Get The Lowest Refinance Rates By Improving Your Credit Score

Are you frustrated shopping for a new home loan because the refinance rates you’re being quoted are higher than what lenders are advertising? If so, the likely culprit is your credit score. Did you know that advertised refinance rates are usually based on having a credit score of 720 or higher? Here are several tips before you refi to improve your credit score and make sure you’re getting the lowest refinance rates.

Refinancing rates crept up slightly with the New Year; however, according to the Mortgage Bankers Association demand will remain strong throughout the year. This means there will be a lot of opportunities for you to take advantage of low refinance rates, even if you have credit challenges.

How To Get The Lowest Refinance Rates Possible

If you want the best possible deal on the lowest refinance rates the first step is to get your finances in order starting with your credit reports.

Your credit report is a record of your past finances including car loans, credit card payment history including any collection activity or liens. Credit reports typically go back for seven years. Your credit score is derived from the contents of your three credit reports.

The better (higher) your credit score, the closer your refinance rates will be to what you see lenders advertising. That’s why it’s worth investing a little bit of your team cleaning up the contents of those credit reports.

Just why is that mortgage rate so low?

In this article I’m talking about getting the lowest rates you see lenders advertising. There is a catch when shopping from today’s best mortgage lenders. There’s always a catch right?

When you’re shopping for refinance rates you’ll find that the lowest mortgage rates include discount points. That means you’re paying a fee to get your interest rate that low. One discount point is typically one percent of your mortgage amount and lowers the interest rate by .25%.

If the mortgage rate you’re being quoted requires 1.5 points on a $200,000 home loan you will be required to pay $3,000 at closing just to get the refinance rates you’ve been quoted. Should you pay discount points to lower your interest rate?

Most homeowners want to avoid paying discount points when refinancing. Mortgage rates are still near historically low levels and the amount of time it takes to recoup the fee you’re paying generally makes paying points a bad idea.

When shopping for the lowest refinance rates ask your loan officer for zero point quotes. If you’d like to see how paying this fee affects your payments there is a table on page three of your Good Faith Estimate.

If you haven’t already done so you should head over to the government mandated website AnnualCreditReport.com. The Fair Credit Reporting Act requires the three credit bureaus (Equifax, TransUnion and Experian) to provide you a free copy of your credit report every year. This credit report does not include a credit score; however, if you’re a member of a credit union most offer low-cost monitoring services that include access to your credit score.

When you apply for mortgage refinancing the lender runs your credit and reviews your middle credit score. Suppose your three credit scores are 640, 660, and 720. The lender will base your refinance rates on the 660 credit score. Mortgage lenders use the “middle” score and do not average the three.

How To Improve Your Credit Scores

The most important thing you can do to improve your credit score is to pay all of your bills on time. In the short term you can boost your credit score by paying down the balances on your credit cards below 30% of your credit limit.

While you’re reviewing your credit reports if you find mistakes or inaccurate information each credit agency accepts online disputes you can use to have the information removed. Removing inaccurate negative information from your credit reports can significantly improve your score.

Shop Smartly For Refinance Rates

Many homeowners refuse to provide lenders with their Social Security number when shopping for the lowest refinance rates for fear of damaging their credit score when that lender runs their credit.

It is true that having a mortgage lender run your credit will lower your credit score; however, this is the only way to get an accurate quote based on your finances. If you don’t provide your Social Security number when requesting refinance quotes you’re going to wind up with someone’s guess of what your interest rate should be.

If your credit isn’t where you’d like it to be you risk losing your quoted rates when the lender does run your credit score.

The best strategy for minimizing the impact to your credit score is to limit all of your refinance rate quotes to a two week period. If you do this you’ll only get dinged for one credit inquiry. Always provide your Social Security number when securing mortgage quotes to make sure the quotes you’re getting are accurate.

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You can learn more about getting the best deal on your next home loan by avoiding junk fees and unnecessary points by checking out my free Underground Mortgage Videos.

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Who Will Refinance My Mortgage?

Are you struggling finding a lender to answer the question “Who will refinance my mortgage?” There are millions of homeowners unable to take advantage of historically low interest rates for one reason or another. Here are several tips to help you find a program and a lender to get your application for mortgage refinancing approved and save thousands in the process.

How Do I Refinance My Mortgage?

The most common reason people have been unable to refinance since the housing market meltdown is a lack of equity. If you’re underwater in your home loan and have not looked into the Home Affordable Refinance Program (HARP) you’re missing a great opportunity. The only catch with this government refinance program is that your home loan must be backed by Fannie Mae or Freddie Mac prior to June 1st, 2009.

Most underwater homeowners that are not HARP eligible do not qualify for this reason. HARP 3.0 is rumored to remove this requirement but has not happened yet.

