3 Things to Know Before You Refinance Your Mortgage Loan

Mortgage refinance rates are at record lows, and many people, myself included, are clamoring to the mortgage lenders in hopes locking in a better rate and saving extra money each month.  I’ve refinanced my house multiple times over the past 10 years, so I’m no babe in the woods when it comes to the process. But it seems this time around has been particularly difficult, time-consuming -- and expensive. 

Here are 3 Lessons that I learned the hard way.  They could have saved me $500 bucks and hours of aggravation had someone told me about them, so I thought I'd share what I’ve learned.

Lesson 1:  Going to your existing financial institution will not make the process any faster, easier or more convenient.
These days the loan restrictions are very tight and everybody starts the refinance process from the ground floor.  There is a ridiculous amount of documentation required, and there is no special treatment.  No wiggle room.

In fact, by going to my current bank, (who will remain nameless, but ends in “of America”), I locked myself into the slowest, most painful loan process I have ever experienced.   A good idea is to begin with comparing refinance mortgage loans online.

Lesson 2:  Until your loan is actually “locked” your Good Faith Estimate (GFE) is basically worthless.
After finding lender who offered a lower rate, lower fees and faster turn-around than my current bank, I started the process again.  I believed (partly because they told me) that my Good Faith Estimate was accurate and they would lock in my rate as reflected in the GFE or lower "once they cleared a couple things", ran my credit and got my non-refundable $495 contract /service fee. 

I’ll spare you the details, but the bottom line is this.  When they talked about “clearing up a few things” prior to “locking” your loan, here’s what they really meant:

• Obtaining a new new appraisal (7 working days)
• Clearing title (3 working days or more depending on report)
• Subordinating any equity lines or 2nd mortgages (7-10 working days) 
• Or More!

By the time they were prepared to lock the loan, my Good Faith Estimate was off by nearly an entire percentage point from their proposed “lock” rate, and my $500 would not be refunded.  The lesson here; be sure your rate is actually locked, or understand the lock requirements and time-frame prior to signing, paying for or agreeing to anything.

Lesson 3: Be patient.  It will only hurt for a minute (or in my case, 3 months)
Refinancing mortgage loans is not easy.  But the rates are low, so in most cases it makes sense to try to lower your expenses and get it done.  The last thing I learned is to not stress over it and just be patient.

For better, or worse the old days of getting a mortgage refinance done in a couple weeks are over.  The reality is the process could take 90 days.  They will have you digging up documents you never heard of, some that you never got and some that probably never existed.  Stressing about it and trying to hurry the process won’t get you anywhere.  So get organized, take a deep breath and be ready for the long haul.  Good luck!