You could nearly drown in all of the paperwork that is associated refinancing mortgage obtaining a mortgage...but you won't. You'll wade through it all and eventually find a mortgage loan offer that's perfect for you. However, your work isn't done once you've been offered a mortgage; more paperwork will come your way as you move towards closing, and you still have to keep an eye on all of it.
When a mortgage loan is offered, a document that summarizes the mortgage must be provided. It's called a Good Faith Estimate (GFE). This pre-closing document, which is usually available within one week of you submitting your mortgage application, is what you need to pay the closest attention to. So, when the GFE is ready, make sure to sit down with your mortgage consultant to view it. When you do, look for discrepancies in what's on the GFE versus what your mortgage consultant has told.
The main details to look for on your GFE are:
Type of loan
Interest rate
Cash due at closing
Amount of the loan
Private mortgage insurance costs
Fees
- Mortgage points - costs for choosing to purchase points to lower your interest rate
- Loan origination - costs for processing the loan
- Appraisal
- Mortgage broker - costs for mortgage broker services (usually 1% - 2% of the loan amount; fee can be negotiable)
- Processing - costs for legwork related to processing the loan; should be less than $500
- Underwriting - for the reviewing of the mortgage application and all related paperwork required to make a decision on the loan; typically less than $500
- Title - costs for the closing attorney's and title company's services; these may be negotiable
If you find a discrepancy, here's what you need to do:
1. Notify your mortgage consultant of the issue
2. Ask "why" and "how." More specifically, ask why the information is different than what you were told. Next, ask how (all the ways!) the change will directly affect your initial, short-term and long-term costs.
3. If the mortgage consultant's responses are acceptable, proceed with the mortgage loan; if they are not, request that changes be made immediately. (This is a key moment where having solid general knowledge of mortgages and understanding your mortgage options can come in handy.)
4. refinancing mortgage on the responses given in 1 - 3, decide whether you're going to proceed with the mortgage. Remember: You're not obligated to adhere to the terms of the mortgage until you sign for it at your closing; before that, consider it a proposed mortgage that you can accept or reject at any time.
Now, it's important to note that GFEs are not standardized forms. Therefore, each company may display the information differently. However, rest assured that the information is there; you may have to hunt for it but it is there because the Real Estate Settlement Procedures Act mandates it.
Finally, remember that the document is called a Good Faith Estimate. It's an estimate of monies associated with your mortgage loan-related costs. Therefore, the figures may change between the time you receive the GFE and your actual mortgage loan closing date. If that happens, go back to 1-4 above.
Mauricio Navarro is CEO of Rationale Media LLC, which owns and manages CompareMortgageQuotes.ca - a Canadian website to compare mortgage rates & receive instant home mortgage rates.
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