Winning Refinance Rates Shopping Strategy

Are you shopping for best refinance rates for your next home loan? Common mortgage mistakes can turn your historically low refinance rates into an expensive mistake. Mortgage lender fees make or break the deal you’re getting. Here’s a winning strategy for paying less for the best refinance rates on your next home loan.

Lowering Your Refinance Rates Is About Winning

You might not think about it this way but it’s really you against the best mortgage lenders. They’re in business to make money. Your loan officer is working for their loan origination fee. The more you pay either of these the less benefit you’re getting from low refinance rates.

The problem with shopping for refinance rates from the best mortgage companies is that making an apples-to-apples comparison of interest rates and fees can be extremely difficult. If you follow these simple tips the process becomes much easier and useful.

Where to Start Shopping for Your Next Home Mortgage

Before you do anything else it’s important to start with your credit reports. Getting the best refinance rates depends almost entirely on your credit score and loan-to-value ratio. While there’s little you can do to improve your LTV in the short-term, there are steps you can take to significantly improve your credit score.

Have you already started shopping for refinance rates? If you’re finding the quotes you get are higher than what lenders are advertising the likely culprit is your credit score. Here’s how to fix that.

  1. Visit AnnualCreditReport.com
  2. This government-mandated website is responsible for providing you a free credit report from each of the three credit bureaus every year. It’s important to stay on top of the contents of these credit reports and make sure the information they hold is correct.

    If you find mistakes in your credit reports each of the reporting agencies (Equifax, Experian, & TransUnion) has an online process for disputing errors. Be sure and allow enough time for the correction to be reflected in your score.

  3. Use a Credit Monitoring Service
  4. AnnualCreditReport.com won’t give you a credit score unless you pay. An alternative to paying for your score is to subscribe to a credit monitoring service that alerts you anytime there are changes made to your credit reports. If you’re a credit union member most offer high-quality, low-cost credit monitoring services.

  5. Improve Your Credit Score
  6. Once you’re confident that the information in your credit reports is correct you can boost your credit score by paying down the balances on your credit cards below 30% of your limit. If you don’t have the cash to pay down the balances one strategy is to ask for a limit increase; however, avoid opening new accounts whenever possible.

How to Shop for the Best Refinance Rates

Once your credit score is the best it can be you’re ready to begin shopping for refinance rates. When you do this it’s important to protect your credit score from excessive lender inquires. When a mortgage lender runs credit to quote refinance rates your score will take a hit for the inquiry.

You can minimize the impact by limiting all of your refinance rate quotes to a two week period. When you do this you’ll only get dinged for one lender’s credit inquiry.

Some people think that by refusing to give loan officers their Social Security number when shopping for refinance rates they’re protecting their credit score. This is a bad idea because you’re relying on that person’s best guess for a mortgage quote which is usually a waste of everyone’s time. Always provide your SSN and pertinent financials to make sure you’re getting an accurate quote.

Shopping Smartly With Your Good Faith Estimate

The new Good Faith estimate is vastly superior to the old version if you use it correctly. The only way to use this document to make an apples-to-apples comparison of refinance rates and fees from today’s best mortgage lenders is to first choose a mortgage program and stick to it.

If you let a fast-talking loan officer quote refinance rates and fees across different programs you’ve already lost the battle.

Do you need 30-year fixed refinance rates? Are you looking for an FHA streamline refinance? Want to pay-off your home with 15-year refinance rates? That’s your program, stick with it.

How to Read Your Good Faith Estimate

The government did a great job simplifying this disclosure document. In order to use it effectively make sure the quotes you get are all from the same program and DO NOT include discount points. If you’d like to see how buying down your refinance rates affects your payment there is a table on page three of the Good Faith Estimate. For now you’re going to use page two for comparing refinance rates and things like the loan origination fee.

Start with box one on page two of your Good Faith Estimate. This is the loan origination fee paid to the person or company arranging your home loan. Many brokers will tell you that one percent is standard; however, I’ve reviewed community-based credit unions that charge as little as $400 for the loan origination fee. Remember the less you pay here the more benefit you’ll get from lower refinance rates.

