10 Refinance Hacks

January 13, 2016| Dr. Ryan Weston | Real Estate 30

Looking to avoid common mistakes when refinancing? Well, you’ve come to the right place.

Here are 10 refinance HACKS that will save you time, money and a lot of headaches when you’re in Escrow.

1) Don’t open any new lines of credit while you’re in escrow and refinancing. 

Don’t apply for any new loans, store credit cards, car loans etc.. Before your mortgage lender funds your new mortgage, they will pull your credit.

If you’ve opened up new credit lines in-between the time the bank originally ran your credit and the close of escrow, it is possible that your credit score could be lower.

This could jeopardize your ability to close the new loan you’ve applied for.

2) Respond quickly to any items that the bank is asking for.

When you are in Escrow on a refinance or purchase transaction, time is of the essence.

Typically when your interest rate is locked with a lender, that interest rate will be locked for a given number of days (typically 30-45 days). This means that the new mortgage loan needs to fund by the time this interest rate lock expires.

So when your loan officer or processor needs a signed letter of explanation from you, or updated bank statements, don’t wait 2 weeks to provide it to them. Send it back as soon as you can. This way you won’t be scrambling at the close of escrow to try to find a missing document that the bank needs.

3) Get your credit score as high as possible, prior to getting a home loan so that you get a better interest rate. 

The higher your credit, the lower your interest rate and vice versa. Collections, judgements and derogatory payments all negatively affect credit scores. So, if it is possible to get them removed, then it’s probably best to do it before you have your mortgage lender run your credit.

In the event that your credit scores come out lower than expected when a bank runs your credit, you can always opt to purchase credit re-score plans that are frequently offered by the three credit bureaus: Equifax, TransUnion, and Experian.

These re-score plans will tell you which credit lines need to be paid down, in order for your credit scores to jump up. The amount you’ll have to pay in order to increase your credit score is dependent on how much debt you have, and what type of derogatory items are shown on your credit report.

4) Work with a lender you trust. 

Because the goal of refinancing (most of the time) is to save money on your monthly mortgage payment, lenders can sometimes under-quote you and then change the scenario on you at the last minute.

For this reason, it’s a good idea to work with someone who you know will be upfront and honest about closing costs, any fees, and also what the escrow process will look like.

5) Avoid (if possible) making large deposits into bank accounts that are being used as part of the purchase/refinance transaction.

Due to guidelines that are set by the FHA, Fannie Mae and Freddie Mac, mortgage lenders will typically have to source any large deposits that are shown on the bank account statements that you disclose.

Sourcing can sometimes be frustrating and time consuming, so avoid using bank statements with a lot of large deposits if you can.

6) Make sure you wire your settlement costs to Escrow from a bank account that you’ve already disclosed to your lender.

This is one of the more common mistakes that borrowers make at closing. When your lender requests that you wire closing funds to Escrow, they are expecting that these funds are coming from an account which you have already disclosed to them.

In many cases, lenders will want a signed letter of explanation from the borrower stating which account they plan on using for cash to close.

If a borrower transfers the closing funds to Escrow using an undisclosed account, then the bank is going to have to source that bank account. Meaning they will want the last 60 days worth of bank statements from that account, AND they will source any large deposit made into that account.

7) Make sure that your bank will allow you to wire funds from your account at the close of Escrow.

If you are wiring funds from a major depository bank such as Wells Fargo, CHASE, or Bank of America, this shouldn’t be a problem.

However, there are some smaller banks that will only allow you to wire funds if you are physically in the bank.

If there are no bank locations within your state, then that could be a major problem at closing.

With this in mind, if you’re using funds from an account in a smaller bank or credit union, it’s best to check with them first before you’re too far into the Escrow process.

8) Keep making your mortgage payments on the old loan until your refinance is complete (unless told otherwise by the loan officer on your refinance transaction)

Never stop making your mortgage payments, unless you are specifically told to do so by your loan officer. Sometimes borrowers get a little mixed up and think that because they are refinancing, they for some reason don’t need to make their mortgage payment on their current home loan.

If you don’t make your mortgage payment on time, the bank that currently holds your mortgage will most likely charge you a late fee, which you could have avoided.

9) Make sure your property is in good condition before it is appraised. 

This one seems like common sense, however many homeowners seems to think that a hole in the roof, exposed circuits in a wall, or uncarpeted steps on a staircase won’t present a problem for an appraiser or home inspector.

Trust me, it will.

If you’re property needs some R&R, then it’s a good idea to complete all of the repairs needed on the property, prior to getting into Escrow. By doing this you will make your life, and the life of your Loan Officer, a lot less stressful.

10) Choose Monarch Capital as your lender!

Duh.

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