Should I Refinance Now That Current Mortgage Rates Are Rising?

Do current mortgage rates have you asking the question should I refinance my home? Demand for refinance rates is down significantly now that current mortgage rates are pulling away from record lows. Did you miss out on historically low rates or should you act now before current mortgage rates climb higher? Here are several tips before you refi to help you answer the question “Should I Refinance” before it’s too late.

Should I Refinance My Home Loan?

While it’s true that the average refinance mortgage rates on a 30-year fixed-rate home loan have recently gone up by 1/5 a percentage point they’re still near all-time-lows.

The simplest way to answer the question “Should I Refinance” is to look at how long it’s going to take you to break even recouping the costs of taking out a new home loan. Every mortgage has settlement charges like the loan origination fee that have to be paid at closing, either by you or someone else.

The more you pay closing on your refi the longer it’s going to take you to break even before you start benefiting from current mortgage rates. One of the most common mistakes you can make is focusing only on getting the lowest current mortgage rates at the expense of fees. When you compare quotes from today’s best lenders it’s important to compare current mortgage rates AND fees. Here’s how to get the lowest refinance mortgage rates and fees using the new Good Faith Estimate.

Don’t Forget to Check Your Credit First

Once you’ve answered the question “should I refinance” you’re ready to start shopping from today’s best mortgage lenders… almost.

When’s the last time you checked your credit reports and score? If you aren’t saying on top of your credit reports you might find that mistakes are dragging down your credit score. Have you already started shopping for a lender and are finding the refinance mortgage rates you’re being offered are higher than what lenders are advertising? The likely culprit is your credit score.

Before you do anything else go to the government-mandated website AnnualCreditReport.com and review all three of your credit reports from TransUnion, Experian and Equifax. The government requires the three credit bureaus to give you access to your credit reports every year but doesn’t require they give you a credit score. If you’d rather not pay for your credit score you can get your TransUnion score for free at CreditKarma.com with no strings attached.

You’ll find that credit scores vary between the three bureaus and mortgage lenders rely on your middle score when quoting refinance mortgage rates. If your scores are 680, 700, and 710 at Equifax, Experian and TransUnion your middle score is 700. Not happy with your credit score? The fastest way to boost it is by paying down the balances of your credit cards below 30% of your limit. Don’t zero them out completely, it actually helps to carry a small balance.

How to Compare Current Mortgage Rates & Fees

Now that you’re ready to begin shopping from today’s best mortgage lenders you want to start requesting quotes. There is a right way to request mortgage refinance quotes that doesn’t waste your time and protects your credit score.

First, make sure the refinance mortgage quotes that you’re getting do not include discount points. Paying points with current mortgage rates makes no sense. You’ll find that lenders advertise interest rates that include points first because they’re lower and seem more attractive. If you’re curious as to how discount points affects your payments there is a table on page three of the Good Faith Estimate but as a starting point make sure your quotes do not include discount points.

Second, make sure you’re giving the loan officer your Social Security Number to get an accurate refinance quote. Some homeowners refuse to give their Social Security Number because they think they’re protecting their credit score from lender inquiries. While it’s true that lender inquires do lower your credit score it’s the only way to get an accurate quote.

If you don’t provide your Social Security number you’re relying on the loan officer’s best guess for your refinance mortgage rates. You need accurate quotes to answer the question “Should I Refinance” and giving your SSN is the only way to get them.

You can protect your credit score from excessive lender inquiries by limiting all of your refinancing quotes to a 14-day period. If you do this your credit score will only get dinged for one lender inquiry.

How to Use the Good Faith Estimate to Shop for the Best Mortgage Lenders

Keep in mind that the Good Faith Estimate is just an estimate but it’s the best way to compare offers from different lenders. Also, make sure you’re comparing refinancing offers from identical mortgage offers. It makes no sense to compare refinance mortgage rates from a 15-year fixed rate home loan to a 30-year adjustable rate mortgage. Your quotes need to be for identical mortgage programs. That’s the only way to make an apples-to-apples comparison of lender fees.

Next, use page two of your Good Faith Estimate to comparison shop mortgage origination fees. Most brokers will tell you that paying one percent of your home loan is standard for the loan origination fee. This is the fee paid to the person or company arranging your home loan and I’ve found community credit unions that charge as little as $400 for loan origination. Remember, the less you pay settling on your new home loan the quicker you break even and the faster you’ll benefit from today’s refinance mortgage rates.