Next, focus on the Yield Spread Premium found in box 2. For the uninitiated, Yield Spread Premium is a lender credit generated for accepting higher than necessary refinance rates. This credit is used to pay your loan origination fee and other closing costs. Is accepting higher refinance rates to pay your lender fees worthwhile? You can use a simple mortgage calculator like this one to determine if it’s a good idea.

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Finally, look at the fees found in Section B starting with box 3. The fees in box 3 are lender specific charges that may or may not include junk fees like loan processing. Box 6 lists required fees that you can shop around for a better deal. Comparing the fees listed in box 3 through six across different lenders can lead to a productive conversation with prospective loan officers.

If you find a loan officer getting impatient or even hostile at your questions regarding fees found on the Good Faith Estimate simply move on to the next lender.

Remember that the Good Faith Estimate is just an estimate and once you’ve found an offer you’ll need to reconcile every with the HUD-1 Settlement Statement before signing the contract.

Click Here For More Details…

You can learn more about getting the best mortgage rates for your next home loan without paying unnecessary fees by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to help you get the best refinance rates without paying unnecessary lender fees…

The HARP Program Strikes (Out) Again

The HARP Program (Home Affordable Refinance Program) has been extended until December 31st, 2015. This isn’t a surprise as most people thought the government refinance program would be extended. Has anything done to help underwater homeowners not in the loving embrace of Fannie Mae and Freddie Mac? Here’s what you need to know about the latest changes to the HARP program to get your home refinanced with the best mortgage lenders.

HARP Program Updates

The Home Affordable Refinance Program (HARP Program) was set to expire at the end of 2013. The Federal Housing Finance Agency extended it with hopes of helping millions of underwater homeowners waiting to get in the HARP program. Director Edward DeMarco was quoted saying the program is being extended to allow more underwater homeowners access to today’s best mortgage rates.

That sounds good, so what’s the problem preventing millions from qualifying for the Home Affordable Refinance Program?

The Federal Housing Finance Agency (FHFA) is planning to launch a nationwide advertising campaign to let you know all about the HARP program. The Home Affordable Refinance Program has been around for years and the percentage of underwater homeowners who don’t know about it has got to be very small. Awareness, or a lack of is not the HARP program’s problem.

The number of underwater homeowners out there that need educating on the benefits of refinancing their six percent or higher mortgage loans is very small considering that 21 percent of the home loans refinanced in January were HARP program loans.

What’s Wrong With The HARP Program?

The problem isn’t a lack of awareness, that’s for sure. The Home Affordable Refinance Program was designed to make it easy for underwater homeowners to qualify. Are you current on your payments? No problem, as President Obama put it you’re a “responsible homeowner” and the government wants to help you get right-side up in your mortgage loan.

The problem is that millions of underwater mortgage loans are held by private lenders like Wells Fargo and Bank of America. Because these privately held mortgage loans are not backed by Fannie Mae or Freddie Mac they are not eligible for the HARP program.

Adding insult to injury, not only does the government have to back your mortgage with Fannie Mae or Freddie Mac, they need to have done so prior to June 1st, 2009. These two requirements are responsible for leaving millions of responsible American homeowners out in the cold.

If you’re an underwater homeowner not covered by Fannie Mae or Freddie Mac your only option thus far has been cash-in refinancing. This means you’re going to pay down the balance on your mortgage to a respectable loan-to-value ratio at closing in order to qualify. The idea sounds dumb on several levels because if you had the cash to pay down your mortgage you wouldn’t be underwater in the first place.

Hope For Non-Government Back Mortgage Holders

The FHFA, President Obama, and the Congress have done nothing to ease HARP program requirements to allow re-HARPing or privately held mortgages to qualify. But there is a new (rehashed really) draft of HARP 3.0 making its way through Congress you should know about.

