When it comes to refinancing there are good mortgage companies and there are bad ones. Choosing the wrong lender can lead to losing thousands of dollars from unnecessary fees and markup. Here are 5 quick mortgage refinancing tips for conventional refinancing and government refinance programs like HARP 2.0, FHA streamline refinance and the VA Interest Rate Reduction Refinance Loan (IRRRL).
1. The Good Faith Estimate (GFE) is Just an Estimate
When it comes to the fees you’ll pay refinancing your mortgage the Good Faith Estimate is not the final word. Your actual closing costs are found on the HUD-1 Settlement Statement. Commonly overpaid items include the loan origination fee and discount points. If you don’t have the cash to pay your closing costs have the option of lender paid closing by accepting higher refinance rates.
2. Compare Refinance Rates AND Fees
One of the most common mortgage mistakes is focusing on getting the lowest refinance rates at the expense of lender fees. Paying unnecessary discount points or overpaying the loan origination fee makes it more difficult to break even recouping your closing costs. If you can’t break even on your out-of-pocket expenses you’ll be losing money no matter how low your refinance rates.
3. Choose The Right Mortgage Type and Term Length
Should you pick an Adjustable Rate Mortgage or go with the FHA or VA for your next home loan? Choosing the wrong type of loan could raise your payment amount. FHA home loans for instance require mortgage insurance which adds hundreds of dollars to your payment. The VA does not require mortgage insurance so if you’re eligible for a VA home loan make sure you’re taking advantage of the benefit you earned by serving.
Term length is the amount of time you have to repay your mortgage loan and along with the refinance rates determines your payment amount. Refinancing with a shorter term like 15 years can save you thousands of dollars in finance charges where lengthening your term will make it impossible to recoup your out-of-pocket expenses.
4. Shop Around For The Best Deal
Mortgage brokers can be an excellent resource for getting your mortgage refinance application approved but they will charge you an origination fee for their services. I’ve seen small credit unions charge as little as $400 for loan origination where most brokers charge one percent or more of your loan amount. Community based credit unions are an excellent starting point for refinance rate shopping even if you’re not a member. Always compare fees for loan origination and look at things like the cost of the appraisal before choosing a lender.
5. Question Everything
If you find something in your mortgage disclosure that you don’t understand or doesn’t look right don’t be afraid to ask questions. There are some fees that can be negotiated as well as junk fees you’ll want to avoid. Don’t let a pushy or unhelpful broker put you in a home loan that you’ll regret. If you find a loan officer or broker pushing back against your questions take your business somewhere else.
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You can learn more about getting the best deal on your next home loan while avoiding unnecessary fees by checking out my free Underground Mortgage Videos.
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