6 Tips For Getting The Best Mortgage Rates

Everyone wants the best mortgage rates for their next home loan; however, the approach most people take results in overpaying thousands of dollars at closing. In fact, the fees you pay closing on your next mortgage make or break the deal you’re getting. Here are six tips for getting the best mortgage refinance rates while paying as little as possible closing on your next home mortgage loan.

How to Comparison Shop for the Best Mortgage Rates

The process of refinancing your home isn’t much different from when you took out your first mortgage. Before you can make an informed decision on which lender’s offer is best there are a few decisions you need to make. Is your goal to improve your monthly cash flow by reducing your payment? Would you rather build equity in your home and payoff that mortgage faster? Deciding what your goals are for refinancing before you start shopping for the best mortgage rates will make the process infinitely easier.

6 Steps to Lower Mortgage Refinance Rates

Have you decided whether you want to lower your payments or to pay off that mortgage loan faster? If so you’re almost ready to begin shopping for a lender and their best refinance rates.

  1. Pick a Mortgage Program & Stick With It
  2. The most important decision you can make when refinancing your home loan is which mortgage program you want/need. Do you need a fixed mortgage rate with low payments? Choosing a 30-year fixed rate loan will meet your needs. Want to pay off the loan quickly with a reasonable payment amount? Consider an Adjustable Rate Mortgage with a 15 year term. Is your credit iffy and you need an FHA streamline refinance?

    Once you’ve decided which program works best for you stick to it and don’t let a fast-talking loan officer quote mortgage refinance rates from programs that you’re not interested.

  3. Check Your Credit Reports First
  4. If you’ve already started shopping for mortgage refinance rates and you’re finding the quotes you get are higher than what you’re seeing advertised, the likely culprit is your credit score. Before you do anything else visit the government-mandated website AnnualCreditReport.com and carefully check your credit reports for mistakes. If you find errors you’ll need to dispute with each credit bureau and allow enough time for the correction to be reflected in your credit score.

    If your credit score isn’t what it should be the quickest way to boost it is by paying down the balances on your credit cards below 30% of your limit. Finally, never miss a payment…especially on your mortgage.

  5. Shop From Multiple Lenders Online
  6. Getting the best mortgage rates for your next home loan means shopping around from a variety of lenders. Also, make sure you’re requesting mortgage refinance quotes the right way. If you want accurate quotes you have to give the loan officer your Social Security number. Many homeowners refuse to provide their SSN when shopping for the best refinance rates because they think they’re protecting their credit score.

    If you shop this way you’re relying on that loan officer’s best guess as to what your interest rate will be which is almost always a waste of time. The trick to protecting your credit score while shopping for mortgage refinance rates is to limit your quotes to a two week (14-day period). If you do this you’ll only get dinged for one lender inquiry on your credit report.

    Also, make sure the quotes you receive are zero discount point quotes. If you’d like to see whether paying discount points is worthwhile there is a table on page three of your Good Faith Estimate; however, you should always start with a zero point quote when shopping for mortgage refinance rates.

  7. Compare Mortgage Refinance Rates & Fees
  8. One of the most common mistakes is focusing on getting the best mortgage rates at the expense of fees. The new Good Faith Estimate makes it very easy to comparison shop fees. Focus on page two, paying close attention to the loan origination fee and Yield Spread Premium. If you’re not already familiar Yield Spread Premium, this is a credit generated by accepting higher than market interest rates. You can find this credit, if any, listed on page 2, section A, item 2.

    The test of how good of a deal you’re getting when refinancing your home comes from how long it takes to break even recouping your out-of-pocket expenses. The quicker you break even the more benefit you’re getting from low mortgage refinance rates. Conversely, the more you pay at closing the longer it’s going to take you to break even reducing your benefit from refinancing.

    You can approximate your break-even point by adding up all your out-of-pocket expenses and dividing by the amount that your payment is going down each month. If you’re unsure what your new payment will be based on the mortgage refinance rates you’re being quoted you can use a simple mortgage calculator like this one to determine the new payment amount.

    Simple Mortgage Calculator

    Loan Amount: Years: Rate:

    Annual Taxes: Annual Insurance:

    Monthly Payment =

  9. Decide How Will You Pay For Your Next Home Loan
  10. Every home loan has fees and what you’ll need to decide is how you’re going to pay your closing costs. If you want the best mortgage rates available you’ll have to pay out-of-pocket to close.

    If you accept higher mortgage refinance rates to cover your loan origination fee and other closing costs you’re going to have a higher payment and eventually overpay for those fees. Unless you’re strapped for cash it’s almost always better to pay the mortgage origination fee and closing costs yourself.

  11. Use The Good Faith Estimate & HUD-1 Statement

  12. The Good Faith Estimate is an excellent tool for shopping for the best mortgage rates. Keep in mind however that it is only an estimate. The final word on your mortgage refinance rates and fees is found on your HUD-1 Settlement Statement. If it’s not in writing on your HUD-1 you didn’t get what the loan officer promised.