HARP Program 3.0 Responsible Homeowners Act of 2013

Senators Barbara Boxer and Robert Menendez have updated their failed Responsible Homeowners Act of 2012. This new bill proses to eliminate HARP program closing costs, including the appraisal while making qualifying easier.

This bill proposes to do this by removing income and employment verification for all HARP program applicants. These proposals are nothing new and do little to reduce or eliminate lender overlays. HARP program participation is voluntary and many lenders use program overlays to limit their risk. These overlays are lender specific rules enforced for qualifying like limiting loan-to-value to 125%, even though HARP 2.0 does not impose limits on loan-to-value-ratio.

Last year’s bill failed to make it to President Obama’s desk. If this year’s attempt will go the distance is anyone’s guess. Whether or not Congress or the President removes or modifies the Fannie Mae or Freddie Mac requirement is anyone’s guess as well.

Click Here For More Details…

You can learn more about getting the best mortgage rates for your next home loan without paying unnecessary fees by checking out my free Underground Mortgage Videos.

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Should I Refinance My Home Mortgage?

Do you lack home equity or have credit challenges? If so, you might think that the low refinance rates being offered by today’s best mortgage lender are out of your reach. The good news is that government refinance programs exist that can help you overcome the problems that make refinancing impossible. Here are six good reasons to help you answer the question “should I refinance” and save money on your next home loan.

Should I Refinance My Mortgage Loan?

If you’ve got home equity but have a low credit score you can still take advantage of low refinance rates. You might not qualify for what lenders are advertising, but you can still benefit from mortgage refinancing by lowering your payment amount. The best way to find out if paying for a new home loan is beneficial is by using a simple mortgage calculator.

Have you already started shopping for today’s best refinance rates? If so, enter the interest rates you’ve been quoted here along with your loan balance and desired term length.

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Once you’ve determined how much your payment will go down each month from refinancing you can figure out if paying for a new home is worthwhile by approximating your break-even point.

You do this by adding up all of your closing costs including the loan origination fee and dividing by the amount you’re saving each month. This is only an approximation because it doesn’t factor in things like changes in term length or taxes; however, it’s still useful for our purposes.

Dividing your costs by the savings you determined with my simple mortgage calculator tells you the number of months it’s going to take you to break even recouping your out-of-pocket costs. If this time frame is acceptable to you then refinancing probably makes sense.

Stop! Read This Before You Do Anything Else…

If you haven’t started shopping for refinance quotes you’ll need to hold off for a moment. Have you checked your credit reports? If not, your first step needs to be proofreading your credit files for errors.

You can do this for free by vising the government mandated website, AnnualCreditReport.com. Did you find mistakes? If so, each of the credit bureaus has an online process for disputing the error. Once you’ve done this you’ll want to allow enough time from the outcome of the correction to be reflected in your credit score.

Once you’re satisfied that your credit reports are accurate the quickest way to boost your credit score is to pay down the balances on your credit cards below 30% of your limit. Your credit score will take a hit when mortgage lenders run you credit; however, you can minimize the impact by limiting all of your refinance quotes to a 2 week (14 day period).

When you shop for refinance rates this way you’ll only get dinged once for a mortgage lender checking your credit. Some people think they can avoid this hit by refusing to give their Social Security number when requesting mortgage quotes. If you do this you’re relying on someone’s best guess of what your interest rate will be which is almost always a complete waste of time.

Still Not Convinced Refinancing Your Home is the Right Choice?

Here are six of the most common reasons for paying for a new home loan in today’s economy:

  1. Lowering Your Mortgage Rate
  2. This is the most common reason for refinancing. With refinance rates below four percent for many homeowners you can lower your payment by hundreds of dollars. If you have credit problems you probably won’t qualify for rates this low; however, using a simple mortgage calculator like the one above will help you decide if your mortgage refinance is worthwhile.

