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REFI NEWS
2.2
THE REFI
NEWS—ISSUE
2.2
Your Guide to Home
Mortgage Refinancing
and Credit-Related
Issues
In This
Issue
How to Speed Up the
Mortgage
Process
There are two major
ways in which you can
have a direct impact on
the speed of your
mortgage process
– preparation and
research.
Preparation
– You
should always
have the required
paperwork
ready.
Documentation: Varies
depending on programs,
however the following
is a good start: two
years’
W2’s, two most
recent pay stubs, proof
of homeowners
insurance, proof of
assets (most recent two
months or quarterly
statements of 401k,
IRA, etc.) most recent
mortgage statement,
property tax bill, copy
of bankruptcy
petition/discharge if
applicable. If you are
applying for a
“stated” or
“no doc”
mortgage, the same
documentation applies
(except the income
documentation).
Research – It is
important that you have
a clear goal outlined
prior to applying for
your
mortgage.
Here are
some questions
you need to ask
yourself before
you apply.
Do I want an
adjustable or fixed
rate mortgage?
If you are moving in
the next two to five
years, an ARM is
something you should
consider. If you have
some credit issues, an
ARM may also be
consideration because
it will provide you
with a lower payment
during the credit
rebuilding
process.
What
types of terms
should I
consider?
If you are comfortable
with the payment amount
on a shorter term, then
you absolutely should
strongly consider
taking a 25, 20, 15 or
even a 10-year term
opposed to a 30-year
term. If you are taking
an adjustable rate
mortgage this is not an
issue, because the
payment schedule on
this type of loan is
based on either a 30 or
40-year payment term.
All mortgages permit
additional payments
towards principal, so
even if you take a
longer term you can
easily shorten the term
with additional
principal
payments.
What are
my key
objectives?
Are you refinancing to
lower your rate,
consolidate debt, cash
out, or any
combination? It is
important that you
identify your
motivation for
refinancing. If
lowering the rate is
your only motivation,
then comparing your
monthly savings with
the cost to refinance
is important. The rule
of thumb is your
savings over a 48 month
period should, at
least, cover your cost
to
refinance.
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Refinancing – Is
It Right for
You?
The relatively low
interest rate
environment over the
past few years has made
mortgage refinancing
more popular than ever
before. According to
Forbes.com,
“today’s
trend of mortgage
refinancing has
revitalized how
consumers view their
homes and their credit.
A mortgage isn’t
simply a way to
purchase a house over
time; it is also a
valuable and modifiable
credit resource that
can be managed to
provide an optimal
level of comfort and
security.”
How can
you determine if
refinancing is
right for you? By
understanding the
four
W’s:
What is
refinancing?
Why does
refinancing help me
financially?
When is
refinancing the right
choice?
Who should I
choose to help me
refinance my
loan?
What is
refinancing?
Refinancing is simply
replacing your existing
mortgage with a new
one. The new mortgage
typically pays off the
old mortgage in full
and often provides
additional funds for
other worthwhile
purposes. The new loan
can have a different
term, different
interest rate, or even
be a different type of
loan (a fixed rate loan
versus an adjustable
rate loan, for
example).
Why does
refinancing help
me
financially?
Lower monthly
payments: One of the
most obvious benefits
to refinancing is lower
monthly payments. This
will allow you to free
up cash for other
purposes, or reduce the
burden a higher loan
payment is having on a
tight financial
situation.
Tapping into your
home’s equity:
:The equity in your
home is your money
– you should put
it to work for you in
the best way possible.
One way is to use it to
pay off higher interest
loans and credit cards.
This itself may save
money especially
when you consider the
possible tax
advantages. You could
also choose to apply
that equity to pay for
your child’s
college education, or
make some much-needed
home improvements. Just
be certain to only take
what you need to get
your finances under
control. After all, you
will eventually be
paying it back with
interest.
Improving Your Credit:
If your credit score is
being hurt by too many
lines of credit and
debt, consolidation can
often help. You may be
able to improve your
credit by using some of
the equity in your home
to pay off higher
interest loans and
credit cards which may
improve your credit
score
(FICO).
When is
refinancing the
right choice?
You are planning on
owning your home for at
least five more years:
This is perhaps the
single most important
factor to take into
account when thinking
about refinancing. Just
because interest rates
are lower does not
automatically make
refinancing right for
you. Refinancing has
many of the same
closing costs as your
initial loan. If you
are staying in your
home for five years or
less, you should
carefully evaluate your
options, in order to
maximize your savings
and minimize your
costs.
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Your
Adjustable
Rate Mortgage
is due for a
large rate
change:.
