Home Mortgage Refinancing Guide

Your mortgage closing costs are the fees you pay up front when taking out or refinancing a mortgage loan. These costs include origination fees, title fees, discount points, appraisals, underwriting and processing fees. Basically any fee paid to the originator or a third party company involved with the closing your loan is considered a closing cost.

There are other fees that you’ll pay at closing including prepaid interest, escrows, and administrative fees that don’t really fall into the category of “closing costs.” You’ve probably heard about junk fees and want to avoid paying unnecessary closing costs when taking out or refinancing your mortgage.

Here are the basics you need to know about closing costs to help you avoid paying too much for your next mortgage loan.

The most common way to pay your closing costs when you purchase a new home is to write a check at the title company during closing. If you are refinancing it is common to roll these fees into the new loan as part of your mortgage. A less known way of paying closing costs is to agree to a higher mortgage rate in exchange for the cash to pay these expenses. This is actually how lenders like Bank of America offer so called “no fee” mortgage loans. The problem is you’ll never know how much these lenders pocket after paying your closing costs in exchange for that higher mortgage rate.

Whenever you take out a mortgage loan you can expect to pay thousands of dollars in closing costs if you are buying or refinancing; don’t fall for the “flat fee” you see from companies like Ditech or “no cost” mortgage loans from Bank of America…it’s a gimmick designed to get you in the door.

Mortgage Junk Fees

There are a number of fees you’ll encounter that serve no purpose and are headed straight for your mortgage company’s pocket. Courier fees, loan processing fees, affiliate fees, administration fees, document review fees, notary fees, all serve one purpose: to get as much money out of you as possible.

You can avoid garbage fees when taking out a mortgage to purchase your home or refinance an existing loan. According to the Secretary of Housing and Urban Development homeowners in the United States overpay nearly sixteen billion dollars every year. To learn more about avoiding mortgage junk fees and the unnecessary markup of your mortgage rate register for the free videos found on this site.

If you are considering mortgage refinancing but are uncertain if you can qualify for a new loan there are steps you can take to improve your chances. It’s no secret that mortgage lenders have tightened their standards for loan approval and in today’s economy many homeowners are feeling the pinch.

Here are several tips to help you qualify for a new mortgage and lower your monthly payment in the process.

Mortgage lenders rely on a number of factors when evaluating your financial history. Depending on your income and credit you will qualify for different types of mortgage loans. Your monthly payment is also affected by your credit as this amount is determined in part by the mortgage rate you receive. Another factor determining your payment amount is the term length you choose for repayment. For example a common mortgage term length of repayment is 30 years.

Check Your Credit before Applying for a New Mortgage

Mistakes in your credit reports will drag down your credit score like a lead balloon. There are three reporting agencies that you’ll need to request your credit reports from before refinancing your mortgage. If you find mistakes in your credit report you’ll need to have them corrected.

Also, it helps to pay down the balances on your credit cards if you have maxed out their limits. You don’t have to pay for credit reports as Congress passed a law requiring these agencies to provide you with a free copy of your credit report every year. You can request these free copies by visiting the website annualcreditreport.com.

Understanding Mortgage Rate Quotes

Once you’re certain that your credit reports are accurate the next step is to find the right person to arrange your mortgage loan. Mortgages are retail products and are generally resold by mortgage brokers and other financial companies. You will always get the best deal by finding the right mortgage broker for the job.

Banks and Credit Unions are exempt from disclosure legislation that protects homeowners by requiring them to disclose their profit margins and markup on your loan; you’ll never get as good a deal refinancing through your bank or credit union. This doesn’t mean mortgage brokers are perfect…far from it, brokers work for a commission so the loan that gives your broker the highest commission is probably not going to be the loan you want when refinancing.

The first thing you should know about mortgage rate quotes is that they almost always include markup to give the mortgage company or broker a commission. It is this markup that drives up your monthly payment unnecessarily. Finding the right mortgage broker to arrange your loan means finding one who is willing to negotiate this markup in exchange for a flat origination fee. It is possible to refinance your mortgage paying only a one percent origination fee to the broker.

You can learn more about refinancing without this markup of your mortgage rate and payment amount by registering for the free video guide found on this website.

When the Real Estate bubble burst many homeowners particularly in parts of the country like California and Florida saw their property values plummet. If you were one of these homeowners you may have gone from having as much as $50,000 in equity to being under water.

The burning question for homeowners who find themselves in this situation is “Can I refinance when I owe more on my existing mortgage than my home is currently worth?” Here are several tips to help you answer this question for yourself.

If the last appraisal of your home valued the property at $350,000 but your lender is telling you it’s now worth $260,000 you can still easily refinance if your mortgage is less than $200,000. The problem comes when you owe more than the property is worth, meaning you have “negative equity” in your home.

