My Refinancing Odyssey
Written: Aug 24 '01 (Updated Aug 26 '01)
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Pros: Reputable company, very responsive service
Cons: Conflicting information from different contacts, paperwork errors, insurance snafu, interest rate fumble
The Bottom Line: I signed; I stressed; I refinanced. Wells Fargo (formerly Norwest) Home Mortgage dropped the ball a couple of times but is saving me tons of cash in the long run.
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| kazu's Full Review: Norwest |
When Alan Greenspan and The Federal Reserve started slashing and burning interest rates earlier this year to stimulate a flagging economy, homeowners rushed like cats at the sound of an electric can opener to take advantage of lower mortgage rates -- which aren't directly tied to the interest rates the Fed controls, but do follow similar trends. (My cats are used to that little "squook" sound the tab-opened cans make so they respond to that instead, but either way it's a conditioned response.) Since my parents taught me from the time I was very young to appreciate money and conserve it whenever possible -- I was well-trained in coupon clipping and piggy banks -- I decided to consult my financial advisor (also known as "Dad") about whether refinancing would be a good idea. He confirmed that it would be, suggesting that I begin with the company where I already had a mortgage.
It's notable that it was only a year and a half ago when I became a first-time homeowner and joined the ranks of Those Who Write Checks for Large Dollar Amounts Using Very Tiny Letters. Since closing costs normally amount to several thousand dollars and it takes a few years to make them up, under different circumstances refinancing so soon and incurring additional closing costs may not have been a good idea. Because interest rates were so low, though, the time was right to refinance. I've heard a rule of thumb that you should refinance if you can get a rate 2% below what you're currently paying, but refinancing at a 1.875% savings (8.5% vs. 6.625%) and moving from a 30-year FHA loan to a 15-year conventional loan will, while costing slightly more per month, save me over $230,000 dollars in interest payments over the life of the loan -- more than the value of the house itself!
My former mortgage company was CitiMortgage, who bought my loan from the company who had originated it. I never had problems with CitiMortgage until trying to refinance my loan. After waiting for hours on hold because of everyone else who had heard the Fed's can opener and run to the phone to refinance, I was put in touch with a nice loan officer who handled my new loan application and got the refinancing process started. The tide of my good luck turned, however, when the loan papers came in the mail full of errors. I had questions which apparently only the loan processor could answer but I was never able to wrangle a return phone call from her. After a couple of weeks I simply gave up, asked for a refund of my application fee, and started hunting for a new mortgage company.
This is where Wells Fargo Home Mortgage came into the picture.
I looked in the phone book to find mortgage companies with names I recognized and who had offices reasonably close to me. I chose three to call: Phoenix Mortgage, QPoint, and Norwest Mortgage. I hadn't really heard much about QPoint in the past and the guy I talked with creeped me out a little, so I crossed them off my list. That left Phoenix and Norwest. It was a little unsettling to call Norwest and hear the voice on the other end say, "Wells Fargo Home Mortgage," but I got over that surprise pretty quickly. I was familiar with Phoenix because I'd worked in the real estate industry for a short time, and the loan officer there was not only pleasant to deal with and very knowledgeable, but she seemed honest, too. She quoted me a current rate of 6.5% on a 15 year loan with one discount point. The Wells Fargo loan officer was also very friendly -- in a more bubbly sort of way -- and quoted me 6.375% with the same loan term and points. (You may recall seeing above that my new loan is at 6.625%... more about that later... grumble.) If you're not familiar with discount points, each point amounts to 1% of the loan value, and points are used to "buy down" the interest rate, resulting in lower payments and less cost overall if you keep the loan long enough.
