Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage application volume surged 18.6 percent from the previous week and 28 percent from a year ago thanks to the biggest one-week rate drop in a decade! Almost 5 million homeowners could likely qualify for a refinance and reduce their interest rate by at least three-quarters of a percentage point, according to Black Knight, a mortgage data and analytics company.
When it comes to mortgage analysis, more often than not, the “numbers” speak for themselves – but there are still many variables to consider in making the right fiscal decisions. Here are some insider-tips to consider:
Tip #1. Having an account with your current mortgage servicer can be helpful, but any time you refinance a mortgage, all banks will consider it as if you were a brand-new customer. A significant portion of new mortgage loans are sold to Fannie Mae and Freddie Mac which means your existing relationship means nothing. Quite frankly, is that even called a “relationship”? They collect your mortgage payments and more often than not don’t do a great job at it. Give your current servicer a shot, but make sure they can hold their own against what the market has to offer.
Tip #2. Rates go up and down all the time, and not every drop in rates creates a good refinance opportunity. Just because you get a mail stuffer that says it “pays for you to refinance” does not mean that it actually does. Just because the solicitation references your current loan balance and mortgage lenders name does not mean they “know” anything substantial about you. Keep in mind that there are closing costs to consider, and there may also be some kind of prepayment penalty on your existing mortgage. Be prudent about the analysis before you agree to anything.
Tip#3. When considering a refinance, you should also factor in the months that have already been paid into the equation. Granted, the numbers might look attractive because your payments will be going down, but if you have already paid many years of a mortgage, and a great deal of interest along the way – starting again might not necessarily be the smartest financial decision. Monthly payments, as well as total life-of-loan interest payments, should be mutually considered.
Tip#4. Don’t make mortgage decisions based on the assumption that you will always be able to refinance. This is especially true with regard to things like balloon payments or adjustable rates that might make your mortgage unaffordable in the future. As many people found out during the housing crisis when the time comes to refinance you might find that you lack the credit standing or the equity to do so.
Tip#5. Don’t count yourself out for a refinance before you explore all your options. Just because one broker or bank says you can’t get a mortgage, does not mean it is impossible everywhere. From different appraisers to different credit-scoring models, to different underwriting philosophies – there are options out there elsewhere. Don’t be afraid to ask the broker or banker who says no to you for a recommendation of someone they might know who can help you. Some of my best clients came via a recommendation from a competitor that couldn’t offer something that we can.
In a business where your expertise is often more significant than your price, getting the right advice is the most critical consideration of all. Mortgage financing is as much about your unique goals and circumstances as it is about interest rate conditions. It always pays to analyze the details in full before you rush into any financial decision. Naturally, it makes the most sense to work with someone competent who proactively guides you through many of these questions as you determine the right approach for your specific situation.
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