Home Mortgage Refinancing ? What?s in Your Contract?
Are you one of the millions of Americans who will be refinancing their home mortgage loan this year? When you sign your contract and the other papers for your refinance, will you know what your signing?
Your Contract: This one is simple, but I would guess very few people do it. READ THE ENTIRE CONTRACT. It seems that usually the home mortgage refinancing contract is written with the preparer pointing out the obvious terms, i.e. sales price, earnest deposit, closing date, inspections, etc., but all of the language in the contract is binding; not just the part that your read and/or understand. Read it and if you don't understand it, seek legal counsel. This is the agreement for every part of the transaction. How taxes will be prorated, who pays for what, when do you agree to close the transaction and when will you be allowed to take possession of the property are all in your home mortgage refinancing contract.
If your purchase is new construction there are often many specific clauses to your sale. Remember the builder probably sells many more houses than you buy and knows what language to include in his contract to protect and benefit him. Make sure this language is something you are willing to abide by.
There should be specific language in all contracts as to what amount will be used to prorate items, in particular property taxes. It is particularly important in new construction or areas that are being reappraised to understand how taxes will be prorated. If it states that the last available tax amount will be used you need to find out, before agreeing to it, that this amount was not based on a lesser value.
In new construction the property was probably taxed on land value only or a partial value of the improvement. The tax bill that you will be responsible for will probably be based on a higher amount. If the Seller is giving you a credit for their part of the year that they owned the property before an actual tax amount can be ascertained, make sure that the best available information is being used to estimate the taxes. You also need to be aware that if you have an escrow account with your lender that they may set your monthly tax payment up on a lower amount than when your property is fully assessed. Be prepared to have your monthly payment increase when the higher tax bill is paid and your escrow account is analyzed. You many have a shortage that you'll want to pay all at once rather than have it included in your payment increase.
If your escrow account is already short from a previous tax payment there will not only be an increase for the next year's tax bill, but an additional increase to cover the already existing shortage. Paying the shortage in one lump payment would eliminate this double increase. Your payment will still increase to the amount required to pay the next year's bill, but you won't also be making up for last year's shortage. This can be confusing so ask your home mortgage refinancing closer or loan servicing department of your lender to explain your options.
If you're buying a property that was split at the time of your sale (duplex, large parcel split into smaller ones, or some types of new construction) make sure that your property is assigned it's own tax identification number before a tax bill is issued. You don't want to receive a tax bill that includes other property other than the one that you own.
When you review your preliminary title commitment tax information should be included in the search. You can find out if the tax identification number included other property. This number is also what you will use if you need to contact the County for any other information regarding taxes.
Before you sign, if there is something that is not clear to you or you don't understand, ask. Most mortgage refinance contracts are standard forms and your loan officer or mortgage loan closer can usually clear up any confusion you may have. Remember that the papers you sign are legal documents and you are agreeing to the terms stated in the contract. If you're not absolutely certain that you understand your contract, seek legal counsel.
About the author: J. Stewart offers more timely refinance and mortgage information for those wanting to refinance at http://www.2applyforloan.com
Latest News
 ABC News | A Rush Into Refinancing as Mortgage Rates Fall New York Times, United States - Mortgage rates immediately dropped, and that led to a surge in mortgage refinancing activity for the week — even with the Thanksgiving holiday. ... Treasury mulls plan to lower mortgage rates to 4.5% Homeowners' Refinancing Jumps by Record Pace Proposal could drop mortgage rates to 4.5 percent |
 Emirates Business 24/7 | Mortgage Refinance Applications Soar As Rates Fall EasyBourse.com, France - The Mortgage Bankers Association's index of refinance applications posted a record 203.3% increase over the previous week. Additionally, the US Treasury ... Fed will buy $500 billion in securitized home loans Mortgage rates fall, but many borrowers will have trouble qualifying US move cuts mortgages to lowest rate since February |
 RTT News | US MBA’s Mortgage Applications More Than Doubled Last Week Bloomberg - The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan jumped 112 percent to 857.7, the highest level since March, ... FINANCIAL STOCKS Bulls outlast bears in Wednesday grudge match Mortgage Apps On Rise As Rates Drop UPDATE 1-US mortgage applications post largest gain ever |
VA Specialty Lender Offers 100% Mortgage Refinancing PR Web (press release), WA - Salt Lake City, Utah (PRWEB) December 3, 2008 -- iFreedom Direct Corporation, a Salt Lake based mortgage company, is now offering 100% VA refinance "cash ... |
 Reuters | Bernanke Says US Must Step Up Foreclosure Efforts (Update1) Bloomberg - ... been prodding private mortgage servicers and bond investors to cooperate with government efforts to modify or refinance loans for troubled borrowers. ... Bernanke: More foreclosure help needed Op-Ed: Fed Throws Refinancing Party; No One Shows Up The Fed's Potentially Very Bad Policy |
Carmen: Time Is Right to Refinance Your Mortgage CNBC, Englewood Cliffs - Despite the doom and gloom in the economy, there's actually a glimmer of hope shining through for homeowners looking to refinance. The average interest rate ... |
Lower mortgage rates help but jobs, prices key Reuters - Applications to buy and refinance homes hurtled higher last week as the lowest rates since the summer of 2005 unleashed pent-up demand. ... |
Bally Total Fitness files for bankruptcy again San Francisco Chronicle, USA - Refinance volume more than tripled, while purchase volume increased 38 percent. Refinances accounted for 69.1 percent of applications, up from 49.3 percent. ... Thanksgiving week saw rise in mortgage activity |
Low rates breathe life into mortgage market Columbus Dispatch, OH - Spurred by average interest rates on 30-year fixed mortgages that are under 5.5 percent, many homeowners are considering refinancing. "The mortgage rates ... |
Refinancing a viable option for certain homeowners Monitor, TX - For the many locals who are still paying off subprime mortgages, refinancing is also likely not an option. But with a 30-year mortgage rate at close to 5.5 ... You can still refinance loans |
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