Should you refinance your house with a direct-mail mortgage offer?

Many homeowners are often inundated by the amount of junk mail offers they receive each month. Here is what to think about if you’re considering refinancing with a direct-mail solicitor…

Confusing pitch

You receive a letter in the mailbox about a refinance offer saying the mortgage offer is a fixed rate loan with an ultra low interest-rate. Lenders have to disclose the annual percentage rate when advertising. The annual percentage rate is a disclosure item representing the total cost of the mortgage. Say you see a 30 year fixed rate loan advertised at 3.25%rate sounds like a good deal right? Do not be fooled by ignoring the APR. If the APR is anything in the 4% range or .5 more in the rate advertised you would be paying a colossal amount of points and fees to get that interest rate. It may sound like an enticing offer, however in most instances you can probably do better. Don’t buy into an advertisement that seems a little fishy. The old saying applies “If if walks like a duck, looks like a duck, then it is probably a duck.”

Your time

Plan to invest a considerable amount of your time in putting together your own loan. Think about it, direct-mail mortgage companies are high volume shops where numbers are the name of the game. You will do business with them on their terms which means they paper push resulting in you structuring, pricing, packaging, setting up and establishing your own loan.

Easier process

The pitch is “working with us be easier because we own your loan”. Unless you have a financial hardship refinancing with your lender is not automatically easier, moreover, they will need an appraisal and all the paperwork the local lender down the street needs too. Another pitch you will see is light or little documentation. They reality of it is today’s mortgage loan world is a full doc where ability to repay must be documented.

Mortgage tip: An FHA Streamline Refinance requires very little or no financial documentation if you are refinancing an FHA loan to a new FHA loan. This is due to the program under the same hub of the federal government.

Lending relationship

The loan officer on that snazzy loan offer is probably hundreds of miles away. You will need to trust your social security numbers to this individual and their organization. Do your research.

Ultimately, the choice is yours on who you decide is the best fit for you financially. Work with someone whom you feel comfortable who you like and trust. If that is a representative is at your current mortgage company, so be it. Unfortunately, you’ll likely never actually meet the person that you’re working with if you choose to work with a lender that is servicing your mortgage or anything other direct mail mortgage company for that matter. Traditional loan officers can offer pretty competitive rates, set up, structure and can handle your loan from start to finish and can make you aware of market opportunities far quicker and easier than the mortgage company soliciting you in the mail because simply because rates are low.

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