There are more options today for mortgage refinancing than ever. Mortgage lenders offer loans for every financial situation and credit rating. Choosing the wrong type of loan or neglecting to do your homework and research mortgage lenders could be a costly mistake. Here are three tips to help you avoid overpaying for your next mortgage loan.
I. Mortgage Refinancing: Watch Out for High Interest Rates and Fees
Mortgage companies and brokers routinely mark up the interest rate you qualify from the wholesale lender that approved your loan. This markup of your mortgage interest rate is called Yield Spread Premium and there is a way to avoid paying it. When your mortgage company or broker provides you the written guarantee of your mortgage interest rate, ask to see the guarantee from the wholesale lender. If your mortgage company refuses, find another company that will show you this document.
II. Mortgage Refinancing: Carefully Review the Good Faith Statement
To avoid overpaying when mortgage refinancing it is important to carefully review the charges found on your Good Faith Statement. The origination fees you pay should not be higher than 1-1.5%. Find the loan processing fee and make sure you are not being charged more than $400. Carefully review the Good Faith Statement for anything that resembles an application fee, lock fee, broker administration fee, or courier fees. These are junk fees you should simply refuse to pay.
III. Mortgage Refinancing: Beware the Risk of Foreclosure
If a mortgage company asks you to exaggerate your income or sign blank or incomplete documents, this is a sure sign that you are dealing with a dishonest company. Predatory mortgage lenders use this tactic to structure their mortgage loans to promote default; when you are unable to keep up on your payments the lender will foreclose and take your home. When you do your homework and carefully research mortgage offers, predatory mortgage lenders are easy to spot.
You can learn more about mortgage refinancing while avoiding costly lender pitfalls by registering for our free mortgage video tutorial.