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.

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

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Should I Refinance? The Rule of Thumb Has Changed

Should I refinance my mortgage loan? For years financial advisors have used a dumb refinancing rule of thumb to answer this question. It used to be that you were told only refinance if your mortgage rate will go down two percent or more. This “dumb rule” left a lot of people that could be saving money out in the cold. The good news is that the mortgage refinancing rule of thumb has changed. Here’s what you need to know about getting best deal on your next home loan.

My “Should I Refinance” Rule Of Thumb

Instead of focusing on only getting the lowest refinance rates use page two of the Good Faith Estimate to figure out how long it’s going to take you to break even. If you can live with the amount of time it takes to recoup your out-of-pocket expenses then the answer to “Should I Refinance” is yes.

How you accomplish this is often easier said than done. Fortunately, there are tools available to help you get it done with spades. Here’s how you can use the new Good Faith Estimate to find the best deal for your next home loan.

What’s new about the Good Faith Estimate?

The old Good Faith Estimate was an unstandardized mess to try and figure out and compare fees. Fortunately, the new Good Faith Estimate makes this much easier. You can make the job of comparing refinance rates and fees much easier on yourself using my mortgage refinance rate shopping rule of thumb.

Refinance rate shopping rule of thumb

In order to be effective, your Good Faith Estimate needs to be used correctly. Before you can do this you need to make a few decisions about which home loan is best for you.

Which mortgage program best meets your needs? Do you need a fixed interest rate with a low payment? Choosing a thirty year fixed rate mortgage loan gets the job done. Can you afford to pay a little extra to build equity in your home? Chose a fixed rate 15-year mortgage loan. Do you have credit challenges and need a mortgage backed by the FHA? The point here is pick a mortgage program and stick with it.

Don’t let a fast talking loan officer confuse you by quoiting refinance rates across different programs.

Next, make sure the Good Faith Estimates you get are zero discount point quotes. If you’d like to see how paying discount points affects your payment amounts there is a comparison table on page three; however, you should always start with zero point quotes.

Finally, pay attention to the loan origination fee, yield spread premium, and service fees found in section A and B on page two of your Good Faith Estimates.

The loan origination fee is paid to the person and or company arranging your home loan. Most loan officers will tell you that one percent is standard; however, I have reviewed community based credit unions that charge as little as $400 for their loan origination fee. Spend some time comparison shopping mortgage fees and you can find deals like this.

What about Yield Spread Premium?

I still get negative comments from people when I talk about Yield Spread Premium. This is a credit paid by the lender when you accept higher refinance rates. It used to be that the broker could pocket this credit along with the loan origination fee as his or her commission.

The rules have changed; however, despite what you may have heard Yield Spread Premium is not illegal.

Really, it’s on your Good Faith Estimate, go look. Item two of section A reads and I quote: “The credit or charge for the interest rate of X% is included in ‘Our origination charge.’ You receive a credit of Y$ for this interest rate of X%. This credit reduces your settlement charge.”

Guess what folks that is Yield Spread Premium! By accepting higher refinance rates you’re paying less for settlement charges. That’s also how those no fee refinance offers work. Keep in mind that higher refinance rates means a higher mortgage payment and more time to recoup your out-of-pocket expenses.

How long will it take you to break even?

Now that you know which fees to look at on your Good Faith Estimate you’ll want to figure out how long it’s going to take up to break even. You can approximate your break-even point by adding up all of the settlement charges and dividing by the amount you’ll be saving each month.

This is only an approximation because there are other factors like term-length that influence your break-even point. As long as you’re not lengthening your term, going from a 15-year mortgage to a 30-year, the approximation works for our purposes.

Do you break even in a reasonable amount of time? What’s reasonable you ask? For some people two years, others four years. As long as you don’t refinance again or sell before recouping your settlement fees you won’t be losing money from refinancing.

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Want to pay less closing on your next home loan for things like the loan origination fee? Check out my free Underground Mortgage Videos.

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Why Annual Percentage Rate is Crap for Refinance Rate Shopping

If you’re shopping for the lowest refinance rates from today’s best lenders you may have noticed that quotes are listed by Annual Percentage Rate. APR was intended to help homeowners pick the least expensive home loan factoring in interest rates and closing costs. Should you trust APR when shopping for a home loan or will choosing the lowest ARP get you the highest out-of-pocket expenses?

