Resetting Expectations

With interest rates remaining near historic lows, many clients have been refinancing their mortgages over the past few months. A lot has changed since they took out their loan or last refinanced, and not just with interest rates. I’ve heard from more than one person who is surprised to find out that you need a credit score of 780 or higher to snag the best rates as well as 20% equity in your home.

A few things to keep in mind when you start shopping for the best rate:

1. Check http://www.annualcreditreport.com/ for a free credit report from each of the three nationwide consumer credit reporting companies. You will receive a detailed listing of all of your lines of credit, open and closed. You now have the ability to check your score for free at http://www.creditkarma.com/, a new web site from TransUnion. This site also give you a credit report card to compare your credit score in each category to the national averages and run scenarios such as how taking out additional credit or closing a line may impact your score. If you do find errors on your report, make sure they are corrected prior to applying for a loan.
2. If you have retired since applying for your last loan or refinanced prior to the housing meltdown, the information needed to prove your monthly income may have changed. If you are living off of your investment assets, your advisor can prepare a letter for your lender stating how your income is structured. Many times, it is helpful if we talk to a loan officer or underwriter directly to help them understand the monthly “paycheck” you receive from your portfolio and how that may differ from the income reported on your tax return.
3. Don’t automatically refinance with your current lender. A good place to shop for local rates is http://www.bankrate.com/. We have found that many of the smaller banks or credit unions offer competitive rates, lower closing costs and more intuitive underwriting. Feel free to call us for the names of local lenders you can trust and to assist you in comparing offers .

Deciding whether you should refinance, pay off your existing mortgage or how much to put down on a new home are all things we can help you evaluate. Remember that we are more than your investment account managers. We are here to help you with any financial decision, whether is involves refinancing your house, buying vs. leasing a car, how to fund college costs or when is the optimal time to retire.

Christine L. Carleton, CFP®
clcarleton@taaginc.com
http://taaginc.com/