  3. Lowering Your Monthly Payments Despite Poor Credit
  4. Bad credit mortgage refinancing can accomplish this in two ways. First, if you qualify for a lower refinance rate your payment will go down. If not, you can still lower your payment by extending the term length of your home loan. This isn’t recommended for everyone as it can make recouping closing costs difficult and slow your rate of building home equity. If you slow building equity in your home you run the risk of being underwater in an economic downturn. Common mortgage term lengths for refinancing include 15, 30, and even 40 years. (again, not recommended)

  5. Easing Pressure on Your Budget
  6. Once you qualify for lower refinance rates or a lower payment amount from extending your term length, you’ll get a lower payment. This frees up cash in your monthly budget to pay down other bills, which will help improve your credit score. Reducing debt and using credit responsibly will help you pay less to lenders in all aspects of your finances.

  7. Build Equity at a Faster Rate
  8. If your goal is to pay off your mortgage as quickly as possible you can do this by shortening your tem-length. The most common term-length in this case is a 15-year fixed or adjustable rate mortgage. Your payments will be higher in this case than you would get with a 30-year mortgage; however, you’ll pay significantly less in lender finance charges and build equity in your home at an accelerated rate.

  9. Lock in Your Payment With a Fixed Rate Mortgage
  10. Are you currently paying on an Adjustable Rate or Interest-Only mortgage? If you’re worried what will happen when your fixed rate period ends or that balloon payment is due there is no better time than the present to refinance with a fixed-rate mortgage.

  11. Consolidate Credit Card Debt With Your Mortgage
  12. Again this one isn’t for everyone as treating your home like a bank account has risky and dangerous consequences. Depending on how much home equity you have and how good your credit rating, you may be able to roll all of your credit card and consumer debt into your mortgage balance with cash-out refinancing. Enlisting the help of a good mortgage broker could help you find a lender willing to facilitate the transaction. Remember to use a simple mortgage calculator first to see how increasing your loan balance will affect your payments and your ability (or inability) to recoup your closing costs.

What if You Have an Underwater Mortgage?

Underwater homeowners (meaning you owe more than your home is worth) can benefit from the Home Affordable Refinance Program (HARP 2.0), if you qualify.

The biggest stumbling block when qualifying for HARP is that Fannie Mae or Freddie Mac must back your mortgage AND they must have done so prior to June 1st, 2009. If you meet these qualifications and are current on your payments you could qualify for today’s best refinance rates with a streamline like refinance loan.

Click Here For More Details…

Want to learn more about refinancing with today’s best mortgage companies without paying unnecessary fees or markup?

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How To Get The Best Refinance Rates

Want to get your hands on today’s best refinance rates but don’t want to pay for a new mortgage loan? While it’s true that the fees you pay make or break the deal you’re getting there are steps you can take to make sure you’re getting the best refinance rates. Here are several tips to help you find the best refinance rates while avoiding unnecessary lender and junk fees.

Want the Best Refinance Rates? Start Here First.

Before you start shopping for the best refinance rates it’s important to make sure your financial affairs are in order. If you’ve already started shopping for a new mortgage and are finding the refinance rate quotes you’re getting are higher than what lenders are advertising the likely culprit is your credit score.

The first step in getting your financial fairs in order starts with your credit report.

How to Get Free Credit Reports

Congress passed a law several years back requiring the credit bureaus to provide you free copies of your credit report every year. You won’t get a credit score with them but you can get your free credit reports by registering with AnnualCreditReport.com.

Once you’ve accessed your credit reports you’ll want to carefully review them for errors. If you find mistakes each of the three credit bureaus (Equifax, Experian & TransUnion) has an online process for disputing mistakes.

When you’re certain that your credit reports are accurate you can focus on your credit score. Most credit unions offer low cost credit monitoring services that allow you regular access to your credit score if you’re a member. How high does your credit score need to be? Most lenders base their advertised rates on having a score of 720 or better.

Which credit score do mortgage lenders use? Lenders typically use your FICO score, named for the Fair Isaac Company that created credit scoring.