    It’s a good idea to reconcile your Good Faith Estimate with the HUD-1 Settlement Statement before closing. The same is true of your mortgage refinance rate lock. If you haven’t locked in your best mortgage rates in writing you haven’t locked.

Investing a few hours in careful comparison shopping of mortgage refinance rates and fees will save you thousands of dollars at closing and help you avoid common mistakes that tripped up your neighbors.

Click Here For More Details…

You can learn more about getting the best mortgage rates without paying lender markup or 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 get the best mortgage refinance rates without overpaying at closing…

IRRRL Mortgage Refinancing for Veterans

If you’re paying on a VA mortgage or are veteran with a conventional mortgage and want to take advantage of today’s low refinance rates there are several options available to you. According to the Veteran’s Administration, many veterans are struggling with qualifying for mortgage refinancing based on their employment status or income. Here are the basics you need to know about the VA government refinance program to help you lower your payment with today’s low mortgage refinance rates.

VA Interest Rate Reduction Refinancing Loan

The first mortgage refinancing option available for homeowners with an existing VA home loan is the Interest Rate Reduction Refinancing Loan (IRRRL). This is the VA version of the streamline refinance which requires little documentation or qualifying. In order to be eligible for the IRRRL refinance you must already have a VA mortgage loan and demonstrate a tangible benefit from the new home loan. This benefit would be lower refinance rates or converting from an adjustable rate mortgage to a fixed rate home loan.

You must be current on all of your mortgage payments and not have more than one 30-day late payment during the last year. You’ll be charged a fee to fund your IRRRL refinance of .5 percent of your home loan amount. You can pay this out of pocket at closing or roll the funding fee into your mortgage balance. If you’re a disabled veteran it is possible to get the funding fee waived.

The Interest Rate Reduction Refinancing Loan does not allow you to take any cash out against your home equity. Finally, you cannot consolidate your first and second mortgages using the VA streamline refinance.

The VA does not require a minimum credit score, home appraisal or proof of income to qualify for the IRRRL; however, many lenders enforce their own program rules called overlays. Some lenders require a minimum credit score of 640 or better just to qualify. If you find that you have trouble qualifying for the VA IRRRL because of lender overlays consider shopping around from a variety of lenders.

Not all lenders enforce program overlays when it comes to Interest Rate Reduction Refinance Loans. Community based and military credit unions are a good starting point when shopping for mortgage refinancing because they typically offer the lowest fees and refinance rates.

Other Mortgage Refinancing Options

If you’re a veteran and don’t already have a VA mortgage it is possible to refinance with a standard VA home loan. Be prepared to submit full documentation and meet the minimum qualifications for a VA mortgage loan. If you’re already paying on a VA mortgage and cannot find a lender to approve your IRRRL refinance you might still qualify for mortgage refinancing with the standard VA refinance. If you’re already in a VA mortgage and good credit and 20 percent equity you might want to look at both options to see which is cheaper.

If you decide to refinance with the standard VA mortgage you can expect to pay a loan origination fee which depending on the lender could be cheaper than paying the funding fee. If you’re short of cash it is possible to take higher refinance rates on a standard VA mortgage refinance to pay your loan origination fee and closing costs; however, in this case the IRRRL would most likely be the more attractive option.

If you’re looking to cash out on your standard VA mortgage refinance most lenders won’t let you borrow more than 90 percent of your loan-to-value ratio even though the VA allows up to 100 percent cash-out refinance loans.

Your Mortgage Refinancing Fees Matter

If refinancing with a standard VA home loan is going to be your best option remember that just because you’re getting a VA mortgage doesn’t mean you don’t have to worry about lender fees. The fees you pay for loan origination and closing costs will make or break the deal you’re getting on your VA refi. This includes paying unnecessary discount points to buy down your refinance rates.

Click Here For More Details…

You can learn more about getting the best deal on your VA mortgage refinance 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 with today’s best mortgage lenders for your VA mortgage loan…

Warning: Avoid Paying For Mortgage Refinance Rates

If you’re shopping for today’s lowest mortgage refinance rates you’ve already encountered a deceptive fee lenders use to boost their profits at your expense. If you fall for this fee it’s going to be more difficult, even impossible to break even on your out-of-pocket expenses. Here are several tips before you refi to help you avoid paying for today’s best mortgage refinance rates.

Save Thousands On Mortgage Refinance Rates

Refinancing with today’s best mortgage companies can slash hundreds of dollars from your monthly housing payment. The problem with paying for mortgage refinance rates is that it boosts your out-of-pocket expenses and if you’re unable to break even you’ll be losing money no matter how low your new interest rate.

