Sunday, May 31, 2009

My Wells Fargo No Closing Cost Mortgage Refinance

I know it's been a while since I last posted, but I just wanted to say that my mortgage with Wells Fargo and their no closing cost mortgage went uneventfully. I do have some comments to share about them that I thought was frustrating.

I applied sometime at the end of March I believe. The process was relatively painless except for the fact that I felt like there was NO outreach from WF and my refi. I had to keep calling Wells Fargo's call center to find out what they needed, what I needed to do, anything to keep my process rolling. I did not even speak to my loan processor one time. This is definately NOT for the consume who needs their hands held to complete the refinance process.

In the end however, I randomly received a package from WF with my closing documents in it. There was two packets in the package that I received. Both of them were the same thing, but one had a note that the package was for my records, and the other packet was the one to be signed and then sent back to Wells Fargo for them to process. Although I was expecting a package, it was definately not like, it's supposed to be here on such and such date, it just appeared via UPS, not to be confused with USPS.

I had to take the package that needed to be signed to a notary, then sent back in the prepaid return package and then dropped off for UPS to send back to Wells Fargo. I didn't want to pay any notary fees, because I'm a frugal individual, and ended up calling one of the Wells Fargo branches here in town. At first, I would need an account to get the notary service for free. Fine, I'll slap $25 in an account to ge the service for free. Then I found out that if the documents are Wells Fargo documents, they would do it for free! Yeah, that's what I'm talking about! I drove my happy butt to the branch and signed and was out the door in about 20 minutes.

I placed the package in the envelope and dropped it off at an UPS drop site and was done. I again, didn't know how long the payoff would take, but I checked yesterday and the payoff has apparently cleared my old mortgage lender because the balance is $0.

I now am waiting for refunds from my old lender for my escrow balance and any overpayment that may have occurred to account for interest expenses that were missed. I am also awaiting for an account statement so that I can setup online access via Wells Fargo's website and then I'll be happy.

In the end though, I was expecting a little more hand holding than occurred only because mortgages are large transactions and every where else you get a mortgage, the people your working with want to get the transaction completed. If I was told I would be on my own more so, my expectations could have been set so that I wasn't caught off guard.

Now this transaction was good for me because my payment dropped almost $150 per month. Now that is a bit of a myth, but let me explain. I was paying $75.xx a month for PMI with my old lender, so there's half the savings. The other half came from a slightly lower interest rate, 5.875% down to 5.5%, and the reamortization of my mortgage back out to 30 years.

See, once you get into years 3-5, more and more of your mortgage payment starts getting applied to principal instead of the interest. Approximately $150 per month was getting applied to my mortgage principal. With the new mortgage though, I'll probably be somewhere in the high $100's again. Oh well, that's just the way things roll.

I only did it because I wanted to increase my cashflow. If I want in the future, I can always pay more money to principal and get the loan paid off quicker. Right now though, it's all about the cash flow! With the economy the way it is, a smaller mortgage is easier than a large payment. The other benefit now is my taxes and insurance is no longer escrowed. I can now put that month amount into my OWN savings account and collect the interest for myself.

In the end, I got what I wanted which was a no closing cost mortgage with a lower interest rate and a lower payment amount by about $150.00. If your looking for cashflow, I would highly suggest you look at Wells Fargo's no closing cost mortgage because it is pretty painless after all and requires NO money for your closing cost. Your loan balance doesn't even get increased. You do however have a higher interest rate to pay for that benefit, but if you don't know how long you'll be in your house, in a falling interest rate environment, and a house you will not own for a long time, a no closing cost mortgage is the best way to go. If however, rates are pretty stable or they are going up, and you will be staying in your house for a while, then pay points and closing costs will be the way to go.

In the end, my Wells Fargo no closing cost mortgage went well and I do encourage others to go with the program if it fits your needs and you do it for the right reasons that I mentioned above.

Saturday, May 9, 2009

How does a mortgage refinance work?

If you’ve decided that you want to refinance your mortgage, for whatever reason, some examples of reasons to refinance are annotated over at Boston mortgage refinance, but you can refinance with a no closing cost mortgage by taking a higher interest rate. Like I’ve mentioned in prior posts, if you don’t believe you will be in your house for longer than a few years, a no closing cost mortgage is the way to go so that your not sitting on large closing costs that you incurred by refinancing.

So how does a mortgage refinance work? I’ll try to explain it in a way that is easily understandable and you can use this information while you refinance your mortgage. Be mindful that different states and localities have different ways of doing business, so if you live in Philadelphia, you may want to check up on important Philadelphia refinance information.

In the beginning, you found a house you wanted to purchase and used a purchase mortgage to acquire said house. You went with a broker or lender and filled out the paperwork and everything worked out well and now you ‘own’ your house, or are making payments towards owning your house. Since you purchased your house the mortgage rate has gone down or because of reasons listed above, you have decided that you want to refinance your mortgage to a lower rate.