Adjustable
Rate
Mortgages
often have
attractive
low
introductory
interest
rates that
hold for a
fixed number
of years, and
then adjust
to a higher
rate at the
end of the
period. If
you are
planning on
staying in
your home for
a while,
refinancing
to a fixed
rate mortgage
just prior to
that
adjustment
can offer
stability
over the long
term.
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You
want to build
equity
faster: Say
you are
holding a
30-year loan
and making
extra
payments to
the principal
every other
month. While
that will
enable you to
pay your loan
off in less
than 30
years, it
could be
smarter to
refinance to
a 15- or
20-year
mortgage
offering a
lower
interest
rate. By
doing so, you
will not only
reap the
benefits of
building
equity
faster, but
you will be
doing so with
a lower
average
monthly
interest
payment. Even
in this
scenario,
however, it
is important
to weigh the
lower rate
against how
long you are
planning on
staying in
your home
after
refinancing,
as well as
whether or
not your
financial
situation is
stable enough
to allow you
to continue
to make
higher
monthly
payments.
Who
should I choose
to help me
refinance my
loan?
You don’t need
to go back to the
company that approved
your first (purchase)
mortgage. In fact, you
may be better off
choosing a company that
specializes in
refinancing. Their
experience may help
streamline the process,
and they may be able to
help you find ways to
save on closing
costs.
Also
realize that
mortgage brokers
are paid fees and
commission. These
are additional
costs that are
built into the
loan. A direct
mortgage lender, like us, does not
have these third
party fees, so
their loans may
cost you less.
You may also wish
to check the
Better Business
Bureau website at www.bbb.org.
Most
importantly,
choose a company
that is
reputable, and
who offers a wide
range of
refinance plans
from which to
choose. We
specialize in
refinance loans,
offering dozens
of different
refinance
programs. You are
certain to find
one that meets
your unique
requirements.
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THE HOMESTAR
DIRECT LOAN FROM METROCITIES
A NEW BREED OF MORTGAGE LOAN
There is nothing more
rewarding than
experiencing
personalized,
world-class service.
Our
fundamental 5-Star
philosophy reflects
this commitment, by
putting the customer at
the center of
everything we do.
Here’s what some
of our customers have
to say about the loan
officers who made their
Homestar Direct
Mortgage a 5-Star
experience:
“The
second experience
with Ms. Sonya
Newman
was every bit as
good as the first
time! As a repeat
customer, I found
that Sonya was
just as
knowledgeable,
diligent and
attentive to my
customer needs as
she was with my
first mortgage
refinance…My
refinance
objectives were
fully met and my
closing was
conducted in an
efficient and
timely manner. I
was fully
prepared for the
closing and
everything
–
ultimately
– went as
expected…You’re
the best!
I’m now
confident of that
for each and
every time. I can
assure you that I
will be a repeat
customer for any
future mortgage
needs and will
happily refer
business to Sonya
Newman and
Homestar Direct
at any
opportunity.”–Darcel
Haes-Blackman,
Piscataway NJ
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Our Associates
“Make a
Difference”
We
are committed to making
your refinance process
as simple as possible.
Our “Make a
Difference”
initiative recognizes
the achievements of our
loan officers and staff
in going above and
beyond the call of
duty.
Gabrielle
Modafferi
Senior Loan
Officer
When
people first meet
Gabrielle
Modafferi, they
are immediately
struck by her
enthusiasm and
genuine love of
people. It comes
as no surprise
that her focus is
on customer
service.
“The way I
treat customers
is paramount to
being
successful,”
explains
Gabrielle.
“It’s
always been an
important part of
every job
I’ve ever
had.”
While
positions in
retail finance
and retail real
estate have
enabled Gabrielle
to hone the
skills needed to
become a Senior
Loan Officer. It is her
background as a
customer service
trainer that has
enabled her to
shine. Gabrielle
takes the time to
understand her
customers’
needs and
concerns, which
goes a long way
in ensuring a
positive
experience all
around. As a
result, not only
is she a member
of our
prestigious
President’s
Club, she is also
a consecutive
three-time winner
of the
company’s
annual
“Champions”
trip, awarded
only to the companies
top
performers.
How
Gabrielle
Modafferi Has
“Made a
Difference”
for Her
Customers:
“[Gabrielle]
went above and beyond
your 5-star service
slogan. I feel you
should put her in a
category all her own.
She makes customer
satisfaction a
tradition, not a fad.
