Are you looking for the lowest refinance mortgage rates and want to avoid paying unnecessary fees? Do you know how to spot lender junk fees correctly using your Good Faith Estimate and HUD-1 Settlement Statement? Here are several tips before you refi to help you get the lowest refinance mortgage rates from the best mortgage companies like Amerisave without leaving money on the table at closing.
Refinance Mortgage Rates Online
The Internet is an excellent resource for shopping for the lowest refinance mortgage rates if you go about it correctly. The problem is that many homeowners approach mortgage refinance rate shopping in the same manner they approach shopping for a kitchen appliance. Most of your neighbors collect a few Good Faith Estimates, squint at them until one in the morning and choose the offer with the lowest interest rate. This approach often results in overpaying thousands of dollars in unnecessary discount points and junk charges.
What Fees Are Legitimate & Which Are Junk Fees
Every home loan has fees you’ll be required to pay at closing. Even those no fee refinance offers trade paying closing costs for a higher monthly payment. The closing costs you’ll pay for mortgage refinancing fall into the following four categories:
- Mortgage Lender Fees
- Government Fees
- Escrow and Pre-paid Interest Fees
- Third Party and Title Fees
How can you tell which are legitimate and which are junk? Government fees are unavoidable and are required by the State, County, or town you’re living. No one’s happy paying property taxes and other charges; however, the government fees you find on your Good Faith Estimate and HUD-1 are all legitimate and should not vary among the best mortgage lenders.
Escrow fees will vary from one lender to the next as many lenders have different guidelines for prepaying property taxes or insurance. These fees, including interest fees, are usually based on how much you’re borrowing.
The most common mortgage mistakes come from lender fees and third party expenses. Lender fees include any discount points required to lock your refinance mortgage rates and the rate lock fee charged if any. Rate lock fees, application fees, processing fees, and document prep or courier fees are all junk fees and should be questioned and negotiated away.
How to Use Your Good Faith Estimate Correctly
Lenders are required to give you the Good Faith Estimate (GFE) which is supposed to include all closing costs and fees up front, when you submit your application for mortgage refinancing. There is a 72 hour waiting period from the time your lender receives your application before they can start billing you for fees like a home appraisal. New disclosure laws require the Good Faith Estimate to be accurate; however, keep in mind that this document is still just an estimate given in good faith.
The final word on lender fees comes with your HUD-1 Settlement Statement that will reflect anything that changed since you received the Good Faith Estimate. You might be able to negotiate a lower loan origination fee for example, or find that your attorney fees have gone up because your application required additional work. If anything does change on your Good Faith Estimate after you receive it, the lender has to provide you an update and your closing will be delayed by three days. You can use the additional time to compare offers from various lenders if you’re finding too many changes to lender fees.
What to Expect Closing on Your Mortgage Refi
You’ll get a copy of the HUD-1 Settlement Statement at closing showing all charges, including what you’ve already paid. Pay close attention to the mortgage loan origination fee which is the commission paid to the broker arranging your refi. The HUD-1 is the final word when it comes to fees and should not differ from any updates you received on the Good Faith Estimate. Take your time and carefully review the HUD-1 Settlement Statement to make sure everything matches what you’ve been promised, including your refinance mortgage rates.
Your mortgage lender is required by law to provide you the HUD-1 Settlement Statement 72 hours prior to closing to give you time to review the document. (It used to be 24 hours prior) The change gives you time to scrutinize everything and not be rushed closing on your new home loan.
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My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
