Refinancing Your Mortgage? 5 Things To Consider.

Refinancing Your Mortgage? 5 Things To Consider.Have you been thinking about refinancing your mortgage?

It is still a great time to do this as mortgage rates continue to be at reasonable levels.

It is also a good opportunity for home owners who are upside down on their mortgages.

According to Yahoo Finance, “the revised Home Affordable Refinance Program, or HARP 2.0, allows refinances for homeowners who owe more than their homes are worth, regardless of how deeply underwater they are.

More information on the HARP 2.0 Program can be found here: www.harpprogram.org.

Last year we took advantage of these low interest rates to refinance our mortgage and I am very glad we did it.

Of course, I only recommend taking on a mortgage for no longer than 15 years and only with a fixed interest rate.

So yes, it is a great time for refinancing your mortgage and here are 5 things to consider as you make this move:

1. Should you Refinance?

Of course with the low interest rates, you can save a lot of money on interest and also pay off your mortgage earlier.

However, refinancing only makes financial sense if you intend to stay in the home long enough to recover the closing costs.

For example, let’s say you have a $200K mortgage at 4%. If you get a new mortgage at 3%, you would save $2,000 per year in interest.

If your closing costs are $4,000, you would need to stay in the home 2 years to recover your closing costs.

2. Check your Credit Report.

The first step any mortgage lender will take is to run a credit check.

Any negative or incorrect entries in your report could cause delays in your refinance process.

Take time to check it and take action to resolve any issues.

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3. Prepare for A Home Appraisal and Credit.

The mortgage lender will require a full credit report including your FICO scores. You will pay for the cost of this report.

The lender will also require an appraisal of your home. Costs for an appraisal can run between $300-500.

You will be expected to cover this cost as well before the refinance is processed.

Be prepared to share any home improvements you have made since you purchased the house with the appraiser.

4. Prepare your Documentation.

The lender will also require certain information such as W2 statements for the last 2 years, bank statements for all of your accounts for the last 2 months, and payment stubs from your last 2 pay periods.

Be ready to provide these documents quickly to avoid any delays.

5. Communicate

Mortgage lenders are dealing with a large volume of refinance requests due to the low rates.

Stay in contact with your lender to make sure they have all the documentation they need and that the refinance is progressing normally.

Just like with anything else that involves your money, you need to stay on top at all times.

Have you thought about refinancing your mortgage? What has been your experience? What other reminders would you add to the list?

The Longest Christmas

three kingsI hope you had a great Christmas Day celebration with your family. For many people, the only thing left of the Holiday season is the New Year celebration. However, if you grew up in Puerto Rico, you know that our Christmas celebration goes all the way to January 6 (at least) when we celebrate Three Kings Day.

On this day, children receive gifts left by the Wise Men which commemorates the gifts the Magi brought to Jesus when they came to worship Him (see Matthew 2:1-12). In addition, there is the tradition of the “Octavitas” which could take the celebration all the way to January 16. So if you love to party, you might consider celebrating Christmas on the Island of Puerto Rico next time.

There is another way in which the Christmas season could be extended for you. If you used credit cards to buy gifts or for other expenses, you could be paying interest on those purchases for a few more months. If statistics are right, not only did you spend more, you might still be paying for those expenses come May.

If the 2012 Christmas season will be an extended one for you, resolve now to pay cash for all of your Christmas expenses in 2013. Christmas is scheduled again for December 25 so it should not be a surprise to anyone. Start planning now:

  • Determine how much you want to spend in gifts, decorations, entertainment, etc. Divide that amount by 12. This is the monthly amount that should go into your Christmas “sinking fund“.
  • Ensure your monthly budget includes a line item for the “Christmas Fund”. You should already be working on your January budget, so you have time to make the adjustment.
  • Stick to the plan!

In 2013, you could have a Christmas celebration without any regrets and without any bills that follow you into the new year. But as it always has been, it is up to you. If you need help, I am here for you. I pray you have a very prosperous and peaceful 2013.

“For which one of you, when he wants to build a tower, does not first sit down and calculate the cost to see if he has enough to complete it?
Otherwise, when he has laid a foundation and is not able to finish, all who observe it begin to ridicule him,”
Luke 14:28-29 (NASB)

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Check Your Credit Report

Have you checked your credit report lately? I suggest you should do so at your earliest convenience.

According to the Federal Trade Commission (FTC):

A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy.

Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.

This really means that you could get 3 reports (one from each agency) within a calendar year. Keep in mind that the free report will not include your FICO score. You could request the score with the report, but you have to pay for it.

This is a step I have been taking for the past few years and I have not had any issues with inaccurate reporting. However, in the last year, I could not get an online copy of the report from one of the agencies.

That should have raised a red flag and should have caused me to ask for a written copy via regular mail from the reporting agency.

However, I did not do that, choosing instead to rely on the reports from the two other agencies. Recently we had started the process for a mortgage refinance to take advantage of the very low rates available at this time.

One of the first steps a mortgage lender or broker will take is to run a credit report from each of the consumer reporting companies. This step will give them your credit score and also flag any negative information in your report.

In my case, 2 of the 3 reports came back with no issues. My credit history was reported as it really was.

Unfortunately the third report included several inaccurate entries which put a hold on the underwriting process for the refinance. That was the report from the agency which I could not get online.

Once I requested the actual report via mail, I found more than 20 inaccurate entries which did not belong to me and of course they were all negative entries.

So what are the lessons learned from this experience?

  • Take the time to request a copy of your credit report. You can order your free annual credit report online at annualcreditreport.com, by calling 1-877-322-8228, or by completing the Annual Credit Report Request Form and mailing it to:
    • Annual Credit Report Request Service
    • P.O. Box 105281
    • Atlanta, GA 30348-5281
  • Get a report from each one of the agencies.
    • They are supposed to cover the same information but there can be differences.
    • In some cases entries in one report will not show up on the other reports.
  • In case you cannot get a copy of your report from the online website, proceed with the phone call or complete the form to request via  mail.
    • Just make sure you get your hands on that report.
    • If I had done this, I would have taken the steps to correct the problem before starting the mortgage refinance.
  • Review your report for any inaccurate entries.
    • Keep in mind that only entries that are inaccurate can be removed from the report.
    • Don’t fall for scams that promise to “clean-up your credit”.
  • If you find any inaccurate entries, contact the appropriate credit reporting agency.
    • Send a letter via certified mail, return receipt requested detailing the inaccuracies.
    • Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information.
    • Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days.
    • Additional information can be found at the FTC website.

A key element in your battle to win with money is to pay attention to all the elements of your financial picture.

While I do not advocate using credit to build your FICO score, I do want to make sure you take the necessary steps to maintain a clean financial reputation.

!Take the time and do it today!

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April in Review

In case you missed any of the posts during April, you can access the posts below. Remember: there is always Help and Hope For Your Finances!

Financial News Articles in April

Quote of the Month

“Give whatever you are doing and whoever you are with the gift of your attention.” – Jim Rohn

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