You’ll find that you have three credit scores based on your credit reports from TransUnion, Equifax and Experian. Mortgage lenders use the “middle” score when determining your eligibility for the best refinance rates. If your credit scores are 640, 700 and 720 your “middle score” is 700. Mortgage lenders do not round or average credit scores.

How to Boost Your Credit Score

If you want the best refinance rates for your next home loan you need to make sure your credit score is up to snuff. Here are several tips to quickly boost your credit score.

  1. Always Pay Your Bills on Time
  2. Never, ever miss a payment deadline. Set up auto billing or use your bank’s online bill pay to make sure your bills are paid on time. Nothing sinks your credit score faster than missed or late payments.

  3. Pay Down Your Credit Card Blances
  4. The fastest way to boost your credit score is to pay down and maintain the balances on all of your credit cards below 30% of your credit limit. If you don’t have the cash on hand to pay down the balance one strategy is to ask the credit card company to raise your limit.

  5. Avoid Department Store Charge Cards
  6. Store charge cards are the worst kind of debt you can have on your credit report. Avoid opening new store charge cards and if you’ve already got them pay off the balances but do not close the account.

  7. Avoid Cancelling Credit Cards
  8. Do you have credit cards that you never use? Make sure that you pay down the balances but do not close the accounts. It helps to use the cards periodically as long as you keep the balance below 30% of the available credit.

  9. Time Heals Everything
  10. If you have negative information in your credit reports the information will drop off eventually. Avoid paying those “Credit Repair” companies as there is little they can do besides take your money.

Shop Smartly for the Best Refinance Rates

Are you happy with your credit score? Many homeowners try and protect their credit score when shopping for the best refinance rates by refusing to give out their social security number.

If you do this you’re relying on the loan officers “best guess” when quoting mortgage rates and probably wasting your time. It’s true that your credit score takes a ding when mortgage lenders run your credit, this is unavoidable. You can however manage the damage by limiting all of your inquiries to a two week period.

If all of your mortgage lender inquires fall within a two week period your credit score will only get “dinged” for one inquiry.

Click Here For More Details…

You can learn more about getting the best refinance rates while avoiding lender junk fees by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample to help you shop smartly from today’s best mortgage companies

Types of Mortgage Loans

Are you new to the refinancing game? If so, understanding the types of mortgage loans and available programs is a solid starting point for saving money. Until you choose a mortgage program it’s next to impossible to make an apples-to-apples comparison of refinance rates and fees across different lenders. Here are the basic types of mortgage loans you need to know to make an informed decision for your next home loan.

Types of Mortgage Loans You Need to Know

The most common of the different types of mortgage loans is the conventional, 30-year fixed rate home loan. This is the mortgage your parents had. Once you’ve got one the terms, interest rate and payment won’t change until the day you pay it off.

The 30-year fixed rate home loan is the most common and the least risky of all the types of mortgage loans. It is also one of the more expensive refinancing options. Before getting to the other types of mortgage loans we need to talk about conforming vs. non-conforming.

Conforming vs. Non-Conforming Mortgage Loans

You’ll see the terms “conforming” and “conventional” thrown around a lot, almost interchangeably.

What are conforming mortgage loans? Conforming refers to the dollar amount you’re financing in the eyes of Fannie Mae and Freddie Mac. The conforming loan limit is set each year by these quasi-government agencies, Fannie Mae & Freddie Mac are tasked with helping American homeowners by limiting risk for mortgage lenders.

Fannie Mae and Freddie Mac do this by guaranteeing mortgage loans against default and ensuring lenders have funds available for home loans. If your mortgage is over the conforming loan limit it is essentially too big for Fannie Mae and Freddie Mac to cover and is called non-conforming.

In 2013 the conforming loan limit is $417,000. If your home loan is over the conforming loan limit it is considered a jumbo mortgage loan. (Another one of the types of mortgage loans)

Adjustable Rate Mortgage Loans

If your goal for refinancing your mortgage is to get the lowest payment possible one of the types of mortgage loans you’ll want to consider is the Adjustable Rate Mortgage (ARM). These home loans have more risk than their fixed rate counterparts because if interest rates go up when your home loan resets the payment will also increase.