What is this unnecessary fee you’re paying for mortgage refinance rates that I’m talking about?

Paying unnecessary lender discount points robs you of the benefit you’re getting from mortgage refinancing.

Spend any amount of time shopping for mortgage refinance rates and you’ll find that lenders quote interest rates including discount points first. If you’re not already familiar with discount points this is a form of prepaid interest you pay at closing to lower your mortgage refinance rates. One discount point is one percent of your home loan and typically lowers your interest rate by .25%.

Should You Pay Discount Points?

Refinance rates are at 60 year lows and keep falling lower. Should you pay the lender a fee to get even lower mortgage refinance rates? For many homeowners who do not have cash on hand this isn’t a question; however, many make the mistake of thinking discount points put them ahead of the game.

You can answer this question for yourself by approximating the break-even-point for recouping your closing costs. You can do this by dividing your total closing costs including points by the amount your monthly payment will go down each month. This gives you (approximately) the number of months it’s going to take to break even on your out-of-pocket expenses before you’ll benefit from today’s low refinance rates.

Notice that I say approximate because this calculation is only valid if you keep the same term–length or go shorter. If you choose a longer term length like going from a 15-year home loan to a 30-year loan you’ll never break even due to the higher finance costs.

Here’s an example to illustrate my point:

Suppose you’re refinancing your home for $250,000. Your old payment based on an interest rate of 6.5% was $1,580 per month. The lender is quoting you mortgage refinance rates at 4.0% with half a point paid up front. This would lower your monthly payment to $1,200 per month at a cost of $1,250 for that half point. This is paid in addition to average closing costs of $5,000.

Is it worth paying $1,250 extra for the discounted rate?

If you don’t pay discount points in this example the refinance rate will be 4.5% with a monthly payment of $1,266. That’s a difference of $66 per month. It will take you an additional 18 months to break even recouping the discount points you’re paying. Since it’s going to take you 16 months to break even recouping your $5,000 in closing costs, that’s a total of 34 months.

Is your cash better spent on other things? Considering that the average homeowner refinances every four years that’s up to you to decide.

Click Here For More Details…

You can learn more about paying less for mortgage refinance rates from today’s best mortgage lenders by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Underground Mortgage Videos
Here’s a quick sample to get you started with the lowest refinance rates without unnecessary points or fees…

Why Annual Percentage Rate Sucks

Annual Percentage Rate Sucks…Period. I’ve written about this before but it’s worth revisiting as this is the most helpful advice I can offer you when it comes to your home mortgage. Here’s why APR sucks and why you should avoid it like the plague.

Annual Percentage Rate is one of the most commonly used yet controversial mortgage terms you’ll encounter when shopping for the lowest refinance rates. Trusting your lender’s APR when shopping for mortgage rates is like trusting a bad neighbor. Next thing you know the fridge is empty and there’s money missing off the dresser.

Annual Percentage Rate Definition

Annual Percentage Rate is a term lenders love to sling around when advertising refinance rates. What does Annual Percentage Rate or APR really mean? Annual Percentage Rate was intended to represent the real cost of a home loan over time, expressed as a yearly interest rate. This sounds good on paper because the APR is supposed to take into consideration closing costs and other fees associated with the home loan.

It doesn’t matter if you’re purchasing a home, refinancing your existing loan or considering a home equity loan, you’ll find the interest rate and Annual Percentage Rate are not the best way to choose from today’s best mortgage lenders. The idea behind Annual Percentage Rate is that it should tell you the interest rate your home loan would have if you paid no fees out-of-pocket whatsoever.

The problem with Annual Percentage Rate is that it makes several assumptions about you that are almost never true AND lenders use some creative accounting when it comes to discount points. Lenders are required by Truth-in-Lending laws to provide you an APR when you get quotes for a home loan. You’ll find it on the Federal Truth-in-Lending Disclosure Statement you receive with your Good Faith Estimate.

What’s Wrong With APR?

Annual Percentage Rate was intended to allow you to make apples-to-apples comparison of different mortgage offers from different lenders. If you rely on APR to choose from today’s best mortgage companies an offer with an interest rate of 4.0% and an Annual Percentage Rate of 4.25% would appear to be better than a similar home loan with an interest rate of 4.0% and an APR of 4.5 percent.

Here’s my advice for you today when it comes to APR and getting the best refinance rates for your next home loan:

Never shop for a home loan based on the APR. Ever.

It doesn’t matter if you’re refinancing with a conventional loan, VA, FHA or jumbo mortgage loan, basing your decision on the APR decreases your chances of getting the best deal. Mortgage lenders manipulate APR to make their offers seem more attractive and get away with this because there are no standards for calculating Annual Percentage Rate.

This is why Annual Percentage rate is never the apples-to-apples comparison that it was intended to be. The mortgage offer with the lowest APR often has the highest closing costs meaning more cash out of your pocket.