The straight answer to the question of refinancing when you’re underwater is no; however, there may be other options available to you. This may not be the answer you want to hear and for this I apologize but it is important to know your options when you are upside down in your mortgage loan. 100% mortgage loans are no longer available in today’s marketplace so unless you have the cash on hand to pay your mortgage down below the value of your home refinancing is not going to be an option.

If you don’t have the cash on hand there are ways to get it. Hard money lenders are one such method. A “hard money lender” is a private investor lending money to homeowners who are either upside down in their homes or are facing foreclosure. You have to be careful when dealing with private investors and observe the rule of “buyers beware” as there may be very little regulation of hard money lenders in your State.

You can learn more about your mortgage refinancing options, including costly mistakes to avoid by registering for the free mortgage videos available on this website.

Your mortgage payment that includes loan Principal, mortgage Interest, property Taxes, and homeowner Insurance is commonly referred to as PITI. Payments of this type are often paid through an escrow company. Your mortgage lender will receive the loan principle an interest to pay down your mortgage loan.

The escrow company will then pay your homeowners insurance policy premiums and property taxes. Lenders often structure loans in this manner to reduce their risk by ensuring your homeowners insurance and property taxes are paid in a timely manner.

The insurance and taxes portion of your monthly payment is not paid to the lender although they may hold it until the payments are due. This allows the lender or Escrow Company to collect interest on your money. Suppose for instance the property taxes on your home are $3,000 per year. You will pay $250 per month in addition to your Principle and Interest for the Taxes. The lender or Escrow Company will hold your money until the year’s end when it will be paid to the County for your Property Taxes.

If you financed your home with a fixed mortgage rate the Principal and Insurance portion of your payment will not change from one year to the next. It is likely that your Taxes and Insurance will change when your insurance policy is renewed or the property taxes on your are reassessed. It is a good idea to anticipate these increases and allow room in your budget for the changes.

Escrow Companies are notorious for not keeping up with changes in your Property Taxes and Insurance. If this happens you could receive a bill for the asking you to bring your escrow shortfall current. This money isn’t going to your lender but is being used to make up the difference in the higher amount of your Property Taxes and Homeowners Insurance. You can avoid a shortfall in your escrow account by notifying the Escrow Company whenever you receive a change in your insurance policy or tax information from the county you live.

If you are considering refinancing your home mortgage the interest rate you receive is probably your number one concern for the new loan. What you might not know about that mortgage rate is that the quotes you receive are often padded to give your mortgage company a commission. Here are refinancing tips to help you avoid this padding of your mortgage rate and save you thousands of dollars in the process.

The Best Rates Come From Mortgage Brokers

It’s true; you’ll never get a wholesale mortgage rate from your bank or that “e” site. You have to find the right person to arrange your loan and negotiate with them to avoid paying the unnecessary markup of your mortgage rate. This is easier than you think…you just need to understand how mortgage brokers are compensated for arranging your loan and then learn which buttons to push.

Mortgage brokers are simply reselling loans from wholesale lenders for a commission. Brokers receive compensation in two ways. The first is the origination fee you pay at closing. This fee can range from anywhere from zero to as high as 4%. You might think that a zero origination fee mortgage is the way to go; however, you’ll soon see that this type of loan results in much higher mortgage rate and monthly
payment.

The second way your mortgage broker is compensated is with a commission paid by the lender. Mortgage lenders pay a fee known as Yield Spread Premium when your mortgage broker locks and closes your home loan with an above market mortgage rate. You get a higher rate than you could have and the lender doubles, often triples your brokers commission on your loan…most often without your knowledge or consent.

Here’s an example of how this unnecessary mortgage rate will cost you thousands of dollars. Suppose you’ve decided to refinance your home for $300,000. Your mortgage broker quotes you an interest of 7.0% because you’ll be taking cash back on the loan to pay off some old debts. What you don’t know is that you were approved for a mortgage rate of 6.25% but the broker marked your rate up for a commission. You got suckered into paying .75% too much for your new loan and the broker walked away with the one percent origination fee you pay plus a whopping three percent from the lender for overcharging you.

What does this mean for your monthly payment? On a $300,000 thirty year mortgage with a fixed 7% mortgage rate your monthly payment will be about $2,000 per month. The same loan with the 6.25% mortgage rate that you deserve would have a monthly payment of only $1840. That’s almost $200 per month, a whopping $1,920 per year you’re overpaying for the loan.

You Can Save Thousands of Dollars on Your Next Mortgage Loan

There is good news for any homeowner willing to invest a few minutes learning how to refinance without overpaying. It is possible to refinance your home mortgage paying only a one percent origination fee without markup of your mortgage rate for Yield Spread Premium. Learn how to do this and you and your family will have access to wholesale mortgage rates for every home you buy and every loan you refinance. You can learn more about doing this for yourself by registering for the free mortgage videos found on this website.