Did you miss the boat on ultra-low refinance rates or can you still lower your payment and put some cash in your pocket? Are you kicking yourself for letting the refinance craze pass you by and are asking “Should I Refinance now that interest rates are going up?” Here are several tips to help you decide if refinancing with today’s best mortgage lenders is still worthwhile.
Mortgage Refinance Rates Are Going Up
The outlook for refinance rates in the coming months is just plain grim. Mortgage refinance rates for a 30-year fixed rate home loan inched over four percent, up from 3.5 percent last month.
Don’t panic just yet if you’ve been procrastinating yourself out of a better deal. You can still get a lower payment without paying unnecessary fees or discount points, but you’ve got to lock current refinance rates soon.
If you look at the big picture, historic refinance rates are still very low, just not as low as you could have locked them.
Fannie Mae Says Refinance Rates Not Likely Going Down
Fannie Mae’s chief economist, Douglas Duncan was quoted saying that the forecast for refinance rates in the coming months is not good. Mr. Duncan went on to say that if you can afford to lock at today’s refinance rates, “I would lock.”
If you’re floating refinance rates hoping to get a better deal the chances of catching the downside is highly unlikely. If you haven’t already had a conversation with your loan officer about locking in current refinance rates you might want to get that person on the phone quickly.
Not All News Is Bleak For Mortgage Refinance Rates
Fannie Mae went on to say that refinance rates have gone up more than the Fed intended. Interest rates have gone up nearly .60% (60 basis points) from last month’s levels.
Mr. Duncan believes the Fed will try and hold refinance rates where they are, which could stabilize the 30-year fixed interest rate at four percent. Locking in refinance rates at four percent doesn’t mean you’re getting a bad deal; on the contrary, there are still millions of homeowners out there paying six percent or more.
Should You Pay To Lock Your Refinance Rates
If you’re still shopping from today’s best mortgage lenders you’re bound to encounter a rate lock fee. While this is considered to be a junk fee by many financial advisors because it doesn’t cost the lender anything to lock your rate, there are some instances when it’s okay to pay application and rate lock fees.
In many cases the rate lock fee is credited to your settlement costs when you close but the deciding factor should be how much the lender is charging for their loan origination fee.
How much should you be paying for mortgage origination? Many loan officers will tell you that one percent is standard because they’re splitting their commission with the lender; however, I’ve seen community credit unions charge as little as $400 for this fee. The less you pay closing on your next home loan the more benefit you’ll get from four percent refinance rates.
Shop For The Lowest Mortgage Lender Fees
The Good Faith Estimate is an excellent tool for comparison shoppers. The government recently revised this disclosure document making it easy to compare settlement fees as long as you’re looking at identical mortgage programs.
If you need a 30-year fixed rate loan make sure all of the quotes you’re getting are for that program; don’t let a fast talking loan officer confuse the issue by quoting a 15-year ARM.
The settlement fees you want to comparison shop are found on page two of your Good Faith Estimate. Make sure the quotes you get for refinance rates are from identical programs that DO NOT include discount points. Most lenders quote refinance rates in their tables that include points first so you’ve got to ask your lender for zero point quotes.
If you’re curious how much benefit you’ll get from paying discount points there is a table on page three; however, most homeowners with normal credit do not benefit from paying this mortgage lender fee.
How To Read The Good Faith Estimate
Refinance rate shopping with the new Good Faith Estimate is pretty straightforward. Start with box one of section A on page two. This is the lender’s origination fee and is the fee you’ll get the most bang for your shopping efforts. Any discount points or lender markup of your refinance rates is found in box 2 of section A.
Markup means you’re getting higher than market refinance rates for a lender credit paid towards your settlement fees. This can be helpful if you don’t have the cash to pay your closing costs but you won’t get four percent refinance rates if you accept the lender’s credit. Many lenders allow you to roll your settlement fees into the loan balance, which could be a more attractive option than accepting higher than market refinance rates.
Box three of section B is lender specific fees that you’ll want to compare from a variety of banks, credit unions and direct lenders. If you’re having trouble collecting favorable quotes you might try enlisting the help of a good mortgage broker, just be careful that you’re not overpaying their loan origination fee.
Spend some time comparison shopping lender fees and you can still get a really good deal on your next home loan despite current four percent refinance rates.
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