Banks and lenders love to beat the “Low, Low APR” drum when marketing their offers. The refinance rate quotes you collect are likely to be sorted by APR with the lowest Annual Percentage Rate appearing first.

They do this because the refinance quotes highlighted with the lowest APR include the highest discount points. Paying discount points with today’s ridiculously low mortgage refinance rates is a total waste of money. If you agree to pay unnecessary discount points on your next home loan you’ll have lower payments over the lifetime of your mortgage and the loan offer will even appear cheaper because it will have a lower APR than a zero point offer.

The bottom line when it comes to APR is the mortgage with the lowest Annual Percentage Rate is going to have the highest closing costs thanks to unnecessary discount points. If you’re paying discount points at closing in today’s market you’re wasting your money. Period.

APR assumes you’ll keep your home loan for the entire duration of the 30-year term. Considering the average homeowner refinances their mortgage every four to five years the chances of recouping your mortgage fees becomes slimmer and slimmer the more you pay at closing.

How Should I Shop For Mortgage Rates?

The best way to shop for the lowest purchase or refinance rates is to compare mortgage rates AND fees, focusing on the loan origination fee. Avoiding discount points completely and trying to find the lowest origination fee will make sure your out-of-pocket expenses are minimal AND you’re getting today’s great rates.

I’ve seen loan origination fees as low as a flat $400 from community-based credit unions. These credit unions are an excellent starting point for your mortgage rate shopping.

Click Here For More Details…

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

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Underground Mortgage Videos
Here’s a quick sample to get you started avoiding lender junk fees and unnecessary points on your next mortgage loan…

Lowest Mortgage Refinance Rates

Want the lowest mortgage refinance rates for your next home loan? Did you know that your neighbors are literally throwing away thousands of dollars every year because of hidden markup of their so-called lowest mortgage refinance rates? Here are several of my best tips for saving money and getting the lowest mortgage refinance rates that don’t include hidden markup or junk fees.

Hidden Markup for an Unnecessary Commission

Did you know that the person arranging your home loan collects a second commission known as Yield Spread Premium for overcharging you? In fact, according to the HUD Secretary your neighbors in the United States are overpaying sixteen billion dollars this year because of this hidden markup. I call it an unnecessary commission because most brokers do their best to hide and explain away the fee known as Yield Spread Premium. After all, if the lender’s paying a fee that isn’t coming out of your pocket why should you care, right? It’s not the fact that lender paid fees aren’t coming out of your pocket that should concern you, what should bother you is why your lender is paying this fee in the first place.

All You Need to Know About Yield Spread Premium

Mortgage fat cats refer to the fee they collect for marking up your mortgage interest rate as Yield Spread Premium or YSP. Simply put, this fee is paid by your lender for locking and closing your home loan with higher than necessary interest rates. You’re not really getting the lowest mortgage refinance rates if their being marked up by a middleman are you? The problem with this type of commission is that you’re already paying the broker a perfectly reasonable origination fee for the work they do and their markup drives up your payment by thousands of dollars unnecessarily.

Here’s an example to illustrate my point. Suppose you are refinancing your home for $250,000. Your broker charges you an origination fee of 1.5 percent and brags about having the lowest mortgage refinance rates around at 6.25 percent. The first thing you should know is that this broker is overcharging you for the origination fee at 1.5 percent. One percent of your loan amount is a perfectly reasonable fee to pay for loan origination without any markup for Yield Spread Premium. The second thing you should know about this home loan is that the lender actually approved you for their lowest mortgage refinance rates at 5.75 percent; however, the broker marked it up to collect two percent of your loan amount in Yield Spread Premium.

In this example, the commission pocketed by your broker is the 1.5 percent loan origination fee you’re paying at $3,750, plus the lender paid compensation (Yield Spread Premium) for overcharging you, 2 percent or $5,000 for a total of $8,750. (Just for a few hours’ work) As you can see, the broker has more than doubled their commission (at your expense) and here’s why. Your payment on a thirty year, fixed-rate home loan at 6.25 percent will be $1,539 per month. If you had the lowest mortgage refinance rates you deserve at 5.75 percent your payment would only be $1,458. That’s a difference of $972 per year that you could be using for other things…all because your broker overcharged you.

How to Get the Lowest Mortgage Refinance Rates

You don’t have to pay for this unnecessary markup of your lowest mortgage refinance rates. It is possible to pay a flat one percent for the mortgage origination fee and walk away with wholesale mortgage rates without paying points or accepting markup for Yield Spread Premium, you just have to find the right person to arrange your home loan.

You can learn more about getting the lowest mortgage refinance rates without paying hidden markup or junk fees by checking out my free Underground Mortgage Videos.
httpv://www.youtube.com/watch?v=be9md0A0_2c
Here’s a quick sample to get you started on the road to a wholesale mortgage rate for your next home loan.