Nationwide Home Mortgage Loan Company

It is very important to enter into a mortgage with a clear set of goals which contain the best possible scenario and the least attractive scenario you are willing to take. As simple as this sounds, many people begin the mortgage process with the plan “get me your best deal”. This rarely works in the borrowers favor. The most important thing about setting goals prior to contacting a mortgage company is the ability to clearly communicate to your loan officer what your boundaries are for the transaction.

If not, you could spend your time traveling down the road for weeks and find out right before closing that the deal on the table isn’t even close to what you expected. When a loan officer hears “get me your best deal” they do just that. However, they usually do this without regard for what your primary reason for refinancing really was.

For example, lets say you wanted to get $10,000 cash out during your refinance to pay off a debt to your brother and your current rate is 6.5%. Let’s also assume that after the appraisal is finished the equity position does not allow you to take out this amount of cash, or if it does the rate is really crumby. If you have told the loan officer to “get me your best deal” and not communicated your goals clearly you may get a phone call like one of these days before closing:

• I have your loan approved Mr. Customer however we were only able to get you $3,000 out…or
• Mrs. customer we were able to get the the $10,000 you asked for however due to your homes value your rate is going to be 8.5%…

This very scenario is played out hundreds of times each day in the mortgage business. Okay, maybe not hundreds “each day” but you get my point. The fault mostly falls on the loan officer, she is the professional and she should have drawn clear goals for you. However, most loan officers are commissioned as opposed to salaried. They also know that most people who go all the way down the road with a mortgage and are ready to close will ultimately close anyway on a loan they are not happy with. Sad but true…

This very scenario is probably the primary reason why people give the mortgage industry low marks for customer service. Keep in mind though, if you take a few minutes to think about what you are willing to accept and what you are willing to accept and what you are not willing to accept you can avoid this.

In short, when refinancing there are two types of transactions, a “rate and term” refinance and a cash-out refinance. Cash out refinances have slightly higher rates and slightly lower “loan to value” ratios that the investor will allow. Meaning, if you tell the loan officer “all I want to do is to lower my rate” and half way down the road you say something like “hey, can I get $xxx when we do this too? (this happens quite often)” The loan officer will probably say “sure” , however they may or may not tell you the consequences of your request until closing.

There are many other examples how a lack of planning can throw a wrench into a mortgage transaction that can be found. The cardinal rule is, if you want a lower rate make this your primary goal and decide the thresh hold of what you feel that rate needs to be to make the transaction worth your while. (Here is a calculator that helps answer the question “Should I refinance or Not”) If you would also like cash out make sure the new rate falls within your thresh-hold.

If your goal is to get cash out to pay debts or have” cash in hand” you can use the calculator above to determine what rate and loan amounts will be your breaking point in the transaction. Just remember, after speaking with a loan officer ALWAYS get a “Good Faith Estimate” to record the deal that you have discussed with them. If you do not you can expect surprises.

Tags: Discussion, loan officers, Mortgage Basics, Mortgage Tips, refinancing, setting goals

This entry was posted on: Saturday, June 7th, 2008
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