Beware Mortgage Yield Spread Premium

Huh? Yield Spread what? This is a credit found on page two, box 2a of your Good Faith Estimate, and yes, Yield Spread Premium is still legal. The only thing that changed is that mortgage brokers are not allowed to take the credit as a commission.

What is Yield Spread Premium? Simply put, it’s a credit you get for accepting higher than market refinance rates. Think of Yield Spread Premium as discount points in reverse. For every .25% you allow the lender to mark up your interest rate you’ll get a credit of one percent of your loan amount. This credit is used to pay your origination fee and other settlement costs.

The higher your closing costs the more markup you’ll need to cover. This is how those “no fee” and “no cash out-of-pocket” mortgage refinancing offers work. The problem with accepting Yield Spread Premium is that you’re giving up the lowest current mortgage rates which means you’ll have a higher payment for the entire time you keep the loan. Instead of breaking even you’re going to reach a point where you’re losing money by having the lender cover your closing costs. If you can afford the fees it’s almost always better to pay closing costs yourself if you plan on keeping your home.

How to Calculate Your Break-Even Point

Are you still questioning should I refinance? One way to put your mind at ease about paying for a new home loan is to calculate how long it’s going to take to recoup your out-of-pocket expenses. You can use a simple mortgage calculator like this one to calculate the number of months it’s going to take you to reach your break-even point.

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Once you know how much your monthly payment is going down from current mortgage rates divide your total closing costs by your savings. (The difference between the old payment amount and the new) This will tell you approximately the number of months it’s going to take breaking even.

I say approximately because it doesn’t factor in taxes or changes in term-length. As long as you’re keeping the same term-length (term-length is the number of years) or going shorter, the approximation works. (If you’re going longer, say from a 15-year to a 30-year mortgage you’ll probably never break even.)

Once you know how long it’s going to take you to break-even recouping your mortgage settlement fees you can answer the question “Should I Refinance.” If you’re comfortable with the amount of time it’s going to take breaking even then mortgage refinancing probably makes sense. Remember, the better you shop for fees and the less you pay for things like loan origination the faster you’ll reach your break-even point.

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You can learn more about paying less for current mortgage rates by avoiding lender junk fees and markup by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to help you make an informed decision answering the question “Should I Refinance.”

How To Get Your Lowest Refinance Mortgage Rates

Are you considering taking out a new home loan with today’s low refinance mortgage rates? When deciding if it’s a good idea you’ll want consider the cost of taking out a new mortgage loan. Every new home loan has fees including settlement charges, points and possibly mortgage insurance depending on the program and your loan-to-value ratio. Here are several tips to help you decide if taking out a new home loan is worthwhile and how to get the lowest refinance mortgage rates if you decide to go forward.

Should You Take Advantage of Today’s Refinance Mortgage Rates?

The mortgage fees you pay closing on your new home loan make or break the deal you’re getting, especially when refinancing. If you’re not able to break-even recouping the out-of-pocket expenses from refinancing you’re losing money no matter how low your refinance mortgage rates.

The less you pay at closing the better…that’s why comparison shopping refinance mortgage rates and fees is so important. One of the most common home loan mistakes is focusing only on refinance mortgage rates at the expense of fees. Overpaying the loan origination fee or agreeing to pay discount points for a lower interest rate is a recipe for losing money.

Should I Refinance My Mortgage?

Before you start shopping for the best mortgage lenders you want to decide if refinancing is even worthwhile. You can do this by approximating your break-even point using a simple mortgage calculator like this one.

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

The mortgage calculator gives you an idea of how much your payment will go down based on current refinance mortgage rates. Once you’ve got an idea of what the payment will be divide your total estimated closing costs by the amount you’re saving each month. This tells you approximately the number of months it’s going to recoup your out-of-pocket expenses from your monthly savings. If this time-frame for breaking even is acceptable for you than paying for a new home loan makes sense.

Remember that if you’re considering a cash-out refinance that you may be required to purchase mortgage insurance which can add hundreds of dollars to your payment. The same is true if your loan-to-value ratio is less than 80%. Mortgage insurance can quickly turn attractive refinance mortgage rates into a losing proposition.

How to Shop for the Lowest Mortgage Rates & Fees

Comparison shopping refinance mortgage rates and fees from different lenders can be a confusing and frustrating process. In addition to comparing mortgage rates from today’s best mortgage lenders you need to shop closing costs. The trick to comparison shopping is to only compare lender fees from identical mortgage programs. If you’re comparing fees from different programs across different lenders you’re not making an apples-to-apples comparison.

