Wednesday, September 16, 2009

Real Cost to Refinance your Home Mortgage

While home mortgage rates continue to stay near historical lows, many homeowners have taken advantage and decided to refinance their home mortgages and keep their money in their pockets. But a new low interest rate isn't the only thing you need to consider. There’s a little matter of what fees will be incurred. So just how much should it cost you to refinance you currant home mortgage?

Because no two mortgage companies are alike, it's difficult to say with precision what it is going to cost you to refinance your mortgage. Generally you can expect to pay about 2 to 5 percent of the new loan amount in fees when you refinance. It's important to keep the cost in mind when shopping for a new mortgage to replace the old one.

While it's not necessary to refinance with the same lender who currently holds your mortgage, it's a good place to start. They may offer a stream lined refinance process that will piggyback on costs you incurred when you took out your present home mortgage. But don't stop there, no matter how good their offer may appear. You need to check with several different lenders to determine what kind of rates they offer and the costs involved in refinancing with them. Be on the lookout for mortgage companies that quote you a low rate but throw on a lot of junk fees and unnecessary charges.

So what are some fees you can expect to pay when refinancing? Let’s take a look, but keep in mind everything is negotiable.

  • Application fee: This fee is supposed to cover the cost of processing your home mortgage refinance request so the lender can decide whether to lend you the money and at what rate. Generally they cost between $50 and $500 and include the cost of your tri-merge (home mortgage credit report). I know some people consider this a legitimate charge. I disagree. Mortgage companies and banks spend big money in their effort to get people to do business with them. Now they have a live customer sitting across the desk from them and they expect to charge you to see if you will do business with them! That’s like walking into the car dealer show room and giving the salesman $200 to show you a car they will sell you. Look, at one time there may have been cost involved to manually qualify a borrower for a home loan. But those days are long gone. Today it all automated desktop underwriting. I may cost 20 bucks to pull a tri-merge but beyond that it's a couple of strokes on a keyboard and in a matter of seconds a decision is made. I think charging you for the Tri-merge credit pull is cheesy and have never paid for my credit report much less a mortgage application fee .
  • Appraisal fee: While a lot of folks can't understand why they need another appraisal since they had one done when they purchased their house. You need to understand just what an appraisal is. It's nothing more than an opinion of your home's value at a particular moment in time. While this was more of a sticking point in the past when home values only seemed to go up. Today, reality has set in and it's not unreasonable for a lender to want to make sure their loan will be sufficiently collateralized. They generally cost about $350 for a residential appraisal. Multi units and commercial properties can expect to cost significantly more. Also it is worth inquiring whether the lender will accept and update from the previous appraiser as this can save you a couple of dollars.
  • Title insurance: This protects the lender in case there is ever a question as to encumbrances and clouds to your title. Should someone make a claim against you ownership and some other issues that are just beyond the scope of this post. While the cost is determined by the loan amount, typically they cost between two hundred and fifty and a thousand dollars. For a little bit more you can acquire an owner’s policy that will protect YOU for as long as you own the property. The lenders policy will expire when his interest in the property does (when the loan is paid off). But if you are refinancing and can use the same title company they will offer a refinance transaction discount.
  • Loan origination fee: This is the charge brokers, lenders and banks get for doing (originating) the home loan. Since most home mortgages are quickly sold to other investors on the secondary market originating is where their money is typically made. You can expect to pay 0 - 3 percent of the loan amount. If there is no origination fee, chances are it was just passed on by way of a yield spread premium in the form of a higher interest rate. Let me climb up on my soap box for a moment. I don't begrudge someone making money doing home mortgages. I my opinion a fair fee is $1,500 to $3,000 depending on the difficulty of the deal. In my mind there is no justification for charging one person $3,000 for putting together a particularly hard $100,000 mortgage and $9,000 because the loan amount is $300,000, yet it's done every day and in my opinion is just soaking a borrower. Please keep in mind, everything is negotiable.
  • Points: This is an area of so much abuse and misunderstanding that the scope of this post cannot do it justice and well be dealt with in a latter article. For now, you need to understand that a point equals 1% of the loan amount and are used to buy down your interest rate. In practice it is nothing more than pre paid interest.
  • Junk fee: These are all those other fees you may see on a good faith estimate or Hud1 that really should be part of the origination fee. They will have names like doc prep free, administrative fee, transfer fee, courier fee. You need to question the loan officer when you see any fee that you consider was or should have been paid for as part of the origination fee.

You should now have a better understanding of how the decision as to whether refinancing you home mortgage is a lot more than can you just get a better interest rate. If you are not going to recoup the cost of your home mortgage refinance there really isn’t much sense to doing so. It’s really that simple.

Sunday, August 23, 2009

New Orleans Home Mortgage Citizen Opinion

Outside of the comment box, I don't expect it to become a practice of New Orleans Home Mortgage to post readers opinions. But for some reason this email I received struck a chord. I can sense the frustration and confusion that surrounds the market that affects the city today.

