, where home values are stabilizing or declining; it makes economic sense to save your hard-earned money if you will not qualify for the  mortgage loan due to the value of the property. Do not waste your money on a complete appraisal if you believe the home is unreasonably priced. Contact Platinum Funding Now For a FREE Property Value Check.

5. Depending On County Assessor Value When Determining the Value of Your Home.

Mortgage loan  companies do not use the county tax assessor 's value to help determine if they'll originate your mortgage loan. They, like real estate agents, usually use the sales comparison approach (Click here for a FREE market data comparison). The tax assessor’s value is irrelevant to the actual value of your home.

6. Using Your Current Lender When Refinancing.

Although you may have a good history with your current mortgage loan lender, you won't get the best deal when you refinance.  Your current lender will require the same documentation as other every other mortgage brokers, but as you know, you can get at least .75% better rate from a Mortgage Broker than going directly with your current lender.   Each time you refinance your financial picture needs to be re-verified. Your previous mortgage loan represented a snap shot of the past; any mortgage lender (including your current one) will need to start from scratch to verify your current financial situation. You will still be subject to re-qualification; even if you’ve developed a good relationship with your existing mortgage lender.

If you are buying a new home, do your research and shop around for the best deal. Generally, mortgage lenders require the same documentation and approval process that you went through when buying your home originally. Usually, a second mortgage loan  on your home is sold on the secondary  market and has to be independently approved.

7. Not Getting a Good Faith Estimate of Closing Costs.

You will want a good faith estimate (GFE) when securing a refinance mortgage loan . . Within 3 working days after receipt of your completed mortgage loan application , your mortgage loan company is required to provide you with a written GFE of closing costs. However, don’t make the mistake of shopping for your mortgage loan  via a simple comparison of GFEs!

In fact, a GFE that has a substantial portion of the fees marked zero may be a warning sign that not all mortgage loan program fees are being disclosed up front. Make sure to inquire whether all fees are accurately reflected on the document.

8. Not Getting Your Rate Lock in Writing.

Be sure this is in place before continuing the mortgage loan process. Know the length of time the rate lock is in effect, and insure all particulars, such as APR, closing costs, and any other fees are listed. A mortgage loan officer can quote you an interest rate... and within a few hours interest rates change based on always changing economic data impacting Wall Street – the primary driver of interest rates.

When you lock your rate, get a written statement detailing the interest rate, the length of time of the rate lock, and other particulars about the program.  Request a copy of the lock for your records.

9. Signing Documents without Reading Them!

Do not sign documents in a hurry. As soon as possible, request a copy of the mortgage loan documents in order to review what you'll be signing at close of escrow . This way, you can review them and get your questions answered well in advance of your signing appointment. Do not expect to read all the documents during at your closing appointment. You will feel pressure to complete them quickly due to the presence of the notary. Make sure you fully understand the mortgage loan documents you are signing. Be on particular look out for items such as the "Note", that gives a very detailed breakdown of the terms of your loan, p repayment penalties, ARM riders and the Estimated Closing Statement. Bring a copy of your original Good Faith Estimate with you to the signing table so you can compare closing costs and ensure that you are receiving the same deal you originally negotiated.

10. Delay in Getting Documentation to Your Lender.

One of the most common complaints that home owners have when refinancing is that the process takes too long. While a typical refinance transaction should take less than 30 days; it is often up to you to determine how fast your new mortgage loan is funded. When your mortgage loan company asks you for additional paperwork or documentation--get cracking! They are working to approve your mortgage loan, and the quicker you get pertinent documents to them, the better off you are! The verifications, backup documentation and additional information they’ve asked you for has been required by the underwriter after the initial review of your loan. Your mortgage broker is trying to get you approved!

By delaying you simply extend the refinance process. If too much time transpires between your broker 's requests and your delivery of the documents you could end up with a higher interest rate should your rate lock expires.