What mortgage fees can you expect to pay? One of the most important is the loan origination fee. This is paid to the person or company arranging your home loan. Many brokers will tell you that one percent is standard for the mortgage origination fee. I’ve reviewed community credit unions that charge as little as $400 for their loan origination fee which is one of the reasons comparison shopping is so important.

Other closing costs to consider include mortgage processing, underwriting fees, attorney fees, title insurance, recording fees and pro-rated taxes and insurance. Fortunately, the new Good Faith Estimate makes it easy to comparison shop mortgage lender fees across identical programs.

How to Use the Good Faith Estimate to Compare Mortgage Fees

The government recently revamped the Good Faith Estimate making it much more useful for refinance rate shoppers. First, when shopping refinance mortgage rates make sure the quotes you’re requesting do not include discount points. You’ll find that lenders like to quote refinance mortgage rates based on paying discount points because it makes their interest rates seem more attractive.

Agreeing to pay discount points used to make sense when home loans came with double digit interest rates in the 1980s. These days refinance mortgage rates are at historically low levels making points a waste of money. If you’re curious how paying this fee to the lender affects your payments there is a table on page three of your Good Faith Estimate; however, most homeowners do not benefit from paying points.

Remember, the less you pay closing on your new home loan, the more you’ll benefit from current refinance mortgage rates. Start with the loan origination fee fount on page two, box 1a. Next, look at any yield spread premium in box 2a. This is a credit generated by accepting higher than market refinance mortgage rates that is used to pay your origination fee and other closing costs. If you’re taking this lender credit you’re not getting the lowest interest rate possible and your monthly payments will be higher.

The next section on your Good Faith Estimate that you want to focus on is box b on page two. This includes lender specific fees, including third party fees that you can shop around for. You’ll find the mortgage fees vary from one lender to the next so don’t be afraid to haggle with loan officers over the fees you find in box b.

What to do if Lender’s Aren’t Quoting You Their Lowest Refinance Rates

If you find the quotes you’re getting are higher than what lenders are advertising the likely culprit assuming that your LTV ratio is better than 80% is your credit score.
Have you been to AnnualCreditReport.com this year to review your credit reports for errors? Mistakes in your credit reports are like a boat anchor for your credit score, keeping you from the lowest interest rates from today’s best mortgage companies.

AnnualCreditReport.com won’t give you a credit score unless you pay for one. CreditKarma.com is an excellent alternative to those fake free credit score sites that bait you into paying for their credit monitoring services.

If you find mistakes in your credit files you’ll need to dispute the errors with each credit bureau (Trans Union, Equifax, & Experian) and allow enough time for the correction to be reflected in your credit score.

Strategies for Refinance Mortgage Rate Shoppping

You already know that comparing refinance rates and fees across identical mortgage programs is the only way to make an apples-to-apples comparison of lender fees. It’s also important to make sure the quotes you’re requesting are accurate and don’t negatively affect your credit score.

When a mortgage lender runs your credit you get a hard inquiry on your credit report which lowers your credit score. Some people refuse to provide their Social Security Number when shopping for refinance mortgage rates because they think they’re protecting their credit score.

If you do this you’re getting the loan officer’s best guess on what refinance rate you’ll qualify. The only way to get an accurate Good Faith Estimate for comparison shopping fees is to give up your Social Security number. The trick is to limit all of your quotes to a 14-day period. If you’ll do this you’ll only get dinged for one hard lender inquiry on your credit report and will protect your credit score as much as possible.

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You can learn more about getting the lowest refinance mortgage rates & fees from today’s best mortgage lenders by checking out my free Underground Mortgage Videos.

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What To Do When Your Mortgage Refinance Application Is Denied

Are you one of the millions of homeowners in the United States that had your mortgage refinance application denied? If you are, don’t take it personally, you’re in good company. Fortunately, there are steps you can take to get approved in most situations. Here are several tips for turning that denied refinance application into an approval with today’s best mortgage lenders.

Common Reasons for Mortgage Refinance Denials

There are a number of reasons that lenders deny applications for mortgage refinancing. Lack of home equity is one of the most common reasons for having your refinance application denied. You don’t have to be fully underwater to be denied, just low on equity. If you’re not underwater but need to improve your loan-to-value ratio, consider cash-in mortgage refinancing.