Should I Refinance My Mortgage?

The first thing you need to do is answer the question “Should I Refinance My Mortgage?” Most homeowners do this by figuring out how long it’s going to take breaking even on closing costs. The way you break even recouping your out-of-pocket expenses when refinancing is by lowering your monthly payment.

You can approximate the amount of time it’s going to take you to break even by adding up all of your closing costs and dividing by the amount your payment is going down. This will tell you the number of months it’s going to take to break even. If you sell or refinance again before breaking even you’re losing money no matter how low your interest rate.

Who’s Going To Refinance My Mortgage?

Shopping for a mortgage lender can be a confusing and frustrating process, especially if you’re shopping for a lender’s approval. Many homeowners throw fees and rates out the window only focusing on getting the first approval available. Others focus on getting the lowest refinance rates at the expense of fees. Either approach results in overpaying thousands of dollars, something that can be avoided.

Are you shopping for mortgage approval? Consider focusing your efforts on government refinance programs from the VA, FHA, or HARP 3.0 when available.

You still need to focus on fees and rates but in this case enlisting the help of a mortgage broker can help balance finding an approval with paying less in closing costs.

How Do I Pay Less To Refinance My Mortgage?

Once you’ve decided if refinancing is worthwhile for you the next step is to choose a program. If you need an FHA home loan with a 30-year fixed interest rate then all of your quotes should be for that program. Don’t let a fast-talking loan officer confuse you by quoting refinance rates across different programs.

Comparing mortgage offers across different lenders from identical programs is the only way to make an apples to apples comparison of refinance rates and fees.

Your next step in getting the best deal for your home mortgage is to focus on the fees you can control. Page two of your Good Faith Estimate details the loan origination fee, yield spread premium and any discount points. For most people paying discount points is a waste of money so requesting zero point quotes is a good starting point.

Page three has a comparison table you can refer to if you’d like to see how points affect your monthly payment.

The next largest fee that you control is the loan origination fee. This is paid to the person or company arranging your home loan. Most brokers will tell you that one percent is standard; however, I’ve reviewed community based credit unions that charge as little as $400 for loan origination.

You might find that some loan officers are unwilling to negotiate settlement charges because if they do the lender takes the difference out of their commission. If this is the case simply move on to the next lender. The less you pay closing on your new home loan the more you’ll benefit from today’s low refinance rates.

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

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5 Mortgage Mistakes Even Smart People Make

If you’re thinking about refinancing your home you’re probably already shopping for the best mortgage lenders. Shopping for refinance rates can be confusing and choosing poorly could cost you. Common mortgage mistakes like comparing quotes from different programs are currently costing your neighbors thousands of dollars. Here are a few tips to help you avoid the hazards when shopping for the lowest refinance rates from today’s best mortgage lenders.

Common Mortgage Mistakes You Want to Avoid

  1. Fixating on the lowest refinance rates
  2. Getting the lowest refinance rates doesn’t automatically mean you’re getting a good deal. Especially if the offer is loaded with discount points and junk fees. Do you think choosing a mortgage based on the Annual Percentage Rate is a smart move? Mortgage lenders like to brag about their low APR refinance offers; however, the mortgage with the lowest Annual Percentage Rate usually comes with the highest closing costs and junk fees.

    Sure, you can buy down your refinance rates but if you’re not able to recoup your closing costs you’re losing money no matter how great your interest rate.

  3. Comparing refinance rates & fees across different programs
  4. Pick a mortgage program and stick with it. Don’t let a fast talking mortgage broker muddy the waters quoting refinance rates on a 5/1 ARM when you want 30-year fixed. It’s impossible to make an apples-to-apples comparison of lender fees unless you’re comparing offers from the same program. If you want a 15-year fixed mortgage then you should only be comparing fees from section 800 of the Good Faith Estimate from quotes on 15-year fixed rate mortgages.

  5. Not comparing closing costs correctly
  6. Do you know which of your closing costs are negotiable? Can you spot a junk fee at a 100 yards?

    You already know not to compare fees across different mortgage programs but did you know there are fees you can negotiate to pay less? When comparing refinance offers from today’s best mortgage lenders pay close attention to section 800 of your Good Faith Estimate.

    First, make sure you’re comparing zero point quotes for your mortgage program. Next, separate the fees paid to third parties like attorneys or the title company. These fees should be pretty much the same across different lenders and generally cannot be negotiated. Next, look for junk fees like processing, rate lock, administrative and courier fees. These you can call out and question to avoid paying as a condition of your business. Finally, look at the loan origination fee.

    The mortgage origination fee is paid to the broker or lender arranging your home loan. One percent is common; however, I’ve reviewed credit unions that charge as little as $400 for loan origination. Remember, the less you pay closing on your next home loan the more benefit you’ll get from lower refinance rates.