You’ll see Adjustable Rate Mortgage loans designated 5/1, 7/1, or 10/1. The first number represents the fixed rate period of the ARM. The 5/1 ARM for example is fixed for the first five years. The second number is the amount of time your ARM resets. The 5/1 ARM is fixed for the first five years but resets once every year after that.

Adjustable Rate Mortgage loans are a popular choice for real estate investors that are able to leverage the lower fixed-rate period and sell before the ARM resets. When your ARM resets your mortgage servicer will recalculate your payment based on whatever index your ARM is tied, frequently the LIBOR index.

Thanks to the uncertain nature of Adjustable Rate Mortgage loans the risk is higher; however, you will generally have lower payments by choosing an ARM.

Mortgage Loan Term Length

When discussing the types of mortgage loans it’s important to understand how term length works. The term length of your home loan is the amount of time you have to repay the debt. Along with your interest rate term length determines your monthly payment amount.

You can use a simple mortgage calculator like the one below to see how mortgage term affects your payments. Generally, the longer your term the lower your payments are because they’re spread out over more time. Conversely, the shorter your term length the higher your payments will be; however, the advantage of shorter terms is that you’re building equity at a faster rate.

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Mortgage amortization describes the process of paying down your home loan. Your home loan is front-loaded with interest meaning in the early years the majority of your payment goes to pay the lender’s finance charges. Over time this gradually reverses with more of your payment going to build equity in your home.

Government Refinance Programs

When discussing the types of mortgage loans there are a variety of government refinance programs that you need to know about. These programs are administered by the FHA, VA, and USDA. If you already have a home loan backed by one of these agencies and are considering refinancing, each agency offers streamline refinance loans. The FHA streamline refinance for example offers reduced paperwork and faster processing than a traditional refinance loan.

Types of Government Refinance Programs

  • FHA Home Loans
  • FHA home loans are insured by the Federal Housing Administration against default. These home loans are a popular choice for individuals with credit challenges as the qualifications are easier. The downside of an FHA mortgage is that you’re required to pay for mortgage insurance which can add hundreds of dollars to your monthly payment.

  • VA Home Loans
  • If you served in the military the VA home loan is simply the best deal going. VA home loans offer lower interest rates and unlike FHA backed loans do not require mortgage insurance. The VA offers a streamline refinance program called an Interest Rate Reduction Refinance Loan (IRRRL).

  • USDA Home Loans
  • The USDA programs exist to promote home ownership in rural areas. USDA home loans have easy qualifications; however, like FHA home loans they require mortgage insurance.

  • Home Affordable Refinance Program (HARP 2.0)
  • The Home Affordable Refinance Program, also called HARP 2.0, allows underwater homeowners that have previously been unable to refinance to qualify. In order to qualify for this program you must not have late payments for the last year and your mortgage must be backed by Fannie Mae or Freddie Mac.

You can learn more about government refinance programs by contacting the Homeowners Hope Hotline at 1-888-995-HOPE (4673).

No-Doc & Low-Doc Mortgage Loans

There are still a great number of homeowners searching for no-doc or low-doc mortgage loans. Before the housing bubble burst lenders offered no-doc mortgage loans. These were also called stated-income home loans because you simply “stated” your income and assets, scout’s honor.

Granted you still needed a spectacular credit rating to qualify for no-doc and low-doc mortgage loans; however, these loans simply don’t exist anymore.

Choose a Mortgage Program & Stick With It

We’ve covered the basic types of mortgage loans that you need to know about. The first step when shopping for the best deal on your next home loan is to choose a mortgage program and stick with it.

If you want a 30-year fixed rate mortgage don’t let a fast-talking loan officer confuse you by quoting interest rates and fees from a 15-year ARM.

Click Here For More Details…

You can learn more about getting the best deal by avoiding unnecessary fees and points from today’s best mortgage lenders by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample to help you shop smartly from today’s best mortgage companies…