As I was getting ready for work Tuesday morning, The Today Show on Nbc had a segment with Barbara Corcoran, a "real estate expert", about refinancing. Being a loan officer, I watched intently, hoping Ms. Corcoran would dispense good guidance about the multitude of opportunities available for refinancing. While some of her guidance was accurate, she made a number of points in the allotted three-and-a-half minuscule segment that were so erroneous and misleading, I had to respond.
The video can be found on the Today Show website. I suggest watching it first.
Va Loan 125 Ltv
I suppose pointing out that getting any financial guidance in a three-and-a-half minuscule segment is not a good idea. Moreover, Ms. Corcoran sold her real estate firm in 2001 for seventy million dollars. While I respect her success, she is no longer involved in an industry that is vastly different now and her palpate was that of an real estate agent/saleswoman, not a mortgage professional. Hopefully, the segment prompts viewers to palpate a mortgage pro for more in-depth personalized advice. I know she meant well, but I have a real question with the following tips from Ms. Corcoran:
- 80% Ltv can "typically get refinancing"
While the statement is true, she seemed to imply that if your mortgage is more than 80% of the home's value (commonly referred to as Ltv or Loan-to-Value), you cannot refinance. Nothing could be further from the truth. In fact, there are government sponsored/supported programs that allow homeowners to refinance up to 125% of their homes value. Being over 80% does not automatically preclude anyone from refinancing.
- 720 Fico for best rates
Again, the statement is mostly true, except that the best rates are for those who have a 760+ reputation score. In fact, rates may differ at 760, 740, 720, 700, 680... You get the idea. However, mortgage interest rates are carefully by a number of factors together with Ltv, reputation score, your state of residence, comprehensive debt profile, and others.
- Ask for a term equal to that remaining on your current mortgage or "you'll get ripped off on that interest rate."
You will not get "ripped off" if you get a new 30 year mortgage. In fact, a new 30 year mortgage is likely the best way to gain the lowest monthly payment. Getting a new mortgage equal to that of your remaining term is accepted in some cases. Ask your loan officer to show you the cost differences of discrete terms and programs.
- Pre-payment penalties.... Don't get one and don't refinance if you have one.
This one is absolutely egregious, primarily because it can cost you a lot of savings. If you currently have a pre-payment penalty, refinancing now at a low rate may offer savings benefits that offset the penalty. If you wait for the pre-payment penalty to expire, interest rates will likely be higher. Ms. Corcoran made a good point about peak-even analysis, and a pre-payment penalty should be part of that. If anyone offers you a new loan with a pre-payment penalty, Run!!! Pre-payment penalties are virtually extinct, as they were part of the sub-prime mortgage world that is no longer in existence. This piece of guidance would have been helpful in 2005 but is misguided and irrelevant in 2010.
- No windup costs, no points. Lenders will bury the costs in the instrument.
The intimation is that a no windup cost/no points loan is a bad thing. Not true. A buyer choosing a no windup cost/no points loan will trade those costs for a higher interest rate. It's that simple. Once again, have a mortgage pro show you the dissimilarity in a former mortgage and a no windup cost/no points mortgage loan.
- It take 90 days to refinance.
Bogus. Typically, refinances are taking 45 days. I have heard bad dream stories from clients when they use a former pick-and-mortar bank where loans have taken six months. Possibly it's different in Manhattan but for the rest of us, there is no excuse for more than 60 days in a worst case scenario.
- Pmi 1.75% going up in April.
This is misleading and incomplete. Pmi is hidden Mortgage Insurance. The 1.75% Ms. Corcoran refers to is the Fha Mortgage assurance Premium, or Mip. Hud has proposed raising the Mip to 2.25% this year. Mip is typically financed into the loan. Fha insured mortgages do want Monthly assurance (Mi) of either.50% or.55% but it is commonly much less than Pmi. Pmi is required if you have less than 20% equity and a approved mortgage. Pmi rates vary depending on several factors and is typically paid each month as part of your monthly payment. Again, ask your loan officer to show you the cost differences.
What is comes down to is that a mortgage pro can help you decree if refinancing is is your best interest. Sometimes, refinancing is not the best choice for you right now. Don't make the decision based on sound bites from a Tv show. Ask a mortgage pro to sit down with you and observe your current financial situation. It won't cost a penny and may save you thousands of dollars.
Don't Get Mortgage guidance From "Experts" on the Today Show
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