Shopping around for a mortgage worth the effort

Q: Please tell me what reliable bank or mortgage company would have the best lending rate for a 30-year fixed loan.

I don't have time to shop around and am needing to refinance from an adjustable-rate mortgage to a fixed. My loan balance is $210,000 and I want to increase it so I can pay off my credit-card debts of $16,000. I have an average credit score.

A: As with buying any other consumer product, be it a car, a television or cellphone service, you'll only get the best deal if you're willing to do your homework, said Keith Gumbinger, vice president of HSH Associates, a mortgage consulting firm in New Jersey.

"The general rule of thumb in most financial endeavors is you can invest your time or you can invest your money," Gumbinger said.

"If you are not interested in scouring the marketplace for the best possible deal, you will likely end up with an average deal which will still be acceptable to you because you will not have to put in any work for it."

Placing a call to your current lender is your most effort-free approach because that lender already has a file on you and may have a refinancing program specifically for current customers.

"If you found their rates and service to be acceptable for your initial purchase, you will likely find them acceptable for a refinance," Gumbinger said.

But if you want to be confident that you're getting the best deal available, you'll have to educate yourself and shop around.

There are numerous Web sites that have basic refinancing information, current interest-rate numbers or functions that allow you to get preliminary rate quotes from lenders. Some present information in English and Spanish.

Among them are Gumbinger's site, hsh.com. (It does not make loans, accept commissions or referral fees.)

Others are freddiemac.com and fanniemae.com. (Both are federally chartered financial institutions that provide mortgage funds to lenders.) The Federal Reserve Board's site, www.federalreserve.gov, has considerable consumer information, including a primer on how to shop, compare and negotiate a mortgage transaction.

The Seattle Times provides a sampling of mortgage rates offered by various local lenders; it runs every Sunday on the second page of the Business section and another one is at seattletimes.nwsource.com/news/business/ratechart.

Another list runs in this section and at marketplace.nwsource.com/realestate/mortgagerate.html.

Finally, the Federal Trade Commission has consumer information and worksheets for those seeking a mortgage. You'll find them at www.ftc.gov.

Q: Looking at the Seattle area, it appears that home values and sale prices exceed the assessed value of the land and structure.

Is this trend applicable to all areas, or is it just because of the popularity of the Seattle area? How is this trend for house-price markup justified?

A: There is no single method that governments use to assess home values for tax purposes, either nationally or in this state. Thus it's impossible to say if home-sales prices generally exceed assessed value.

However, right now they do in King County, and there are two reasons for that, according to King County Assessor Scott Noble.

The first is that assessments of Seattle-area homes are based on the prior three years of neighborhood sales.

For example, the assessments that came out in early 2007 were based on a rolling average of sales that occurred in 2004 through 2006. That method is used to blunt the effect of speculative homebuying on the market.

The second reason the assessed value is below market value is that we've seen significant appreciation in the past three years.

In an appreciating market, sales prices will be higher than the assessed valuations. In a flat market they'll be about the same, and in a depreciating market they may be less than the assessor's figure.

However it's important to remember that assessed value and market value are not meant to be the same. Homes are assessed for tax purposes only.

The market value is simply the amount a buyer and a willing seller (i.e. not in foreclosure) agree upon.

Q: After I signed for a mortgage, they sent me another paper to sign.

This second one said my home had fewer square feet than the first one said. Was I right to just sign it?

A: Seattle attorney Richard Morse says you were. "As part of the loan, the borrower is obligated to make post-closing clerical corrections," Morse said. Failure to correct errors in the initial documents is a serious matter that can put your home purchase in jeopardy.

To put your mind at ease, Morse suggests you call the servicing department of your mortgage company. Ask to speak to the person who serviced your loan. That person should be able to explain why the two numbers for square feet are different and where the revised number came from.

You may be wondering whether the change affects your home's value. Morse says it doesn't because the size of your house hasn't changed, just the numbers on a piece of paper.

Besides, size is just one determination of value. A home's location and condition can be even more important.

Home Forum answers readers' real-estate questions. Send questions to Home Forum, Seattle Times, P.O. Box 1845, Seattle, WA 98111, or call 206-464-8510 to leave a question on a recorded line. The e-mail address is erhodes@seattletimes.com. Sorry, no personal replies. More columns at www.seattletimes.com/columnists.