What is Mortgage APR Anyway?

Lawmakers intended for Annual Percentage Rate to help you shop for the least expensive mortgage loan. Unfortunately APR is a dismal failure and you should never use it to shop for refinance rates. Let me say that again…NEVER USE APR WHEN SHOPPING FOR MORTGAGE RATES.

Annual Percentage Rate is the single most manipulated marketing tool used by lenders to sell you an overpriced home loan.

Annual Percentage Rate is a government concocted formula designed to show you the true cost of your mortgage loan. Basically you take your loan amount less closing costs factoring in your payments for the duration of the home loan to calculate APR. Most lenders quote mortgage rates alongside APR highlighting their Annual Percentage Rate.

It’s not uncommon to find refinance rates that include an APR lower than the interest rate. Lenders love to advertise their low APR home loans pushing higher closing costs on unknowing borrowers.

How Annual Percentage Rate Falls Short

The formula lenders use to calculate their Annual Percentage Rates makes a number of faulty assumptions.

  1. APR Assumes You’ll Keep Your Mortgage For 30 Years
  2. APR Assumes You’ll Never Pay Extra or Make Bi-Weekly Payments
  3. APR Assumes You’ll Never Refinance

Another problem with the Annual Percentage Rate is the way lenders factor in discount points. Points raise your out-of-pocket expenses as a way of buying down your mortgage rates. While discount points lower your refinance rates and payment amount they raise your out-of-pocket expenses at closing.

Lower refinance rates and payments from paying discount points creates an artificially lower Annual Percentage Rate meaning you’re getting the most expensive closing costs with that “low, low APR.”

If you’re inadvertently paying too much at closing you’re not going to be able to recoup your out-of-pocket expenses, including any unnecessary discount points, meaning you’re going to be losing money no matter how low your refinance rates.

How to Shop For The Lowest Refinance Rates

The best way to shop for a new home loan is to compare interest rates and fees on quotes that do not include discount points. This can be tricky because lenders cook up different names for many of their fees just to confuse rate shoppers. What is the most commonly overpaid fee among refinancing homeowners?

The mortgage loan origination fee is one of the most overpaid and easily negotiated fees you’ll pay at closing. Pay less for your origination fee while avoiding mortgage lender junk fees and you’ll get the maximum benefit from today’s low refinance rates.

Click Here For More Details…

You can learn more about getting the best deal on your next home loan from today’s best mortgage lenders by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started shopping for the lowest refinance rates and fees…

Best Mortgage Rates

If you’re thinking about refinancing your home mortgage loan you’ll want the best mortgage rates you can get for the new loan. Did you know that 99% of your neighbors are overpaying for their home loans because they went shopping for the best mortgage rates the wrong way? Here are my favorite tips and tricks to help you get the best mortgage rates when refinancing your home mortgage loan without paying any junk fees or markup.

Getting The Best Mortgage Rates Online

Getting the best mortgage rates on the Internet is trickier than you think. What you don’t know about every mortgage quote you find online or get from your local mortgage company is that the mortgage rates have all been marked up to create an “extra” commission for someone. If you want the best mortgage rates when refinancing your home loan you’ll have to find one that hasn’t been marked up. Why are mortgage rates marked up for this commission? Mortgage lenders pay a kickback for home loans that close with higher than necessary mortgage rates because these home loans bring them premium profits when sold to investors on the secondary mortgage market. Mortgage lenders don’t care that this markup drives up your payment by hundreds of dollars per month unnecessarily; these companies are motivated only by greed and their bottom line. If you want the best mortgage rates for your home loan you need to know that the mortgage lender and broker are not looking out for you; judge every loan offer with a healthy dose of skepticism and you’ll be on your way to actually getting the best mortgage rates.

Mortgage Rate Markup

What is this markup of your mortgage rates that drives your payment up unnecessarily? The fee paid by wholesale lenders for mortgage loans that are locked and closed with higher than necessary mortgage rates is called Yield Spread Premium. Provided you don’t refinance your home with your bank, the person arranging your home loan receives one percent of your loan amount for every .25 percent they markup your mortgage rate. Yield Spread Premium is paid in addition to any fees you’re paying for loan origination to the mortgage company or broker arranging your home loan.