  7. Choose a mortgage lender based on Annual Percentage Rate
  8. Annual Percentage Rate is the most manipulated marketing tool in your lender’s arsenal. Spend any amount of time shopping refinance offers from today’s best mortgage lenders and you’ll find they quote based on the lowest APR first.

    This is because the lowest APR home loans come with the highest closing costs. The reason this happens is mortgage lenders manipulate their APRs with discount points to make them appear to be the best deal. If you choose the loan with the lowest APR you will have the highest closing costs.

    Always compare refinance rates and fees with zero point offers from the same program across different mortgage lenders. Mortgage refinance rates are still at historically low levers so the only thing paying points does is separate you from your cash.

  9. Neglecting to shop around from the best mortgage lenders
  10. Many of your neighbors simply refinance with their current lender or bank because it’s convenient. Your home loan is the largest financial commitment most people ever make, isn’t it worth spending a few hours to get a better deal?

    Refinance rate shopping isn’t hard and if you follow the tips outlined in this article you’re on track to get a better deal than most of your neighbors. Some of the best deals I’ve found have come from small, community-based credit unions so don’t assume the Wells Fargos and Bank of Americas of the world have the best deals. Pay attention to section 800 and never choose a mortgage based on the Annual Percentage Rate.

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You can learn more about getting the best deal on your next home loan without paying junk 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 lender junk fees or discount points…

Choose The Best Mortgage Lenders Without Overpaying

Refinancing with the best mortgage lenders is a confusing and frustrating process for many homeowners. Lenders use confusion as a marketing tool to sell overpriced home loans. Doing your homework before comparing offers from the best mortgage lenders will help you avoid common mistakes that steal the benefit you get from refinancing. Here are several tips before you refi that will save you thousands of dollars from unnecessary discount points and lender junk fees.

Best Mortgage Lenders: Who are they?

Mortgage lenders change their programs, offers and fees on a daily basis. What makes one the best mortgage lender for your neighbor might make them rubbish for you. How do you shop for the lowest refinance rates and fees from the best mortgage lenders?

Start by choosing a program and stick with it. Don’t let a fast talking mortgage banker confuse you by quoting refinance rates from different programs.

Do you know what I mean by loan program? It depends on what your goals and needs are for refinancing. Do you need the lowest predictable payment? Do you want to build equity as fast as your budget allows? The answers to these questions will help you zero in on a program.

If you want a long-term low, predictable payment then 30-year fixed refinance rates are the way to go. If you’re not planning on keeping your home for very long consider a 5/1 or 7/1 Adjustable Rate Mortgage to get the lowest possible refinance rates. If equity building is your goal then consider a 10 or 15-year mortgage keeping in mind how much higher your payments will be.

Common mortgage mistakes

Letting a broker talk you into a program that isn’t in line with your financial goals is just one common mortgage mistake. Pick your program and stick with it. Another costly mistake made by nearly all of your neighbors is focusing on getting the lowest possible refinance rates at the expense of fees.

If your choices for the best mortgage lenders includes unnecessary discount points, overpaying the loan origination fee and lender junk fees you might find it impossible to break even recouping these expenses. If you’re not able to break even recouping closing costs from refinancing you’re losing money no matter how great your refinance rates.

How to calculate your break even point

Many financial advisors will tell you at best you can only approximate your break-even point. This calculation is still helpful in deciding if refinancing makes sense.

You can approximate your break-even point on any offer from the best mortgage lenders by adding up all of your closing costs and diving by the amount your payment is going down. This will tell you approximately the number of months it’s going to take you to break even recouping your closing costs.

Sell or start serial refinancing before you break even and you’re losing money no matter how great your refinance rates.

How to shop for the best mortgage lenders

The best way to shop for your next home loan is to compare offers from the best mortgage companies on identical programs. Remember to pick your program before shopping and stick with it. Next compare fees found in section 800 of your Good Faith Estimate. Section 800 contains fees that you can negotiate like your loan origination fee and lender junk fees.

Which fees are considered junk? Look for anything that resembles processing fees, administration fees, or rate lock fees. Lenders like to cook up different names for their fees to confuse you so don’t be afraid to question everything.

What about that loan origination fee? How much is reasonable to pay the broker or mortgage company arranging your refi? I’ve reviewed community based credit unions with origination fees as low as $400. The industry standard is around one percent; however, the less you pay the more benefit you’ll get from that low interest rate.

What about no fee refinancing?

You might be wondering about no fee refinancing offers promoted by some of the best mortgage lenders. Why pay all those closing costs when your lender is willing to pay them for you? There are no free lunches when it comes to your home loan. In the case of no fee mortgage offers you’re trading higher refinance rates for having the lender pay your closing costs. Is the trade-off worthwhile? It depends how much your interest rate is going down after the markup.

