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Buying and Selling Homes

Help need advice on mortgage loans!

16 years ago

Hello everyone! I am considering refinancing my house and I am wondering what is the best way to get a mortgage. I am reading a lot on the internet to try and understand the options but its seems like there too many of them. Also, I keep running in to these horror stories of people that were lied to. Any thoughts on how I can avoid this?

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Comments (6)

dave_donhoff
16 years ago
Hi uaprofessor,

Also, I keep running in to these horror stories of people that were lied to. Any thoughts on how I can avoid this?

A) Avoid the fallacious assumption that you can safely & successfully "shop" for personal mortgage financing in the same manner an actual standardized commodity can be comparison shopped. A good mortgage is always a custom-fit process, and the quality of the end results is a direct function of the financial quality & knowledge of the person that does the fitting.

B) Shop the providing individual, seeking professional quality (as you would for a specializing surgeon, or legal representation,) rather than shopping the numbers ahead of the provider.

C) Keep in mind that the best structure and terms are exponentially more important to your long term best financial interests than the face interest rates are. The lowest rates on the wrongly structured program will cost you more in the end than the opposite.

Hope that helps!
Dave Donhoff
Strategic Equity & Mortgage Planner
mariend
16 years ago
Try talking to your banker, credit union or savings & loan where you already have a relationship with. Remember everytime you put in a request, just for information, it could count against you in your credit score.
Find out about prepayment penalities, and find out after you pay the points etc, how long will it be before you come out ahead. It might be better to pay a extra amount each time for awhile, or a certain amount requested to put on principal reduction.
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Comments (18)
Owning the land does help. However, another thing that goes into it is how long you have owned the land. Depending on how long you have owned it will determine whether you can use cost of the land or appraised value. The appraised value will determine how much you will have to put down. For example, if you just bought the land, the house as built appraises for 350k, and the actual cost to build is 250k, then you have 71% loan to value. However, because you have not owned the land long, they will go with the lower of purchase price or appraised value, so 250k + 37k = 287k which is 13% LTV and you would need to put ~21k more in to get to 80% LTV. BUT, if you have owned the land for a while, the house as built appraises for 315k, and the actual cost to build is 250k, then you have 80% loan to value and you would not need to put in anything more to get to 80% LTV. Finally, if it appraises for less - for example, it only appraises for 260k and costs 250k to build, then you are at 96% LTV and would need to put 42k more in to get to 80%. In this case it would not matter how much you paid for the land or how long you have owned it. I agree with calling around to a lot of different banks. US Bank might have a good loan program, however for our scenario, it was not the best deal out there. Some of the ones I found to be competitive included RBC Centura, Suntrust, BB&T, Wells Fargo, Fifth Third Bank, and some other banks that are very local to our area only. Janilyn, the builders that we interviewed were all able to bid based on plans we drew ourselves in 3D Home Architect / Chief Architect. None of them required any money upfront to bid on the job. Only after we narrowed down the field and then chose a builder did we have the final plans drawn by an architect. If you are choosing a builder model and making minor changes to it, I do not see why he would require money upfront. The appraiser may not necessarily need the final plans either. They can likely appraise with the builder model plans with your changes written in on them. Only once you go under contract with the builder, they often require a downpayment upfront. I would have the appraisal done first before handing over 6k nonrefundable.
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It is really hard to decide; my rule of thumb has always been, which will require the least out of my pocket in the long run? Without doing all kinds of calculations (that I can't do, but I believe that there are websites that can calculate it for you) I can't say for sure. There are advantages to the fixed rate refi, especially lowering the interest rate on your original balance; but could you get a lower rate and less out of pocket from a HELOC, paying it off first with the same discipline that you have been using? Have you talked to a credit union? I did take out a HELOC from my local credit union in order to pay off my mom's condo loan; there were no closing costs, fees, etc and the lowest interest rate in town. That was before the crash -- and it was long ago paid off, so I don't know if such a good deal might still be available. Don't know what repairs you need, but some large companies (hvac, roofing, siding) will offer low cost financing too -- you have to read the contract very carefully to be sure that you are getting what was promised.
