How to Get Better Refinance Mortgage Rates Than Your Neighbors

If you’re shopping for refinance mortgage rates you might be disappointed to find that the quotes you’re getting are coming in higher than what lenders are advertising. There are two reasons this could be happening: your credit score and deceptive lender marketing. Here are several no BS tips to help you get the best refinance mortgage rates and pay less than your neighbors closing on your next home loan.

Refinance Mortgage Rates Online

Shopping for mortgage refinance rates on the internet is a convenient way of collecting quotes; however, relying on the Good Faith Estimates you find online is a sure way to overpay. Recently lenders have been advertising 30-year fixed refinance mortgage rates less than four percent. Interest rates are at historically low levels but they’re not that low. Lenders routinely quote refinance mortgage rates that include discount points in the fine print. You’re paying through the nose at closing to buy your interest rate that low.

Discount Points Definition

If you’re new to all this mortgage gobbly-gook you might be unfamiliar with the term discount points. A discount point is defined as an amount you pay at closing to buy down your refinance mortgage rates. One discount point is one percent of your home loan amount and typically lowers your refinance mortgage rate by .25 percent. Does it make sense to pay discount points when interest rates are at their lowest levels ever? Absolutely not…it’s just a way for lenders to boost their profits at your expense.

Deceptive Mortgage Advertising

Aside from artificially lowering refinance mortgage rates by charging discount points the problem with the interest rates you see advertised is that they assume you have a credit score of 720 or better and a favorable loan-to-value ratio. If you have less equity in your home than 80 percent or have a credit score below 720 your refinance mortgage rates are going to be quoted higher.

There are steps you can take to ensure your credit isn’t hurting you when shopping for a new home loan. First, check your credit reports at annualcreditreport.com and make sure there are no mistakes dragging down your FICO score. Second, avoid opening new accounts for at least 90 days prior to refinancing and pay down the balances on your credit cards as much as possible. Maxing out your credit cards can lower your credit score by as much as 30 points, resulting in higher mortgage refinance rates.

Beware Lender Junk Fees

One of the most common mortgage mistakes your neighbors make is focusing only on getting the lowest refinance rates at the expense of fees. The reason fees are so important when mortgage refinancing is that you’ll have to recover your out-of-pocket expenses before benefiting from lower refinance mortgage rates. The more you pay at closing, including lender junk fees, the longer it’s going to take to break even. Lender junk fees can make it very difficult, even impossible to recover your out-of-pocket closing costs negating any benefit you’re getting from your new home loan.