Applying for a Mortgage

When was the last time you applied for a mortgage or are you about to?

Watch out.

As publisher of Rentlaw.com, the National Landlord Guide, you just might think I know all the tricks and traps of the morgtage game. Guess what. I don't.

I've been on this journey to refinance my home I purchased in 1985 for $183,000 and invested about that same amount into doubling the size of it.

Today, according to three independent appraisers hired by various banks, the home is worth a bit over $1 million and I owe $420,000. So what's the problem? It looks like I have around $580,000 in equity, right?

SCENARIO:

ALL I WANT TO DO IS BORROW EITHER THE SAME AMOUNT ($420,00) or "CASH OUT" an additional $200,000 for a total loan of $620,000 against $1 millon. (62%). This would retire my Home Equity Loan at 8% and lower muy obligation by $2800 per month, running it out to a 30 year fixed rate term.


"No problem, we want to business".

PROBLEMS:

1. YOUR CREDIT SCRORE IS LOW.

Question: A 650 is low?

Ok, so I once was late last year for $13.00 (yes thirteen dollars) on my discover card because I thought I didn't owe that amount to finance charges. WRONG. LATE PAYMENT SHOWED UP ON CREDIT REPORT.

You'd think the world came to an end.

Then there is a couple late payments to Mercedes, but a couple days late. BANG.

2. APPRAISAL. Even though your appraisal came in at over $1 millon, another appraiser hired by the lender shows it to be $675,000. This a couple days before the closing. (Company: Wells Fargo )

So being "in the business" I took the time to send comparables that were more comparable to the ones they used (theirs being 5 miles WEST of my home, 1 mile to the ocean...). Time goes by and they still can't decide on a "fair market value..."

Then they are still trying to chnage my request for a simple 30 year fixed rate to those of various adjustable rate mortages, ballon terms etc. Every trick in the book to get a higher return on their end, again using my "lousy" credit score of 650.

THE APPLICATION

My wife works. I work. I have rental property. Seven income producing properties. Over $3.0 million in equity. I want to improve cash flow and LOWER my monthly payment by $2800 per month. HELP! HELP! What is wrong? Shoot me for hustling.

THE MORTGAGE BROKERS

All try their hardest, but seem to run to the same lender with your application. Seems like some lenders, in this case Country Wide (lender 2), must treat the referring brokers pretty good.

SKIP THE BROKER

So I call CountryWide (countrywide.com) directly. I give the agent all my information, then he calls me back and quoted me a rate of 7.125. I told him to "let me think about it because it sounds high". That was last week (July 6, 2007).

So today, July 9, as I was about to write a story about our Real Estate Glossary, I received a call from "Greg" from Countrywide. I siad I thought I did, what was the rate you're quoting me. Again, he told me 7.125 PLUS 1.75 points. I told him it was to high, but thank you.

His repsonse, which prompted this blog entry, was "HIGH, WITH YOUR CREDIT SCRORE...". Given the tone of his voice all I can say is I am glad I decided NOT TO GO WITH COUNTRYWIDE HOME LOANS. My guess in that call center in Houston, they must also double as bill collectors.

Going direct to the lender, in this case, seemed to be a waste of time and results i another "inquiry" on my credit report.

"Look at all those inquires" the next bank will say.

It's a conspriacy by banks to keep you from shopping for the BEST RATE.

Watch your credit scrore, it can ruin your life.

Here's my tips:

Set up an automatic payment with every credit card you have (if you can't get rid of them). At least pay double your current minimum balance. That will keep you form ever having a late payment on your credit card.

If you are disputing an amount, make the payment and dispute it. (unless it's for thousands of dollars). Even small missed payments (like $10) could show as late on a credit report and some knuckle head will try to bring you down for it.

So to Wells Fargo and Countrywide Home Loans, I am still in the market to refinance my Home Equity Loan and you can both kiss my rear.

I earned what I have and I am proud of 650 +/- credit score.

If you can't understand NET EQUITY, oh well. If you can't honor a committment, oh well.

Back to our REAL ESTATE GLOSSARY

Other references:

Rentlaw.com Credit Guide
Rentlaw.com Mortage Guides