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FF, Wow... talk about obfuscation! I would never "bait" anyone who clearly speaks with greater knowledge than mine within his area of expertise Really??? "Never"??? How do you define "never"? More problematic, in my opinion, is when he preaches, as he often does, his gospel of heavily leveraging your house mortgage as a way of getting money to make other financial investments. "Preaching"? "Gospel"? "Heavily"? A) How do you specifically define "heavily" B) Where (links) have I *EVER* encouraged anything LESS than balanced responsibility? We should all realize, I hope, that much of his own financial well-being depends in large part on persuading other people to do just that so one has to wonder whether he should be regarded as an unbiased source when he ventures into financial planning advice. That's defamatory, and precisely the low-road "baiting" that was referenced. The fact that he sincerely believes what he advocates (I'm quite sure that he does) doesn't alter anything. Facts aren't alterable, fortunately. I certainly don't know what that's supposed to mean (do you?) and what I was trying to find out (not very successfully, I'm afraid) is whether he does either. So you can acknowledge yoou don't yet understand the financials I just explained.... yet you are trying to discern if *I* understand what I am explaining (that you do not understand)? Are we all seeing the irony? I do appreciate that our exchange was off topic and I apologize for that. Actually, I think you've been ON topic... the topic being 'hearing that mortgage rates are going up," and whether there was any surprise that the OP had been told such things. It's easy to get suckered into these things and hard to stop when you're having fun. Right, Dave? We do love our fun together, don't we? Cheers, Dave Donhoff Leverage Planner
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I have figured out a budget for getting the house into good rental condition, and I think we can do that for $17K. We are going to proceed with getting a loan from Kevin's credit union (after I get my credit unfrozen) for $100K, $19K will go toward the price above what we want to pay in cash, and then $17K to perhaps $20K will go toward renovations. Whatever we have left over we will pay back to the credit union, but they are giving us a good rate at 3.7%. Whatever we pay off will decrease the amount of time we have to pay back the loan, but not the monthly payments. One repair we will need to make ourselves is the heater for the pool/spa. I estimate this at $3K, but it will be worth it because people have already told me that they are willing to pay the $40-$50 per day charge for heating the pool when they rent in the winter. In May through October, there will be no need to heat the pool, but we need to have that option to offer. The main renovation we will do will be to change the bathtubs to walk-in showers. That's what we want for ourselves, and people have told me that they do not take baths in rental properties and prefer the walk-in showers. Anyway, to answer my original question, it looks like we are going to use my brother's credit union (from Sony) for our loan, and I will be meeting with him tomorrow at 11:00 AM with the loan officer. Tomorrow morning Kevin will do the wire transfer for the escrow from his bank on the Sony lot, and I will meet him after that.
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triciae
16 years ago
If you belong to a credit union; they are often a good place for a mortgage. At the very least, they will be able to explain the terminology & what to watch out for.

Tricia
columbo
16 years ago
Hi uaprofessor,

I was in the same boat looking for my refi. I'm not a mortgage expert and I did not want to become one. I did not feel entirely comfortable having the people selling me the loan explaining the terms to me. That was kinda like having to trust the fox to guard the hen house. I ended up using a serivce called Offer Angel. The web site sent a questionaire to the banks and made my loan officers answer a bunch of questions about the loans they were offering me. The answers were put side by side so I could compare the loans. That part of the serivce was free. The free info was pretty good so I had the company do the customized report for $25. They pointed out some questionable terms on a couple of the loans that I did not even think about. Really all in all a pretty good experience.

Here is a link that might be useful: http://www.offerangel.com
uaprofessor
Original Author
16 years ago
Thanks for your help, I looked at the Offer Angel site and signed up. Thanks for the referral.
columbo
16 years ago
Uaprofessor,

So what did you end up going with?

Columbo

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