Helpful Tips

What NOT to do:

1. Refinancing with your existing lender without shopping around.

Your existing lender may not have the best rates and programs. There is a general misconception that it is easier to work with your current mortgage company. In most cases, your current mortgage company will require the same documentation as other companies. This is because most loans are sold on the secondary market and have to be approved independently. So even if you have been very good at making payments to your existing lender, they will still have to do their verifications all over again.

2. Not providing documents to your mortgage company in a timely manner.

When your mortgage company asks you for additional paperwork, jump on it! Do not complain. They are trying to get you approved, not trying to hassle you unnecessarily! Jump through the hoops as quickly as possible. Borrowers who do not respond to requests for documentation quickly enough run the risk of paying higher rates if the rate lock expires.

3. Pulling cash out of your credit line before you refinance your first mortgage.

Many lenders have "cash-out" seasoning requirements. This means that if you pull cash out of your credit line for anything other than home improvements, they will consider the refinance to be a "cash-out" refinance. This leads to much stricter requirements and can in some cases break the deal!

4. Assuming that your home-equity loan is tax deductible.

In some instances, your home-equity loan is NOT tax deductible. Perhaps you make too much and fall into the AMT trap, or perhaps you have pulled out more than $100,000 cash from your home. Do not depend on your mortgage company for information regarding this matter, check with an accountant or CPA.

5. Getting a home-equity line to pay off your credit cards if your spending is out of control.

When you pay off your credit cards with your equity line, don't go out and charge up those credit cards again and put your house on the line!