10 Biggest Refinancing Mistakes.

1. Refinancing with your existing lender without shopping around.
Your existing lender may not have the best rates and programs available. There's a general misconception that it's easier to work with your current mortgage company. In most cases, your current mortgage company will require the same amount of documentation as other companies will. This is because most loans are sold on the secondary market, and have to be approved independently. So, even if you've been very good at making payments to your existing lender, to a large extent, they may still need to treat you like a new customer.

2. Not doing a break-even analysis.
Find out what the total cost of the refinance is, then figure out how much you'll save every month. Divide the total cost by the monthly savings to get the number of months you'll have to stay in the property to break even on your refinancing costs. Example: if your refinance costs $2000 and you save $50/month, your break-even is 2000/50 = 40 months. You should refinance if you plan to stay in the house for at least 40 months.
Note: The break-even analysis only works if you're refinancing to save money. If you're refinancing to switch from an adjustable to a fixed loan, or from a 30-year loan to a 15-year loan, it's much more difficult to perform a break-even analysis.

3. Not getting a written good-faith estimate of closing costs.
Your mortgage company or loan consultant is required to provide you with a written, good-faith estimate of closing costs within 3 working days of receiving your signed application.

4. Paying for an appraisal when you think your house may appraise too low.
Ask the appraisal company to do a desk review appraisal (typically at no charge) to provide you with a range of possible values. Your mortgage company can ask their appraiser to do this for you as well. Plus, your local Title Insurance company will often furnish you with a market value analysis at no charge. Don't waste your money on a full appraisal if you're doubtful about the value of your house.

5. Using the county tax-assessors' value as the market value of your house.
Mortgage companies don't use the county tax-assessors' value to determine whether they will make the loan. Instead, they use a market-value appraisal which may be very different from the assessed value.

6. Signing your loan documents without reviewing them.
Don't sign documents in a hurry. Whenever possible try to get documents that you'll be signing ahead of time so you can review them. It's advisable to ask for a copy of all loan papers you're signing a few days ahead of the close of escrow. This way you can review them and get your questions answered. Don't expect to read all the documents during the closing. There's rarely enough time to do that.

7. Not providing documents to your mortgage company in a timely manner.
When your mortgage company asks you for additional paperwork, jump on it! Don't complain. They're trying to get you approved, not trying to hassle you unnecessarily! Jump through the hoops as quickly as possible. Borrowers who don't respond to requests for documentation often run the risk of paying higher rates if the rate lock expires.

8. Not getting a rate lock in writing.
When a mortgage company tells you they have locked your rate, get a written statement which details the interest rate, the length of the rate lock and details about the program.

9. Pulling cash out of your credit line before you refinance your first mortgage.
Many lenders have "cash-out" seasoning requirements. This means that if you pull cash out of your credit line for anything other than home improvements, they'll consider the refinance to be a "cash-out" refinance. This may lead to much stricter requirements, and can, in some cases, break the deal!

10. Getting a second mortgage before you refinance your first mortgage.
Many mortgage companies look at the combined loan amounts (i.e. the first loan, plus the second loan) even when they're refinancing the first mortgage. If you plan on refinancing your first, check with your mortgage company to find out if getting a second mortgage will cause your refinance to get turned down.