Dear New Orleans Home Mortgage,
Recently news organizations are reporting an upturn in the economy. You have to stop for a minute and wonder on what they are basing their information. Especially when you consider numbers and percentages can be manipulated to support just about any position.
It’s also being said that one in eight American mortgage loan holders are in foreclosure or behind on mortgage loan payments during the second quarter.

Perhaps foreclosures starts have slowed regarding sub-prime mortgage loans. You know, the mortgage loans being blamed for the most recent banking crisis. If those people responsible for the crisis were to come clean, they would admit their culpability. Don’t believe for one second they didn’t know exactly what they were doing. I’m not referring to those working to sell the loans. They were pawns in a much larger game. I’m talking about the people responsible for setting up the programs in the first place. By now the public at large should start to see clearly just how abused and manipulated we all are by politicians and the corporate banking system just to name a few.

But, I digress.

Currently loans extended to people with good credit are deteriorating more often as home prices continue to fall and job loss and unemployment affect more and more Americans. The credit card companies have been putting the squeeze on those of us with exceptional credit. Raising our interest rates while simultaneously lowering our available credit; they’ve essentially changed the rules during the game and we’re the only ones expected to live by them regardless of the consequences. Again, they know exactly what they’re doing and what the outcome will be. Changing the rules on the general public is nothing new. What should be new is our position and absolute refusal to accept the status quo.

Why does the burden of all the greed and mistakes of so many consistently fall to the public at large to bear. Specifically those of us, who have always played by the rules, paid our bills and worked hard our whole lives.

I don’t know about you, but this beast of burden has had enough.
Just Wanted to Vent

Dear Just Wanted to Vent,

Your frustration is fully justified. We here in New Orleans have been through a lot particularly since Katrina. We have missed some opportunities to truly change the direction of a city that had seen its better day’s decades earlier. But we can’t spend our time dwelling on the spilled milk. As this city continues to move in a positive direction I see new faces that have a fresh attitude and aren’t corrupted by the decisions of the past. I look forward to the work that lies ahead. As I am sure you do too.

New Orleans Home Mortgage

Monday, August 10, 2009

Fed Mortgage Disclosure Changes

While the end of summer brings the height of hurricane season it also brings to an end to higher New Orleans home mortgage rates. The Queen city continues to follow the national trend in seeing an increase in mortgage rates between the months of May and August. This season we have experiences an increase of the rate of about .75%. The fear of inflation is what usually derives this rate increase and this year seems to be no different. But with summer coming to a close and the US economy in unchartered economic territory the relaxation of the fear of inflation may not be a given this time around. That wouldn’t be good news for The New Orleans home mortgage shopper.

Meanwhile porn actress Stormy Daniels is looking into running against David Vitter in the next senatorial election. It makes for great entertainment and adds to the allure of the city. But judging from what has been coming out of DC lately it doesn’t look like much of an advancement opportunity for Ms. Stormy so my gut is telling me she’s going to be a no show and what we have now is publicity ops. But what do I know.

Back to New Orleans home mortgage issues.

As of July 31, some new disclosure requirements took effect. What follows is a summary of the changes as they affect New Orleans home mortgages

  • Now mortgage loans secured by any dwelling, not just your primary residence fall under Regulation Z disclosures. Refinancing and home equity loans are now covered under early disclosures.
  • Early disclosures must be mailed or delivered within 3 business days of receipt of the loan application. Saturday is considered a business day, Sunday and federal holidays are not. There is also a 7 business day waiting period after delivery of the disclosures before closing.
  • If the disclosure APR changes beyond .125% a corrected disclosure must be delivered a least 3 business days prior to closing
  • Lenders are prohibited from charging a consumer any fee, except a credit report fee, until after the early disclosures have been provided.
  • A consumer can waive some disclosures to expedite the closing to address a personal financial emergency, such as foreclosure.
  • Lenders are required to tell consumers that they are not required to complete the transaction because the consumer has received the disclosures or applied for a loan.

Hope everyone has a great summer and look forward to keeping you informed on all the issues that affect New Orleans home mortgages.

Tuesday, August 4, 2009


New Orleans Home Mortgage is dedicated to being the fore most educational blog offering a homeowners that wish to refinance and access equity as well as prospective homebuyers a resource rich site that has a view as unique as the city it serves. We are real estate professionals that have experience in all facets of acquisition maintenance, construction and financing.

Whether it’s a single family home, condo or commercial property New Orleans Home Mortgage is here to inform you to what’s available. The mortgage market is a fast paced environment that has gone through some difficult time and continues to search for the direction that will be progressive and contribute to a vibrant economy. We aim to stay on top of this challenge.

Monday, August 3, 2009

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Welcome to New Orleans Home Mortgage. With the destruction brought on by hurricane Katrina, the housing crash and the mortgage meltdown, New Orleans finds itself in a peculiar mortgage situation. It is the mission of this blog to bring you up to date information on mortgage products that are available locally, everything from rates to lenders. Your participation is welcomed and encouraged. Should you have any questions or wish to add to the discussion please feel free to contact New Orleans Home Mortgage via comment box or email.