Trading potential equity to get a smaller payment now is not always a wise idea. Negative credit loans require minimal payments which are less than the true amount of interest owed, causing the loan balance to grow with every payment, not diminish. These loans were popular in the mid-2000s when dwelling values were climbing consistently every year. When home values stopped appreciating, or even when they began to depreciate, these loans immediately caused many homeowners to invest more than their residence was worth. Fortunately, refinancing is available for many homeowners who have adverse amortization mortgages.
Request a payoff statement from your mortgage business. This announcement will include the effects of any negative amortization of your loan. Knowing your existing loan balance is critical when obtaining new financing. Ideally, the remainder of your loan is at least 20 percent less than the value of your property. Give this balance to the loan officers from whom you call to get quotes.
Contact at least three mortgage companies and request quotes to get a new mortgage. You can use local mortgage companies, large banks or online lenders, even if you would like. Ask these mortgage companies to provide you with quotes together with the federally mandated good faith estimate, or GFE. The authorities standardized this form to make it easier to compare quotes from multiple lenders.
Compare each quote side-by-side using the shopping graph on page 3 of the GFE. If you would rather a fixed-rate mortgage and among those lenders provided you an adjustable-rate loan, then ask that lender to give you a fixed-rate mortgage estimate instead. Some lenders will quote one of the cheapest settlement fees potential, some will quote you the cheapest rate, and some will be in between the two.
Negotiate with the best two lenders until you are given financing using both a low rate and low settlement fees. The rate of interest and the settlement fees are negotiable. Some settlement fees are the expense incurred by the mortgage lender, but you can always request that the mortgage lender pay for that fee instead of you.
Apply with the lender who offers you the best loan for your situation. Ask the lender what documentation you should bring with you to the program. Most likely he’ll need you to document your income and assets. The lending institution will submit your loan to pay for loan approval. Underwriting may need some extra explanations or documentation. This is a normal part of the procedure. When the underwriter completely frees your loan, typically a couple weeks later, the mortgage will be scheduled to shut with the title company or real estate attorney. Once you close on your new mortgage, then you will no longer need to think about your mortgage balance moving up every month instead of down.