RateWatch #391 – Common Mortgage Mistakes

January 31, 2004 by Dick Lepre

What's Happening

Treasuries had a volatile day on Friday. They started out with foreign buying. Suddenly, the dollar went up and concern was expressed about the continuity of foreign buying. The market tanked.

I have always emphasized the importance of an independent Federal Reserve. On Friday we had this: "Democratic presidential contender Howard Dean said Friday that he thought Alan
Greenspan had become too political and should be replaced as chairman of the Federal Reserve."
I presume that what Dean means is that Greenspan should not have been so accommodating of the deficits. The point that we try to make here is that the Fed and, implicitly, the economy is more important than politics. Greenspan, while no fan of deficits of this size, understands that they are here and is "working with them."  What we have seen in the O'Neill flap is the political nature of the Secretary of the Treasury and the apolitical nature of the Fed. That is the way things are
supposed to work.

A Bunch of Little Things to Do and Not to Do

We did a lot of refinancing of mortgage loans last year.  It seems that no matter what we do, the same mistakes keep happening.  I don’t mean major or fatal mistake but just those annoying things that keep loans from getting approved or funded in a timely manner.

Presented here are some things that you, as a borrower need to do to make sure that your loan funds on time.

- keep your W2’s handy.  If, when you get your W2, you find that the copy that you are going to keep needs to be sent to the Questioned Documents section of the police department in order to be read because it is too light then make a photocopy of the top document.  If you cannot make a readable copy then please ask your payroll department for a duplicate W2 for your records.

- when you keep your bank statements, keep all the pages.  If the first page says “page 1 of 7” keep all seven pages even if page 7 is an ad for hemorrhoid medication. Send all 7 pages to your humble loan officer when he asks for your bank statements.

- if you have a HELOC second make sure that you keep the note handy, tell your loan officer about it and send him a copy. The name of this document varies from lender to lender but what we are looking for are the details of the loan:  the maximum credit, interest rate and payment terms.

- if you have a HELOC second and are going to pay it off, read the agreement and see if it has an "early closure fee."  In general, if you paid nothing to get the HELOC and have had it for less than a year or two you should be concerned about this. This fee is usually something on the order of $500.

- if you have a HELOC and are going keep it please send a complete copy of the HELOC
agreement or note to your loan officer.  The new lender needs to see the details. They want to know what your maximum liability is if you draw the entire line.

-if you had a credit dispute when doing a previous loan and the dispute was resolved make sure that you keep the letter that resolved it.  The problem is that credit disputes are often handled by the credit bureau that prints the reports but not handled in the source - the three credit repositories.

- if you co-signed for a mortgage or an auto loan and you are not making the payments then you may need to get (generally) 12 months cancelled checks (front and back) from whoever is making
the payments.

- be prepared to write a check even if this is a “no cost” loan.  In general you need to prepay some interest and possibly property taxes. Make sure that you work out these details with your loan officer. 

- send a copy of the “declarations page” from you insurance policy to your loan officer.  If you have fewer than 4 months to go before your premium is due then you may need to make a partial payment early so that there are at least four months worth of insurance in place the day the loan funds.  Note also that, if the loan amount is going up you may need to increase the amount of coverage.  In my experience, this is the most common “last minute” reason why loans do not fund on time.

- if you are doing refinancing  you should keep get a copy of the final settlement statements from the previous loan. There are at lease two reasons for this:  it shows whether or not you took cash out and it shows who was paid off.  This is of value if that lender did not issue a deed of reconveyance in a timely manner. In fact, when you are refinancing make sure that the lender who is getting paid off records the deed of reconveyance with the Recorders Office.  If they mail you
an unrecorded Deed of Reconveyance it is your responsibility to have it recorded. Make sure that you do so.

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