Four steps to a stress-free refi
Continuing low mortgage rates helped
keep alive a refinancing boomlet in mortgage offices across the
United States. Whenever refinancing is hot, it makes two things
more likely -- delays at the lenders' office and anxiety in borrowers'
"People want to know, 'How do I get my
loan file at the top of the stack?'" says Lori Vella, vice
president for Washington Mutual.
Here are four things you can do to gain an edge over
other refinancing applicants and to make the loan process run more
Know why you want to refi;
Provide paperwork promptly;
Keep in touch, but not too much.
Know the 'why' of your refi
The first step, figuring out exactly why you want to refinance,
is key. "'Because rates are low' isn't the sole reason to refinance,"
Getting a home loan is like buying a vehicle: You
have many choices, and only some of them are right for you. When
you go to an auto dealer, the salesperson wants to know whether
you want to haul stuff, have fast 'n' furious fun, or feel like
a master of your domain. Depending on your priorities, the salesperson
might recommend a sedan, pickup truck, sports car or sport-utility
Likewise, different mortgages meet a variety of needs.
Do you want to refinance so you will have the lowest possible monthly
payment? (That's a trickier question than it appears.) Do you want
to get rid of mortgage insurance? Do you want to pay off the loan
quicker? Do you want to get cash by borrowing more than you currently
owe? Do you want to brag about your low rate and make your friends
and neighbors jealous?
It helps if you can guess how long you'll live in
"The more prepared the consumer is, the
more that we can give them a tremendous amount of advice and counsel,"
says Doug Perry of Countrywide Mortgage. "Lenders are very
eager to provide a great deal of advice to narrow down the mortgage
products as a means of accomplishing financial goals."
Perry, who is first vice president of consumer markets,
says Countrywide has more than 80 mortgage products, consisting
of various fixed- and adjustable-rate loans for an assortment of
periods. Most brokers and lenders can offer dozens of mortgage products,
just as an auto dealer offers dozens of models and trim levels and
Many homeowners want to refinance to get the lowest
possible monthly payment, but that goal is not as straightforward
as it seems. The lowest possible payment would come from an interest-only
loan, but that type of mortgage is a good fit for only a few.
A mortgage that adjusts monthly or annually will sport
a rock-bottom rate -- that is, until short-term adjustable rates
rise above today's long-term rates. There are "hybrid ARMs"
-- adjustable-rate mortgages that have a low introductory rate that
lasts three, five, seven or 10 years, then adjusts annually thereafter.
Those mortgages work for people who are pretty sure they will move
in about three, five, seven or 10 years.
Perhaps you want to lower your monthly payment, but
don't want to start anew. Just ask the lender to amortize the new
loan for the remaining length of the current loan. For example,
if you are three years into a 30-year mortgage, you can ask the
lender to set up the refinanced loan so that you're scheduled to
pay it off in 27 years. Or you can refinance your home loan to pay
it off in 15 or even 10 years.
Bring your papers, please
When you apply, ask your lender for a list of exactly what
documentation and information you must provide. This step separates
the fast customers from the laggards.
"If I were a consumer -- which I am --
and I wanted to make sure that my transaction got preferential treatment,
or among the best treatment, I would make absolutely sure as a consumer
that I understood completely what was expected of me," says
Mike Rich of IndyMac Bank emphatically, "then I would spare
no horses in getting whatever documentation that was requested by
the lender to that lender as expeditiously as possible."