Are you shopping for the best refinance companies for your next home loan and want to avoid unnecessary fees? Choosing a big company like Amerisave doesn’t guarantee you’ll get the lowest refinance mortgage rates; in fact, there are a number of common mortgage mistakes that can cost you thousands, even with the best refinance companies. Here are several tips before you refi to help you find the best refinance companies without overpaying the lender or your mortgage broker at closing.
Shopping For The Best Refinance Companies
Most people approach shopping for the best refinance companies by collecting Good Faith Estimates (GFE) from lenders online or out of the phone book. The problem with this approach is that you can’t get an apples-to-apples comparison from different lenders using the Good Faith Estimate due to a lack of standards in our disclosure laws. The GFE is little more than a marketing tool used by lenders to promote overpriced home loans. If you make your choice from the best refinance companies based on the GFE you’re almost guaranteed to overpay.
Enlisting the Help of a Mortgage Broker
Instead of shopping for the best refinance companies like your neighbors did a more sensible approach to mortgage refinancing is to find the right person to arrange your next home loan. Brokers have access to today’s lowest refinance mortgage rates and a good one can cut through all the crap lenders are pulling to boost their profits in today’s economy. Sure you’re going to pay a loan origination fee for the broker’s services; however, finding the right person can save you thousands of dollars in unnecessary fees and markup over the lifetime of your home loan. Brokers are especially helpful if you have credit challenges and need help choosing the right program to get you qualified for mortgage refinancing.
Do Your Homework Before Applying
It’s a good idea to learn how mortgage refinancing works and what fees you can reasonable expect to pay; however, the most common mortgage mistake is overlooking your credit before applying with the best refinance companies. The refinance mortgage rates that you qualify for will most likely come in higher than what lenders are advertising because your quotes depend on your credit score and loan-to-value ratio (LTV). Unless you have the cash on hand for cash-in refinancing there isn’t much you can do to improve your LTV; however, improving your credit score and therefore mortgage rate is something even the most financially clumsy homeowner can do.
How to Improve Your Credit Score Before Mortgage Refinancing
Here’s an illustration to show you how your credit score affects the refinance mortgage rates you’ll get and the amount you’ll pay for your home over time:
As you can clearly see the lower your credit score, the higher your mortgage payments and finance charges are going to be over time. Many homeowners are intimidated by their credit reports and scores; however, they’re really not as scary as you might think.
Before you can think about applying with the best refinance companies it’s a good idea to check your credit reports for mistakes. If you have mistakes in your credit reports your credit score will be lower than it should be. (through no fault of your own)
If you find that you have inaccurate information in your credit reports you’ll need to file disputes with each credit bureau and allow enough time for the correction to be made and be reflected in your credit score before shopping for the best refinance companies. Once your certain that the information in your credit reports is correct you can improve your FICO score by paying down the balances on your credit cards as much as possible and avoiding taking out new accounts for at least 90 days before applying for a new home loan.
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