MORTGAGE TRICKS TO SAVE YOU $$
Every trade has its secrets: car salesmen know the true cost of a car, painters have shortcuts that make crisp paint lines and finance people know how to finesse the process to pay as little interest as possible. Financial expert Eric Gemelli shares mortgage minimizing secrets with www.WatchBoom.com readers
Teri “Star” Irvine, Senior Mortgage lender with Champion Bank, has worked in the mortgage industry for 25 years. She was trained with a national bank, so was taught to apply the country’s most rigorous standards in every state in order to be certain the company was in compliance with all 50 state’s laws. Her policy was to explain the mortgage product she believed was most beneficial to her clients and ask them to repeat back to her what they were buying. If they couldn’t explain their loan back to Irvine, they didn’t get the loan.
Practices like Irvine’s could have prevented the mortgage meltdown, blamed largely on people signing lending documents they didn’t understand.
In the aftermath of the mortgage meltdown, the U.S. Department of Housing and Urban Development (HUD) has issued 89 new pages of rules regarding new forms, compliance and loan guidelines. Irvine says she had to take seven classes just to learn about the changes to a loan document called the “Good Faith Estimate.” HUD has recently issued a 64-page addendum to the initial 89 pages of changes.
The availability of credit is still tight in some places. Only two of the 47 lenders Irvine works with will underwrite loans in Michigan. Certainly the economy is part of the reason, but scams have been so prevalent in this state known as the epicenter of American car manufacturing, that most companies feel the risk of doing business in Michigan is too great.
In general, lenders are now willing to give loans to people with lower credit scores, says Irvine. Whereas the lowest credit score that would be considered mortgage-worthy a year ago was 620, lenders are now going as low as 580 if there is a reasonable explanation as to why the borrower’s score fell. They realize, says Irvine, people with a long work and payment history can get their credit ruined in the process of divorce or other hardships.
Irvine says one way borrowers can gain the upper hand is to take advantage of the way the mortgage software is written. She recommends sending in an extra payment of just $50 mid-month because most of the mortgage lender computer programs are written to adjust the interest calculation each time a payment is recorded.
The extra payment accomplishes several things:
- it reduces the principal, and that yields,
- lower total interest paid because less is borrowed, and
- the interest is calculated for half the time. The time between payments then doesn’t accrue interest.
This same payment strategy works with car payments and credit card loan reduction, says Irvine. Just send in your regular monthly payment and send in an additional payment halfway through the month.
Irvine also suggests considering refinancing your mortgage if you can save 1% on your rate. At even 1%, most homeowners can recoup the refinance expense in two years. If you intend to live in your home more than two years, taking advantage of these record low rates could be an excellent opportunity.
Irvine can be reached at 303.840.8484 or sirvine@thechampionbank.com.
Author Eric Gemelli founded Cornerstone Financial Services LLC in 1997 and as the managing member has worked in mortgages, life and health insurance, raised venture capital, and trading commodities averaging 30% a month doing so. He offers market forecasting services, and is “sure enough of [his] ability that 80% of [his] fee is based on performance.”
