1. Overvaluing Your Home - While everyone feels pride of ownership concerning their home, lenders look at certain standard information to determine your property's market value for the purposes of getting a home loan. You might have added a room addition or a covered patio or have even remodeled your home to include upgrades such as marble tile flooring, plantation shutters, Berber carpeting, etc. This might lead you to assume that these things will increase the value of your home by an amount equal to the cost of the materials and labor. Unfortunately, lenders don't view these upgrades in the same way that you do. Generally speaking, the return on investment of upgrades such as these can run from approximately 100% for new carpeting and paint (less than 6 months old) to as low as 15% (an all granite entryway costing $250,000).

Some people may use the value on their property tax bill to determine what their home's value is. This value is usually in error by several thousands of dollars either high or low. Properties are generally evaluated for the purposes of property taxes every 3-7 years by the County Tax Assessor's office. Once this value has been determined it usually is not changed unless the property is purchased, refinanced, or if the homeowner request a reevaluation based on declining real estate values.

In addition, you have to be aware of how the values of properties around you affect your property. You might have heard that your neighbor down the street just sold their home for a "high dollar amount". This might have even motivated you think that property values had increased enough for you to refinance and lower your monthly payment. But after the appraisal comes in, it shows a value for your home at an amount less than what you feel it should be worth or what you need to meet your goals. To complete your loan, you might even be required to pay mortgage insurance, further decreasing any cost savings. You might even in the end decide to forget doing it all together. All of this costs you time and in some cases, money.

The way to avoid making a mistake in this area is to use the services of a full service mortgage lending and real estate company such as At|vantage, where they are used to determining property values as a matter of course. They will take the time to find out the approximate value of your home relative to the local market and advise you concerning you best course(s) of action for your needs.

2. Not Considering Your Future Plans - Many people refinance their homes on a 30-year fixed rate loan without considering their future plans with respect to that home. For example, if a family foresees the need to move into a larger home within the next 3-5 years because of kids growing, to move closer to a job, etc., it makes sense to choose a loan that compliments those plans. Many lenders offer a 511 or 7/1 loan program that has a fixed interest rate loan for the first 5 or 7 years that becomes a t year ARM afterward for the remaining 25 or 23 years. Both of these loan programs start at an interest rate lower than the 30-year fixed rate by V2% or more depending on lenders and/or market conditions. This could result in savings of about $50 per month per $100,000 loan amount. Even choosing to refinance from a fixed rate loan to an ARM makes sense if your plans are to move in the near future, before the loan adjusts too far upwards.

3. Being Attracted By A Low Interest Rate and Not Shopping Around - Many lenders advertise very low interest rates for the purpose of getting you to call them. Unfortunately, while they can help you get these low interest rates; for the most part it will cost you upwards of 2%-3% of the loan amount for the privilege. This could mean $2,000-$5,000 or more up front for the lower interest rate plus the commission charged by the mortgage lender to work on your loan, in addition to all of your other costs. This could defer your cost savings outwards even further delaying the benefit of the lower interest rate. It is important that you look not only at the interest rate you are being charged, but also the cost of getting that interest rate when determining if a refinance is of benefit to you.

There are many lenders, all of whom want your business. Unfortunately there are a few who do not have your best intentions in mind, but the enrichment of their pocketbook. It is imperative that you shop and compare not only interest rates but also lenders to ensure you find one that works for you, with your needs in mind. Also, look for one that is willing to answer your questions without hesitation and provide you with information to help you make an educated decision, without having to ask for it.

4. Not Comparing Apples To Apples - Interest rates change on a daily and sometime even two or three times in a day, as a reaction to market conditions. Many times, these changes are in increments of 1/4% up or down, although they could be as much as 1% or more in rare instances. Loan terms and conditions can also change, although not as frequently as interest rates. Many times, a homeowner wanting to refinance will call one lender on one day and get a quote on an interest rate and then will call another lender 2-3 days later asking for their quote. Unfortunately, this can result in a different rate being quoted for possibly a similar loan program. The best course of action is to determine the type of loan program you want to refinance with, such as a 30 year fixed at no points with a 30-day lock, with the closing costs not to exceed $1200. Then call your lenders of choice within a 2-3 hour time frame to get a relatively accurate quote on an interest rate for that program. This will provide you with a means of gaining accurate quotes on your refinance from different lenders.

5. Not Getting It In Writing - Many people take the word of a lender on the phone when getting a quote on interest rates, terms, and conditions, only to find that the loan that they ultimately sign for is not what was quoted to them in the first place. Since they never received anything in writing early on, they have only their memory or scribbled notes to rely upon for those details. A reputable lender should be more than willing to give you a Good Faith Estimate for the loan program(s) that was/have been discussed so that you know up front what a particular loan is going to cost you.

Equally important is to have verification in writing when your lender "locks" your interest rate with their funding source. Loan rate, terms, and conditions can be "locked" or guaranteed with a funding source by a lender, provided that your loan package is underwritten by the funding source. The periods of these locks can last from 12 to 60 days, each of which has a cost associated with it depending on the lender and loan program. Some lenders will tell you the loan is "locked" when in actuality, they are letting the loan "float" a few days, betting that market conditions will improve such that they can make more money on your loan. This works if the market improves or stays the same, but if market conditions worsen ' it is the borrower that usually pays in the end. Getting your confirmation in writing helps to protect your interests.

