Mortgage Refinancing is a straightforward process of taking out a new home loan to replace your existing one. Getting the best deal for your next home loan can be a tricky process that cost your neighbors thousands of dollars more than necessary. How does refinancing work when you’re getting the best deal? Here are several tips to help you get the lowest refinance rates without paying unnecessary discount points or lender junk fees.
How Does Refinancing Work?
Most homeowners approach refinancing the same way they purchase a kitchen appliance. Check out a few offers from the best mortgage lenders and choose the one with the lowest mortgage rate. What happens if the rate quotes you’re getting are coming in higher than what these best mortgage companies are advertising? Here are several reasons that you might not be qualifying for today’s lowest refinance mortgage rates and what you can reasonably expect.
Mortgage Rate Shopping Tips
According to Freddie Mac’s recent lender survey, mortgage rates are hovering near 3.79% if you’re willing to pay .7 discount points to get that rate. The problem is while lenders are advertising refinance rates this low, almost no one is qualifying for that interest rate. Why can’t you lock refinance mortgage rates as low as lenders are advertising? Here are several reasons that could be holding you back.
First you should know that advertised mortgage rates are based on several assumptions. First, the quote assumes a 30-day lock period between yourself and the lender. These days if you’re refinancing, 30-day rate locks simply aren’t available. In today’s market it’s extremely difficult to close on your mortgage refi in 30 days. It just isn’t happening.
Low rates have created a backlog with many lenders due to high volumes of loan applications. Also, recent changes to Federal loan regulations have slowed the underwriting process down by several days. The surge in mortgage loan applications has created a backlog for home appraisals; higher turnaround time for appraisers is also slowing down the application process. Some banks like Bank of America have a 90+ day backlog of mortgage refinancing applications for this reason.
If you elect to lock your refinance rates you’ll most likely only have the option of a 45 day lock period. The longer your rate lock period the higher your costs will be, including higher mortgage rates. That 45-day lock will cost you .125% on your refinance rates. If you get stuck with a 60-day lock period expect your interest rate to be a whopping .25 percent higher.
If the lender you’re considering cannot close in 30-days you’ll never get their advertised refinance rates.
Is this bait-n-switch lender advertising? Absolutely. Lenders know they can or cannot close within 30-days so advertising rates they know aren’t available is a deceptive abuse. Always question your loan originator about the rate lock period and cost associated with locking for a longer duration.
Advertised Rates Are For Conforming Home Loans
Another reason that you might not be qualified for a lenders advertised rates is the type of home loan you’re refinancing. Refinance rates quoted in Freddie Mac’s survey are for home loans under the conforming loan limit of $417,000 for most areas and must be backed by Freddie Mac.
If you’re trying to refinance under the Home Affordable Refinance Program (HARP 2.0), have a jumbo mortgage loan or an FHA home loan you won’t qualify for advertised rates. Lender participation in HARP is voluntary and participating lenders are free to mark up refinance rates as the bank sees fit.
FHA mortgage rates are not the same as conforming rates, no matter where you go. This is also true of VA and some USDA mortgage loans. You’re simply going to pay more than what lenders are advertising.
If your home loan is above the conforming loan limit and you have a jumbo mortgage you’re pretty much at the mercy of your lender. Jumbo mortgage loan rates are set by individual lenders and vary widely in the market, making rate shopping extremely important if you fall into this category of mortgage refinancing.
Do any of these circumstances describe you? How can you the lowest refinance rates from today’s top lenders? Mortgage rate shopping is extremely important comparing both refinance rates AND fees. It doesn’t make sense to choose the home loan with the lowest rates and the highest fees if you’re going to be losing thousands of dollars at closing. Paying unnecessary discount points can quickly turn an attractive rate into a horrible deal.
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You can learn more about getting the best mortgage rates for your next home loan without paying unnecessary discount points or lender junk fees by checking out my free Underground Mortgage Videos.
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