After consulting again with my dad (er, I mean financial advisor) I decided that, despite having a better gut feeling about Phoenix, I'd go with Wells Fargo because of the lower interest rate. I also liked knowing they weren't going to sell my loan right away, and the loan officer at Phoenix had told me that they always sell their loans. The Wells Fargo office was also just a couple of miles from where I live. My Wells Fargo loan officer (we'll call her "Sarah" -- name changed to protect the unaware) was very friendly and helpful, took my loan application over the phone, then mailed me the papers to sign. Yikes! I thought the CitiMortgage papers had been messed up, but these must have been dictated by a four-year-old, typed by a chimp, then put in a blender before being printed. Sarah explained that they have a new computer system which inserts customer data automatically (and apparently not very accurately). I corrected them, signed them, and mailed them back. The waiting began. Refinancing my mortgage has been one of the most stressful things I've ever done, possibly more stressful than buying the darned house in the first place.
As Monty Python says, "Always look on the bright side of life."
The best part of my experience with Wells Fargo Home Mortgage was Sarah's extremely responsive service. When I had a question (which I frequently did), she was always there to answer it with friendly enthusiasm. If I had to leave a message she'd return my call the same day, usually within a few minutes. After my experience with CitiMortgage, whose phones appeared to work only for incoming calls, this was great.
Sarah also got me out of FHA financing and into conventional financing. The main benefit of that change was that I didn't have to pay another up-front mortgage insurance premium to the FHA, which would have amounted to about $3000, and after I reach 20% equity in my home I can drop the private mortgage insurance altogether (with FHA financing I'd have been stuck with the PMI for the life of the loan). Since 5% equity was required in order to do conventional financing without making a down payment, Sarah had my house reappraised and it came in at a higher appraised value than it had when we'd bought it last year. All our closing costs were rolled into the loan and we ended up paying about $400 out-of-pocket.
The Wells Fargo Escrow agent who handled our closing process was extremely knowledgeable (even though she had a fakey-sweet little girl voice and forced lizard smile). The only bad thing about that was that it was all too clear that she was more knowledgeable than the loan officer we'd been working with. She told us the way it really was, while Sarah told us more what we wanted to hear.
Because we chose to go with a 15-year loan term instead of a 30-year loan, we're paying about $250 more per month than we were before. However, that's all principal! Because interest rates for 15-year loans are lower than rates for 30-year loans, we're saving around $300 per month in interest. Sure, we could have lowered our monthly payments by going with a 30-year term for the new loan, but I'm more interested in saving a large amount of money overall than saving a smaller amount of money right now. In the long run the lower interest rate and the shorter loan term makes a difference of some $180,000 in interest. Some of you may think it makes more sense to keep the cheap money and invest it for a higher return, but I'm honest enough with myself to know that it would end up getting spent elsewhere.
If you want to crunch some numbers for yourself, check out the mortgage calculators at HomeStore.com.
There's always a dark side.
The first snag we hit with Wells Fargo was locking in the interest rate. Sarah explained that she was waiting to lock in our rate until Greenspan announced the latest rate cut. She was absolutely sure rates would drop. "What if they don't?" I asked. "They will," she replied with confidence. Well, guess what... after the Fed's rate cut, mortgage rates went up. I've since learned that mortgage rates tend to fall on anticipation of such an announcement, then rise afterward. Apparently Sarah wasn't aware of that, a fact which will cost me an additional $7500 over the life of the loan, assuming I keep it for the full 15 years.
I've already told you about the messed up computer-generated paperwork. Although that didn't cause as much pain as some of the other "dark" incidents, it's worth mentioning.
Sarah didn't initially tell me that she was moving us into conventional financing from FHA. When the appraiser came I told him we were refinancing an FHA loan. I'm not sure whether that had anything to do with the results of the appraisal, but it came in too low and Sarah arranged for a second appraiser to come in. The second appraiser spent far less time in the house and his appraisal was considerably higher than the first. Apparently property appraisal is more of an art than a science. Waiting for the results of the second appraisal was a little stressful, especially since Sarah said the loan would fall through if it didn't come in high enough (though she worded it more kindly than that).