Refinance Mortgage Rates
httpv://www.youtube.com/watch?v=8o2xAWZxdo8
Here’s a quick video about finding the lowest
mortgage rates when refinancing your home loan online.

Before you go saying you’ll just avoid all this Yield Spread Premium nonsense by refinancing with your bank, you should know that while banks don’t collect Yield Spread Premium on their loans they do collect a profit margin known as Service Release Premium when your home loan is sold to investors on the secondary market, just like wholesale lenders. Your bank is also exempt from the Real Estate Settlement Procedures Act, meaning they don’t have to disclose their profit margin or markup on your home loan. Banks markup their mortgage rates just like mortgage brokers because they make a premium profit selling your home loan later on. Your bank will never tell you they’re doing this because all they’re required to give you prior to closing is a Good Faith Estimate and Annual Percentage rate, both of which are based on low-balled fees given in “good-faith.” You’ll never get the best mortgage rates refinancing your home loan with your bank.

How to Get the Best Mortgage Rates

Getting the best mortgage rates when refinancing your home isn’t as difficult as you think; you don’t have to be a financial guru to get the best mortgage rates, you just have to find the right person to arrange your loan. Shopping for a mortgage loan isn’t like shopping for a new television or kitchen appliance; comparing mortgage quotes from dozens of lenders will only get you the best of the worst home loans available and this is why most of your neighbors pay too much for their mortgage loans.

Finding the right person to arrange your next home loan means finding an independent mortgage broker willing to work for a flat origination fee without marking up your mortgage rate for Yield Spread Premium. Finding the right mortgage broker can be tricky because many brokers are unwilling or unable to negotiate the kind of deal that doesn’t include Yield Spread Premium because of their overhead costs. Mortgage brokers working out of posh office spaces that employ expensive sales staff will generally not agree to home loans that do not include Yield Spread Premium.

How do you find the right mortgage broker to give you the best mortgage rates? Remember that only mortgage brokers have access to wholesale mortgage rates and this is your goal for refinancing with the best mortgage rates. The best mortgage rates on any given day are going to be as close to “par” as you can get them. Par mortgage rates is a term meaning you don’t have to pay discount points to qualify for a specific mortgage rate and of course that the mortgage rate does not create Yield Spread Premium for the mortgage broker arranging your loan. A discount point is the equivalent of one percent of your loan amount and is a fee due at closing. Mortgage rates are still very low and the benefits of paying discount points are far less than they used to be in the 1980s when mortgage rates were much higher than they are today. In most cases you will want to avoid paying discount points whenever possible.

Getting back to finding the right mortgage broker to arrange your home loan with a par mortgage rate, you want to look for the smaller, self-employed mortgage brokers that don’t have expensive overhead therefore avoiding junk fees and mortgage rate markup. Start by telling potential mortgage brokers that you understand how Yield Spread Premium works and will not take a home loan that includes the markup. On the subject of junk fees there are several closing costs that you’ll want to avoid when refinancing your home loan. Junk fees are the subject of my Underground Mortgage Videos; however, finding certain fees in your loan documents is a dead giveaway that you’re dealing with a dishonest mortgage broker. The number one red flag you need to keep an eye out for when refinancing your home is the mortgage rate lock fee. This is a classic example of a mortgage junk fee that serves no purpose other than boosting your mortgage broker’s profit. Mortgage lenders do not charge rate lock fees. If your mortgage broker claims there are rate lock fees you can be 100% certain you are dealing with a dishonest mortgage broke and need to find someone else to arrange your home loan.

You can learn more about avoiding mortgage junk fees and getting the best mortgage rates when refinancing your home loan by checking out my free underground mortgage refinancing videos.

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Here’s a sample of what you’ll get when you register today. This video is about your mortgage lender’s dirty secret when it comes to marking up your mortgage rate. These underground mortgage videos are yours free and stream to you online with nothing to download to your home computer.

Best Refinance Mortgage Loan

Are you considering refinancing your home loan and are searching the Internet for the best refinance mortgage?

If so, there are several things you should know about the mortgage rate quotes you find online, even those from your local mortgage broker.

Here are several tips to help you find the Best Refinance Mortgage while avoiding paying too much in interest rate markup and mortgage junk fees.

