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SPEAKING OUT

Common Sense Helps Refinancing Go Well

August 23, 1992|ROBERT STADD | SPECIAL TO THE TIMES; Stadd is a visual - effects producer and free-lance screenwriter. and

The recent wave of refinance fever has been pretty hard to ignore, and I was not immune to its effects. I wanted to lock in a good fixed rate, instead of the adjustable loan I had. I had this feeling that interest rates were going to start climbing soon, and I also needed some cash for some minor renovation.

Having not attempted something like this before (I had purchased our house from my mother, and assumed title on the loan without having to qualify), and having read plenty of horror stories on the subject, I figured it would be a fun challenge to take on. It was. And by using good common sense, I not only refinanced my loan at a very good rate, I also saved thousands while doing so.

Here are some of the things I did that made the refinance work as well as it did.

Have a good attitude. First of all, I assumed that I was going to succeed at this, and that there would be an army of bankers, escrow people, etc. all working together toward this goal, people I had never met before. I had an attitude that it would be fun, a challenge.

Clean up credit. Before I met with the bank, I contacted the three major credit reporting agencies to get a look at my credit report. I found a few things that were untrue or inaccurate, and had them changed. This took several months, but was probably worth it.

Shop around. I shopped around for the right bank by checking the newspaper for the best rates, both for interest rates and points charged. I called those that seemed most favorable. Many of their rates had changed after publication in the paper, so I had to refine my list slightly.

I realize that a lot of people skip this process and go directly to a mortgage broker, but I felt I would have more control and save money by selecting the banker myself, someone I could deal with directly. It was also very important to me to find a banker who I would work with, who was patient and wouldn't mind if I called often with questions.

Be prepared. I was fully armed with income tax records, pay stubs, mortgage receipts, etc., for when I met the banker. This meant he could start processing my application immediately. Everything takes time when processing a loan, and in a market where interest could begin rising, time is definitely not on your side.

Get an estimate. This is one of the most important things I did. I got an estimate up front of all costs. I then went over, line by line, each one of these costs, and found out which ones I could eliminate, such as by timing the financing of the loan so that I wouldn't have to pay two mortgages at once. Then there are such things as title insurance and escrow company that you are not bound to go with, although suggested by the bank. You are free to choose which company you want to represent you in these areas, often at substantial savings.

Become an instant expert. Once my loan papers were in the hands of the banker, I set about finding escrow and title companies. As I knew absolutely nothing about this area, and I had very little time to educate myself, I had to become an expert in a hurry. The approach I used was to ask each company how much "for everything," and to tell me what "for everything" was.

Using this technique, I was able to compare one company against the next and not sound totally like an idiot. I also asked each company whom they recommended. For example, I asked the escrow company who they liked to work with as far as title insurance companies. In roughly an hour, I found two very competent-sounding companies and exactly cut in half the price that the bank had given me for these services.

Make friends. Staying true to my idea of an army working for me, I made sure that I made friends with all those I came into contact with, which is not only good on a humanitarian level, but can save you money, too. I would ask each person I was working with how I could save money, and frequently they had some good ideas.

Increase the appraised value. This is the key to getting as much cash as possible out. The higher the appraised value, the more cash you can possibly get out. I found out who the appraiser was and contacted him directly. I found out what he was looking for in terms of home value. I got a list of what homes had recently sold for in my area, and drove by those homes. I saw why they sold for what they did.

When the appraiser arrived, I discussed each house I had seen with him, and compared our house with those on the list. In my case, the appraiser hadn't been able to see each one of those homes listed, and my having seen them was giving him information he didn't have. Doing all this, I believe I was able to raise the appraised value of my house beyond what it would have been had I not been involved.

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