When our automobile needs a tune-up, it provides us with plenty of clues: hard to start, rough running, poor gas mileage, etc. But when a mortgage needs a tune-up it gives no warning. It motors along silently, not telling us that we are wasting money every month. Chances are, if you have not refinanced recently, you are losing money that could be put to a better use. While qualifying for a mortgage is harder than it was in the past, it is not as hopeless as the media and urban legends would have you believe. I am amazed at the number of people who have been declined for a mortgage by a bank, who easily qualified for a new mortgage that saved them hundreds every month.
Upfront applications fees should never be paid to have a mortgage professional take a look at your situation. A small fee for a credit report is acceptable. FHA and VA mortgages often do not require an appraisal for a rate reduction refinance. If an appraisal is required, the borrower should verify, in writing, that the loan is approved contingent upon an acceptable appraisal. The reason I mention this is that I have seen borrowers ripped-off when they spent hundreds of dollars for an appraisal only to be told they did not qualify because of credit scores, debt to income ratios, etc. An ethical mortgage originator (really, this is NOT an oxymoron), who cares about the client, will do a reasonable amount of due diligence on the front end to make sure the borrower has a good chance of qualifying.
A borrower should always remember that rate AND fees are what matter, and not just the rate. Make sure you will recapture any fees within a reasonable time frame and you plan on owning the property at the end of the recapture period. I talked to one borrower who had just refinanced and had forgotten to consider this. While his monthly payment did drop, it will take him almost seven years to recapture his closing costs. Since he is planning on retiring in three years and selling his home to move out of state, this was not a provident mortgage plan.
As always, your mortgage consultant should do the numbers to see what is best for your unique situation.
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