Being in the business as long as I have, I consistently hear people say things about their mortgage or the impact of their personal “situation” that just aren’t 100% accurate. Your mortgage is as personal and specific to you as your clothing. It’s not one size fits all, and listening to friends and family, and their experiences, can be a very dangerous thing; one that can stymie you in a time when you should be taking action.
Here are some things that you should avoid saying out loud without professional input:
“My credit isn’t very good.” First of all, define “isn’t very good”… compared to what or to whom? Credit is one of the most misunderstood aspects of the mortgage process nowadays. TRUE, the mortgage lenders today will price a loan differently for someone with a 640 FICO as compared to a 740 FICO. But that doesn’t put you out of the game, nor does it penalize you very much at all. And, there are some very simple moves you can make that will dramatically improve your score, once you understand. Besides, there’s nothing wrong with a 640 credit score. MYTH BUSTER… paying off your credit cards doesn’t help you! It can actually hurt your score.
“My house declined in value, so I can’t refinance.” Not true. There are programs (that I can show you) that may allow you to refinance even if all your equity is gone. I recently refinanced a couple who had originally put down 20% in order to avoid mortgage insurance. They had since lost 13% of their equity and the loan to value (amount owed divided by appraised value) on the home was now going to be 93%. Using a special program supported by both Fannie Mae and Freddie Mac I was able to refinance them to market rates AND they did NOT have to pay mortgage insurance.
“I’m waiting for rates to go down a little lower.” Why? Let’s do some math. If you have a $200,000 mortgage and you could get a rate, for example, of 4.75% for 30 years, your monthly principal and interest payment would be $1043.30. If the rate went to 4.625%, your principal and interest payment would be $1028.28… a whole $15 different. If the current rate would save you a whole bunch of money (let’s say $200/month), would you risk that to save another $15? Action will secure your savings. Inaction will depress you in the long run because once they start to go up, you’ll long for that low point you missed! Besides, even if rates would continue down from here… how far are they going to go? Not enough that would cause you to refinance again, that’s for sure.
“We want to lower our monthly payment, so we’re going to put down an extra $10,000.” Think twice before you use all your liquid capital to make a purchase. Yes, if you’re going to avoid monthly mortgage insurance payments, that’s a great idea. But otherwise, you may miss that money once it’s used. At a rate, for example, of 4.75% for a 30 year mortgage, every $1,000 equals $5.22 a month in payment. So, $10,000 is a savings per month of only $52.20, or $600 a year, or a break even (compared to your $10,000) of 16+ years.
“The housing market sucks.” Yes, maybe if you’re the seller. But if you’re a buyer, it’s a great time. And if you’re refinancing, it doesn’t matter what your house appraises at UNLESS it keeps you from your mission. If you have tons of equity in your home and you just want to refinance to lower your monthly payment or shorten your mortgage term, it doesn’t matter if your home appraises lower than you think it should. Sure, it may be a bit depressing, but if you’re not selling your home it doesn’t matter. Take advantage of the rates!
“It’s tough to get a mortgage.” Not really. It can indeed be a process, and, no doubt, lenders are turning over rocks more than ever. But that doesn’t mean there isn’t mortgage money available. Don’t listen to your friends and neighbors… ask a professional.
The whole real estate and mortgage world often gets bad press because, as we know, the media loves for you to think that the sky is falling; it makes good press. But ask the question before you assume the bad news applies to you.
David Rosen- "The Mortgage Guy"
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