Re-examining refinancing

Re-examining refinancing
With rates edging ever lower, homeowners can save a pretty penny -- but be aware of possible ripoffs


March 26, 2009
BY SANDRA GUY sguy@suntimes.com

As mortgage rates fall to new lows, beware of come-ons to refinance your mortgage.

The average interest rate on a 30-year fixed-rate mortgage was 4.98 percent last week, according to Freddie Mac, the giant mortgage company. The rate is expected to continue slipping in the wake of the federal government's efforts to pump money to lenders to lower mortgage rates and loosen up credit.

For borrowers with stable jobs and good credit, it represents an opportunity to refinance at the lowest rates in decades. But people with less-than-perfect credit are likely to pay higher rates. It also presents an opportunity for crooks.

The Better Business Bureau and community housing assistance leaders offer this advice:

• • Check the reliability and credibility of the company offering the refinancing at the Better Business Bureau's Web site, www.bbb.org.

• • Consult with a U.S. Housing and Urban Development (HUD) certified housing counseling agency, of which there are 30 in the Chicago area, including Lakeside Community Development Corp., 1652 W. Wallen Ave., Chicago.

• • Don't sign anything without consulting either a housing counselor or a lawyer, especially if the company is trying to push or rush you into a decision.

• • Assess whether the savings justifies the amount you will pay in closing costs and restarting the mortgage payment through refinancing.

• • A federal stimulus payment of up to $8,000 for first-time homebuyers is a tax credit that you receive with your income taxes, and has nothing to do with a mortgage closing.

• • Never sign documents in which spaces and lines are left blank.

• • Ask questions about confusing terms. especially if you choose a mortgage that doesn't have a fixed rate: When are the "reset" points? Will you be able to make the new monthly payment with a higher interest rate if it resets? Would you face a prepayment penalty or other restrictions if you qualify to refinance?

• • When a mortgage lender asks about income, expenses and other detailed questions, have at hand your bills, statements and other details that will give an accurate picture of your financial situation, rather than exaggerating or making promises you cannot keep.

• • Beware sizable upfront fees or fees that no one can explain. Reputable brokers and lenders do not charge high upfront fees.
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