You should research different lenders and speak to a couple of mortgage brokers to get a handle on the fees they charge to give you a loan. When it comes to fees, there are lender fees, and then there are third party fees. Lender fees are the fees that the lender charges you to give you a loan. They do of course have employees that they have to pay and overhead that they have to pay for as well. The third party fees are the fees charged by people or companies to do work on your loan, for instance the appraiser or title company. Lender fees are controllable by the lender and you can work on those fees with the lender. Third party fees however are not controlled by the lender and they can’t do anything about those fees.

Once you have decided to apply for a mortgage, by law, you are supposed to receive a GFE, or good faith estimate, from the lender outlining all of the different costs or fees that they are guessing will be incurred to give you a loan. Now, I say three days and it is required by law, however, many brokers don’t usually take the time to give you a good faith estimate for whatever reason. This could also potentially be a reason of concern because in my opinion, it could be reflection of the quality of institution or person you are dealing with.

Once you receive that GFE, or get off the phone with the broker and or lender, they will request some documentation from you. The usual documentation requested is your paystubs for the last two months, your W-2 from the last year to see if you earned what you said you earned the year prior, and IRS form which allows the IRS to share your tax information with the lender, and a couple other forms for you to fill out. They may also want all or a few of your checking and or savings account statements to see if you have any money in the bank. They also will need to know who your current mortgage lender is so that they can request a loan payoff and ensure that the amount you are asking for is in line with what you owe unless you are wanting cash out of your house. Now this is not an all encompassing list of the documents they may request, but these forms are normal and you shouldn’t get worried about sharing this information with the lender.

While you are gathering your information, the bank will order an appraisal to find out how much your house is worth so that they are not giving you more money than what the house is worth. The appraiser may want to see the inside of the house, or they may just drive by the house, possibly take some pictures of the outside, and come up with a value for your house. If they want to see the inside of your house, they will make an appointment with you so that they can get into your house and see what it looks like. Coming up with a value for the house is not just what this person may or may not think it’s worth, but they use information from houses around you as far as how much have they sold for, then they make adjustments to come up with a value for your house. The easiest way to come up with a round about figure is find out how much the houses around you sold for on a per square foot basis. Then, average all those figures out, and then multiply it by how many square feet your house is and you have a figure to see about how much your house is worth.

If you have a HEL or a HELOC, the new lender will ask the old lender for what is called a subordination. What happens when your first mortgage gets paid off is then the second mortgage will jump into the first position. Well, if your new lender is supposed to be in first position, then they will ask the lender of the HEL/HELOC to subordinate, or jump back into second position once the original first mortgage is paid off. Lately however, individuals are having a hard time getting the second mortgage to subordinate. You may have to call and hassle them a little to get them moving and this could potentially hold off your closing until it is accomplished. Some HEL/HELOC lenders also may charge a fee to subordinate. Again, this will also have to paid for.

Once they receive this information, you loan documentation with the application will go to what is called an underwriter. What this person does is review all the documentation and ensure it meets all of the lenders loan requirements. If they don’t like something or feel that something is missing, you may get a request for more information or additional forms. Again, this is normal and nothing to be concerned with. Once this is all completed, the lender will order what is called title insurance. This protects the bank so that if anything comes up like there is a title problem, the property because unmarketable, the lender is protected, the lender is protected.

Once title is completed, then a closing is scheduled so that you can go and sign a bunch of mortgage documents and close on your house. Once that is completed, the forms are sent to the bank and you are almost finished. There is a federal law that protects the borrow from having buyers remorse called the three day right of rescission. Because a mortgage is such a large transaction and most likely the largest most of us will make, they allow you three days to write the lender back and say, never mind, I don’t want this loan anymore. Once those three days are over though, your new lender will send the money to your old lender who will then consider your loan paid off. Something to consider however, is because technically you have money from two banks, you will be paying interest on that money for three days on two different mortgages. That interest expense begins when you sign the paperwork, including weekends. SO, don’t sign your paperwork at the end of the week because you will be paying interest for two extra days while you wait for the weekend to finish. If you sign your closing paperwork on Monday, you pay double interest until Wednesday or three days. If you close on your mortgage on Friday however, your paying interest for five days. The other thing is also to close your mortgage as close to the end of the month as possible to limit how much prepaid interest you have to pay before the end of the month.

For instance, if you close on your mortgage on the fifth of the month, you will pay interest at the closing table from the fifth until the end of the month. If however, you close on your refinance on the 25th, you are only prepaying interest for five to six days only. If your paying your own closing costs, this could be a way to lower your closing costs.

Once this is completed, then the old lender will refund to you any escrow amounts that they may have been holding and make sure you get any money back that you were due because of overpayment or bad calculations. Most people should receive a refund on money although some may not receive any.

This is a shortened description of how a mortgage refinance works. If you are however going to be getting a no closing cost mortgage however, everything will be the same except for the closing costs portion because technically, you are not paying for any of that. The only thing that would apply in a no closing cost mortgage is your closing date. Again, try to get the date to occur early in the week so that you are not paying costs for two mortgages for longer than the prescribe three days.

I am currently still in the middle of my no closing cost refinance with Wells Fargo and will update once I’m finished. Everything however is still the same as I mentioned above and everything has been pretty painless.