About Sarah... I always appreciated how friendly and responsive she was, but I'm sure you've encountered people, especially in the world of sales, who are simply burbling with enthusiasm, so much so that it seems to have crossed the boundaries of genuine human behavior. Sarah seemed to be playing the role of the World's Happiest Mortgage Officer, complete with catch phrases like "Make it a great day!" and "I want to be your lender for life." I never saw her office, but I wouldn't be surprised to see motivational posters and plaques lining the walls. Although she was very likeable, she just never seemed genuine.
Closing took place near the end of the month, and the deadline was tight because CitiMortgage had to be paid off before the next month began due to an FHA rule which meant we'd end up paying an entire extra month's interest payment (about $1400) if the payoff didn't arrive on time. The day of closing was when we started getting conflicting information from Sarah and from the escrow agent (we'll call her Jennifer). Jennifer presented the closing papers, which had fewer errors than the application papers, but which weren't perfect, as it seems documents of such financial significance should be. The first (glaring) error was that the discount points we were paying were listed as 1.5, not 1, a difference of about $1000. Sarah had told us that we'd be able to close the loan without paying any costs out of pocket, but the papers Jennifer was showing us had us paying about $3000 to close. This type of surprise is not what I wanted to encounter at closing. With Sarah's help we got it all cleared up, but not without a lot of stress. On top of that, Jennifer was impatient with the questions I asked at closing. She put on a sweet veneer but you could tell she was irritated underneath. It was late and we all wanted to go home, but I wasn't about to end up getting screwed silently.
In the end I did not get screwed (to my knowledge). I did experience additional stress, however, when CitiMortgage claimed the payoff had arrived too late and they'd have to charge us the extra $1400 in interest. Sarah told me the money had been wired on Friday; Jennifer said it had been FedExed. Jennifer was correct, and although I still have to wonder about the wisdom of relying on an overnight parcel service to deliver paper funds when time was so critical and wiring would have seemed to make more sense, Jennifer provided the tracking information which would prove to CitiMortgage that Wells Fargo had paid them on time. It took a few calls, one fax, and finally talking to someone in CitiMortgage's "command center" (really, that's how they answered the phone!) to straighten out that situation.
Last and probably least, Wells Fargo somehow managed to name an insurance agent I'd never heard of to provide homeowner's insurance for us, despite the fact that I'd given both Sarah and the loan processor the name, address, and phone number of my Allstate agent a total of three times. This unknown insurance agent became known to us when we received an insurance policy in the mail and payment for this policy was withdrawn from our escrow account. More calls, another fax, and my waning patience were required to cancel the policy and get things right. (I got my husband, who had floated through most of the refinance process blissfully unaware, involved this time, I was so tired of dealing with this stuff.)
And speaking of our escrow account, the office which originated the loan hasn't yet deposited our escrow balance, so the erroneous insurance payment was made out of wishes and air, leaving a negative balance in the escrow account. I'm waiting for the insurance payment to be refunded and for the account to be funded, which they say can take up to eight weeks. Grumph.
Less persistent or less aware consumers would have unnecessarily lost at least $2400 during this refinance, which I managed to avoid by diligently keeping track of what was going on and what the numbers meant. I'm not completely convinced I couldn't have gotten a better interest rate, but by educating myself and being aware of what was happening with the loan process I was able to avoid some bad pitfalls and some mistakes made by people who are busy with lots of customers and who don't care about my finances nearly as much as I do.
I'm recommending Wells Fargo and giving them a three star rating because I'm happy with the process overall, and despite the negatives, I think they did a competent job. Good service is getting somewhat rare these days, and Sarah was easy to deal with and made me feel like my business was important to her. I ended up with what I consider a good deal, even though I didn't have the luxury of being able to just sit back and not worry about how I was going to get there. All's well that ends well, as they say.
Recommended:
Yes
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Epinions.com ID:
kazu
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Member: Beth
Location: Seattle, WA
Reviews written: 20
Trusted by: 12 members
About Me:
Out standing in my field, chewing clover and waiting for rain.
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