6. Not Doing A Break Even Analysis - A simple way to determine if a loan works for you is do determine how long it would take before you realize a savings benefit from the loan. There are two ways to calculate this, simple and tax advantage averaging. The simple method of calculating your benefits is to take the total cost of doing the loan and divide it by the monthly cost savings to determine how long it will take to actually start saving. For example, if the cost of doing your loan was $1,500 and you realized savings of $75 per month, you would actually start saving money on the 21 month of the new loan. Now if you were planning to move within 2 years time, this might not work for you as an option. But if you plan to stay in the home for 3-5 or more years, then it becomes worthwhile to refinance. The tax advantage averaging method is a little more complicated, but still provides you with a means getting a more accurate assessment of your savings. Taking the example above, lets say that you would realize a tax benefit of $25 per month on your income taxes; in addition to the $75 in actual monthly payments you saved. This would be a total of $100 per month in savings. When the cost of your loan is divided by that amount, you will start saving on the 16th month of your new loan, 4 months earlier. Note that the examples above assume that you are going from a fixed rate loan to a fixed rate loan. Cost savings over time when going from an adjustable to a fixed rate loan or vice versa are more complicated because of the changing nature of the ARM.

7. Getting The Wrong Type of ARM - If you decide that an ARM is the best loan for you, it is important to make sure you are aware of both the index and the margin associated with that loan. Both of these items help to determine the interest rate charged on your loan every time it adjusts. Picking the proper index and margin can mean savings of thousands of dollars over the life of the loan. If you are only going to be living in the property for a only few years, it is better to choose an index such as the 11th District Cost Of Fund Index (COFI) which reacts relatively slow to both market upturns and market down swings. If you can handle more volatility or anticipate that your income will rise significantly higher over the course of time, you would be better served with an index such as the London InterBank Offer Rate (LIBOR). The margin is basically the percentage charged by the bank above their cost of obtaining the money, to lend it to you. The lower the margin, the less of a total rise in the monthly payment will occur, regardless of the rise in the index.

Two other things to look at when choosing an ARM is the lifetime cap of the loan and whether there is a payment cap clause. The lifetime cap is basically the maximum interest rate that can be charged on the loan or the highest interest rate it can adjust to over the life of the loan. Generally, this rate is about 6%-8% over what the nominal interest rate for the loan at the time of escrow. A payment cap is designed to minimize the "sticker shock" associated with an upward rise in the monthly payment by capping it at a present amount. Unfortunately, if the actual adjusted monthly payment is greater than the capped payment, the monthly difference is added to the balance of the loan. These loans are general call "Neg. Am" or "Negative Amortization" loan, because you could actually be increasing your loan balance over time with one of these.

It is important that your are aware of all of the facts concerning your present ARM loan and/or your future ARM loan to ensure you are getting the best one to meet your needs.

Getting the bank to pay for some or all of your closing costs is not difficult. And if you have an idea of how long you plan to stay in the house, you can use this information to your benefit. You can avoid paying loan costs by increasing the interest rate you are willing to pay for your loan. The general formula used to compute this benefit is to credit you 1/2% for every 1/8% increase in interest you are willing to accept. So, for a loan of $200,000, you can get the bank pay for a $1,000 of your closing costs for each 1/8% of higher interest you agree to. If your closing costs are $4,000 for the loan, financing it at V2% higher essentially has the lender paying all of your costs. This fact alone can help or hurt you unless you think just a little more. If you are going to live in the property less than four years, you should save money. If you are going to live in the property more than four years, the increased mortgage payments will overshadow the initial cost savings. Then your best option would be to include the loan costs as part of your loan. All you need to know is how long you will be living in the home. The best way to see which option works for your circumstances is to look at all of them with a mortgage professional.

How To Keep Credit Issues from keeping you from the Financing You Need. There are two types of people with bad credit, those who have credit that can be worked with and those whose credit can't. For those whose credit can be worked with, using the services of a Mortgage lender who has experience dealing with credit issues, or in the case of Mortgage At|vantage, has a division devoted to helping those with credit challenges overcome them, can result in them gaining the refinance loan that they need. For those whose credit situation can not be resolved immediately, it is important to work with a lender such as Mortgage At|vantage with many years of helping those with credit challenges to develop a long term plan of action to meet their needs. In some instances, refinancing their home at a higher interest rate with cash out to payoff monthly bills could result in overall lower monthly payments. As time moves forward and they make their monthly mortgage payments, the borrowers could refinance again in 12-24 months, although at this time at a lower interest rate.

How To Get All The Money You Need For Home Improvements, Debt Consolidation, Or Even A Vacation ... Even If You Have No Equity. - In fact, you can get upwards of 25% or more above the appraised value of your home. Called "125% Loans" or "High Equity Seconds", these loans are offered by certain lenders who are generally optimistic about the status of real estate and it's appreciation in the near term. These loans generally have certain restrictions associated with them, but the moneys from them can be used for most any purpose, such as home improvement, debt consolidation, or your own personal needs. Rates, terms, and conditions for these loans vary from lender to lender, so it is important to work with a mortgage broker that has a number of sources for these loans so that yours can be placed with the right lender.

Don't refinance your loan or make another mortgage payment until you read this report and understand all of the points contained within. Take the time to review each of these points and determine which of them apply to you. Then ask your loan consultant at Mortgage At|vantage to see how they can best serve you in meeting your personal goals and objectives. Taking the time to learn about refinancing can only benefit you. In fact, it will change the way you look at your home and loan...forever.

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