A good mortgage broker can tell you if you’re better off in the long term paying closing costs yourself or if opting for no fee mortgage refinancing makes sense in your situation.

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You can learn more about getting the best deal on your next home loan without paying lender junk fees or discount points by checking out my free Underground Mortgage Videos.

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Should You Refinance Again in 2013?

You refinanced your mortgage a couple years ago when refinance rates were rock bottom…or so you thought. Since then refinance rates have fallen even lower and you’re thinking should I refinance again? There is a downside to serial refinancing that can wind up costing you a lot of money; however, in some situations it makes sense to refinance that mortgage again. Here are the pros and cons of refinancing to help you make an informed decision and avoid losing money.

Serial Mortgage Refinancing Can Bite You

Refinance rates averaged 5.5 percent in 2009 at the height of the refinancing boom. Many people, including most financial analysts predicted we had reached the bottom and rates would correct higher to just above six percent.

Instead refinance rates continued to fall and set new records for historic lows. If you took advantage of refinance rates during the past few years you might be surprised to find that some programs have dipped below three percent.

When Is Refinancing a Bad Idea?

One of the problems with refinancing your mortgage aside from the fees you pay is that you reset the clock on your home loan’s amortization. If you’re ten years into a thirty year mortgage and you refinance with a 30-year mortgage, you’re right back where you started with your amortization schedule.

Another problem with resetting the clock on your home is that your payments are front-loaded with interest. In the early years of your amortization schedule the majority of your payment goes to pay interest. Over time this changes and you begin building more equity in your home, stuffing less of your cash in the lender’s pockets.

In a down market this lack of equity building could result in being underwater, meaning you owe the lender more than your home is worth.

You might think that getting low refinance rates is the most important aspect of refinancing. It’s true that refinance rates along with the term length you choose determines your payment amount; however, the test of how good of a deal you’re getting comes from the fees you pay.

The more you pay closing on your new home loan the less benefit you’re getting from today’s best refinance rates. If you’re still recouping your out-of-pocket expenses from the last time you refinanced two years ago it’s going to take you that much longer to break even on the new mortgage.

Paying too much for things like the loan origination fee or discount points means it’s going to take longer before you realize any benefit from refinancing.

Tax Consequences of Mortgage Refinancing

Politicians love to scare people to further their agendas. That’s what all the talk about the fiscal cliff is about including axing the mortgage interest tax deduction. Many homeowners paying six percent or more have enjoyed a large deduction from their tax returns every year.

What do you think refinancing at three percent is going to do to that deduction? That’s another downside of record low refinance rates. Millions of homeowners are going to find their mortgage interest tax deduction shrink dramatically as a result of refinancing.

This is happening despite fear of falling off the fiscal cliff. It’s actually more of a fiscal slope and not a cliff but where’s the fun in falling down a hill?

Should You Refinance Your Mortgage Again?

You can calculate how long it’s going to take to break even recouping your out-of-pocket expenses to decide if getting lower refinance rates makes sense. This calculation is really just an approximation because factors like term length affect your ability to recoup closing costs. If you choose a longer term length than what you have on your existing mortgage you’ll never break even thanks to the additional years you’re financing.

To approximate your break-even point, add up all of your closing costs and divide by the amount your payment is going down by refinancing. Suppose for example refinancing is going to cost you $5,000 and lower your payment by $200. Divide your closing costs of $5,000 by the $200 you’re saving to get 25 month recovery for breaking even. This is in addition to the time left recouping fess from your first refinance if you took out the mortgage within the last year or two.

Minimize The Downside With a Shorter Term Length

If you’re paying on a 30-year mortgage you can reduce the negative impact of refinancing by choosing a 15-year term-length. It’s true that your payment might not go down with a 15-year mortgage but you’ll offset this with much higher principal reduction. Considering that 15-year refinance rates are typically a half point lower than their 30-year counterparts it’s an easy choice for the fiscally conservative.

You can also maximize the benefit you’re getting from today’s best refinance rates by minimizing what you’re paying at closing. Many of the fees you find in section 800 of your Good Faith Estimate Can be negotiated to pay less or not at all.

The loan origination fee is one of the most commonly overpaid fees found on your Good Faith Estimate. One percent is considered standard; however, I’ve reviewed community based credit unions that charge as little as $400 for their origination fee.

Invest some time comparison shopping refinance rates and fees across identical programs from different lenders and you can save yourself thousands of dollars at closing.

Click Here For More Details…

You can learn more about getting the best deal on your next home loan without paying unnecessary lender 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 get you started shopping for lower refinance rates without paying lender junk fees…