Finding the Best Refinance Mortgage Online

Did you know that 99% of the mortgage quotes you get today have been marked up to give someone a commission? This is a commission you’ll pay in addition to the loan origination fee. Does it make sense to pay double for your mortgage loan? The problem accepting a mortgage rate quote that includes markup for a commission is that you’ll keep paying the mortgage broker’s fee over and over again every year for as long as you keep the loan. Doesn’t it make more sense to pay a flat mortgage origination fee of one percent and get the broker out of your life for good?

Mortgage Broker Markup

So what is this nefarious markup of your mortgage interest rate that costs the average homeowner $1,200 per year? Simply put, mortgage brokers get a kickback from lenders for locking and closing your home loan with higher than market rates. What are market mortgage rates? Also known as “par” mortgage rates, this is one that does not cost you discount points to get and does not create a kickback for your broker. Here’s how it works. Your mortgage broker quotes you an interest rate based on how much they think you’ll agree to overpay. The broker knows what mortgage rate you were approved for; however, for every .25% they overcharge you the lender pays the broker one percent of your loan amount in addition to the origination fee you’re probably overpaying for the broker’s services.

How to Avoid Yield Spread Premium

This kickback paid the lender for the mortgage broker overcharging you is called Yield Spread Premium. Most homeowners have never heard of Yield Spread Premium and the abuse is so rampant that the Secretary of Housing and Urban Development recently stated American homeowners will overpay sixteen billion dollars this year alone because of it.

Fortunately Yield Spread Premium can be avoided. There are a handful of honest mortgage brokers out there willing to help you find the best refinance mortgage available without overcharging you in the process. A reasonable fee to pay for your loan origination is a flat one percent; you just need to find the right person to arrange your loan.

Banks Will Not Give You Par Mortgage Rates

Many homeowners think they can avoid markup and mortgage junk fees by refinancing with their bank or credit union. The problem is while its true banks don’t have the same markup as your mortgage broker on their loans they still markup interest rates to make a premium profit when your loan is sold. Also, due to a loophole in the Real Estate Settlement Procedures Act your bank isn’t required to tell you that they’ve marked up your rate or disclose their profit margin on your loan. Banks simply don’t offer their customers par mortgage rates…if you want best mortgage refinance possible you’ll have to use a mortgage broker to arrange your loan.

How to get the Best Refinance Mortgage

You can refinance your home loan by paying a flat one percent origination fee without junk fees or a mortgage that includes Yield Spread Premium; you just need to find the right mortgage broker for the job. Don’t get me wrong, not all mortgage brokers are dirty and rip off their customers; however, they have earned the reputation they deserve which is why you need to take steps to keep your broker honest when mortgage refinancing.

How to Keep Your Mortgage Broker Honest

You can keep your mortgage broker honest by reviewing key pieces of documentation before signing your loan contract. Don’t worry about making a mistake during the process; your three day recission rights allow you to back out of the deal up to three business days after signing before your mortgage loan is funded. Here are the documents you need to focus your attention on to get the best refinance mortgage possible.

First, make sure your loan does not create Yield Spread Premium for the mortgage broker. Tell your broker that you will pay a reasonable amount for the origination fee but will not accept a mortgage that creates Yield Spread Premium. Once you find a mortgage broker willing to arrange your loan with these terms you will need to pay close attention to the following two loan documents. First, once you lock in your mortgage rate you will need written confirmation of your lock from the lender. The lender’s written rate lock confirmation will clearly disclose any Yield Spread Premium being paid to your mortgage broker.

Make sure the written rate lock confirmation provided by your mortgage broker comes from the lender and is not something your mortgage broker typed up for you. Many brokers do this to conceal the Yield Spread Premium they are taking on your mortgage. Also, never accept verbal confirmation of your mortgage rate lock. If you don’t have your lock in writing from the lender then you haven’t locked. Period.

The second document you need to focus your attention on to get the best refinance mortgage is the HUD-1 settlement statement. This document will disclose all fees, including mortgage junk fees and Yield Spread Premium. Outlining all of the fees and markup you need to look out for is beyond the scope of this article and is covered in detail in my Underground Mortgage Videos.

You can learn more about finding the best refinance mortgage without paying junk fees or markup of your interest rate by checking out my Underground Mortgage Videos. Here’s a sample of what you’ll get when you sign up today. This module is called “Your Mortgage Lender’s Dirty Little Secret…”

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