Every time I call
she’s there or
phones me back in
minutes….Not only
did she deliver what
she told me, but was
able to obtain a better
interest rate - talk
about under promise and
over
deliver….People
like Gabrielle
certainly make
companies a pleasure to work
with. Thank you for
employing such a
wonderful and dedicated
person.”–
Brian Naulty,
Eastampton,
NJ
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Builder
Surveys Says
Average Square
Footage Leveling
Off
A new home builder
survey indicates
Americans increasingly
are prepared to pass up
more square footage in
their homes if they can
get better quality
features in something
with a smaller
footprint. After
growing steadily since
1970, the average home
size leveled off during
the past three years,
remaining at about
2,340 square feet. When
asked to choose between
a bigger house with
fewer amenities or a
smaller house with high
quality products and
amenities, 63 percent
of the home owners in
the NAHB survey asked
for better features.
About 57 percent said
they preferred the cost
of those features to be
included in the base
price of the
homes.
The
survey also
found:
The top features home
owners want in the
kitchen are a walk-in
pantry (84 percent),
island work area (77
percent), special use
storage (62 percent)
and built-in microwave
(62 percent). 37
percent said they
wanted their kitchens
visually open to the
family room, with a
half wall; 34 percent
want the two completely
open. The top bathroom
features were a linen
closet (91 percent),
exhaust fan (88
percent) and separate
shower enclosure (78
percent). Nine-foot
ceilings are now a
standard height, up
from eight feet
previously. Younger
households prefer their
washer and dryer to be
located near the
bedrooms; older
households prefer them
near the kitchen. 44
percent of respondents
preferred a brick
exterior. The remainder
were divided among a
variety of
finishes.
Source: Real Estate
Intelligence Report
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Top-
ASK
STEVE
When is s quote a
“real”
quote?– A.
McLeod, Orlando, FL
Unfortunately, the
Mortgage Industry is no
different from any
other industry. There
are many well
intentioned,
trustworthy people, but
there are also a few
that may not have your
best interests in mind.
When you are price
shopping, you want make
sure the Broker/Banker
gives you everything in
writing before you
proceed with an
appraisal.
Lenders/Brokers are
required by law to mail
out their
pre-disclosures within
three days of receiving
a complete application.
These disclosures
document the rate,
term, closing costs,
accounts being paid
off, etc... To sum it
up, if the offer is not
in writing it’s
not an
offer!
What is
an
“Interest-only”
Loan?– S.
Jameson,
Middletown,
NY
The
“interest-only”
loan has become very
popular over the last
couple of years and has
numerous benefits for
many people. An
interest-only loan has
a fixed period of time
(usually ten years or
less) where no
principal is paid off
– only interest
is paid, hence its
name. [Of course, as
with any mortgage, an
individual is free to
make separate payments
to pay off principal at
any time.] At the end
of the interest-only
term, the loan will
convert into a fully
amortizing loan
(repaying the balance
including principal
over a preset term).
Often, people will
refinance before the
interest only term is
up. So what’s the
benefit you may ask?
— Several. First,
very little principal
is paid off in the
first few years of a
conventional 30-year
loan. If you plan to
pay off your mortgage
(whether through
refinancing or sale)
during the first three
to five years, an
interest-only loan may
be a great option due
to its lower initial
monthly payments.
Meanwhile, equity may
have been built up if
the value of the
property has increased
over the same period.
An interest-only loan
can also help people
lower monthly payments
initially to assist
with cash flow. This is
especially helpful for
people who expect their
income or financial
situation to improve in
the future.
Additionally,
an interest-only
loan is useful
while trying to
repair a low
credit rating.
The lower initial
monthly payments
will help with
cash flow while
rebuilding a good
payment history.
Typically, people
with
“less-than-perfect”
credit will then
refinance into a
conventional loan
after their
credit scores
have improved.
Interest-only
loans are great
products for many
people; however,
they are not for
everyone. Be sure
to discuss all
the pros and cons
with your loan
officer to
determine if it
is right for
you.
Steven
P. Weiss, Branch
Manager of
the Homestar Direct group of
Metrocities Mortgage,
has assisted
customers with
mortgage and
financial issues
for over 20
years. Steve
invites readers
to contact him
with their
mortgage related
questions at
Homestar Direct,
115 West Century
Road, Paramus NJ
07652-1450, or by
emailing him at SWeiss@Homestar.com.
Select questions
will be printed
in future issues
of The Refi
News.
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Call
Toll Free: (800)
684-8853
www.HomestarDirect.com
Disclaimer:
The content of
this newsletter
is for general
information
purposes only. It
is not intended
as financial or
investment advice
and should not be
construed or
relied on as
such. Before
making any
commitment of a
financial nature
you should seek
advice from a
qualified and
registered
financial or
investment
adviser.
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