Cash-in refinancing means you’re bringing cash to the table to improve your loan-to-value ratio to get your mortgage refinance application approved. I don’t recommend this if you’re fully underwater or will have to pay a significant amount as you could qualify for the Home Affordable Refinance Program (HARP 2.0) in these cases. If you only have to pay $10,000 to get approved for a conventional home loan cash-in refinancing could be a worthwhile investment.

Consider The Home Affordable Refinance Program

If your loan-to-value ratio is greater than 80 percent you could qualify for underwater refinancing with HARP 2.0. The program was recently overhauled by President Obama so if you were denied when the program was first introduced you should reapply. Under HARP 2.0 there’s no limit to how underwater you can be and there are more incentives for lenders to approve your HARP application. For many homeowners this is a more attractive alternative to cash-in refinancing.

The basic requirement for HARP is that Fannie Mae or Freddie Mac purchased your mortgage prior to June 1st 2009 and you cannot have any late payments in the last six months. Additionally, you must have made 11 of your last 12 mortgage payments on time. If you meet these basic requirements you are HARP eligible; however, many lenders enforce their own program overlays. Overlays are limits on things like minimum credit scores and maximum loan-to-value ratios to get approved. Not every mortgage lender enforces overlays and every lender’s rules are different.

FHA or VHA Mortgage Refinancing Options

If you’re low on equity consider an FHA home loan. FHA refinance rates are competitive compared to conventional mortgage rates. The downside to an FHA home loan is that you’ll be required to pay mortgage insurance which will raise your monthly payments. VA home loans on the other hand do not require mortgage insurance so if you’re a veteran don’t overlook your VA mortgage eligibility. VA home loans are the single best option available on the market today.

Bad Credit Denial? Improve Your Credit Score

If your mortgage refinance application is denied due to credit your only option is to improve your credit score. The easiest way to do this is to pay down the balances on your credit cards below 30% of your available limit. Make sure you’re making all of your payments on time and work with creditors to remove negative information from your credit reports.

If you haven’t checked your credit reports for mistakes now would be a good time to do this. You can get free copies of all three credit reports by visiting the website AnnualCreditReport.com.

Keep Applying With Different Mortgage Lenders

Mortgage lenders have different requirements for underwriting so if one denies your application there’s a good chance another one will approve you. Shopping around for the lowest fees is important as closing costs can vary significantly from one mortgage lender to the next.

The biggest lenders like Bank of America or Wells Fargo don’t always have the lowest refinance rates and fees. Smaller lenders or credit unions might approve your mortgage refinance application when the lending giants turn you down.

One last thing to consider is enlisting the help of a mortgage broker. Your broker has access to programs the average homeowner would never know about and have experience getting applications approved. Just be careful not to overpay the broker’s loan origination fee as paying too much could make refinancing an losing proposition.

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You can learn more about getting your mortgage refinance application approved and getting the best deal by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started refinancing with today’s best mortgage lenders…

Who Has The Best Mortgage Rates?

Are you shopping for the lowest mortgage rates for your home loan but want to avoid paying unnecessary fees? Should you stick with a big lender like SunTrust Mortgage Rates or shop more from the best mortgage lenders? Did you know that the single most important aspect of your home loan in today’s market isn’t the mortgage rates? Here are several tips to help you get the best deal on your next home loan without walking away from cash on the table.

It’s All About The Fees…

If you’re in the market for mortgage refinancing and are shopping for the lowest mortgage rates you might want to reconsider your approach. If you really want lower refinance mortgage rates than your neighbors got, it’s not hard to do…if you’re willing to pay. Most homeowners focus so much on getting the lowest mortgage rates they lose sight of their closing costs and wind up paying too much for things like unnecessary discount points.

Remember discount points from when you purchased your home? Most people pay a point or two when buying their home because they simply don’t know better. Mortgage rates are hovering near sixty-year lows so paying discount points is not only unnecessary it’s a waste of your money!

Most lenders, even some credit unions like NFCU mortgage rates post tables that include discount points for no other reason that boosting their income. (at your expense) If you agree to pay discount points in exchange for lower refinance rates your out-of-pocket expenses will be higher and you’ll be gaining less benefit from today’s low mortgage rates.

Why Closing Costs Matter

Aside from the fact that closing costs are draining cash out of your pocket that you could be using for anything else, overpaying lender fees makes mortgage refinancing a losing proposition. The reason is that you must recoup these out-of-pocket expenses like the origination fee before benefiting from your new home loan. If you sell or refinance again before breaking even you’re losing money no matter how low your interest rate.

How to Approximate Your Break-Even Point

You can approximate the amount of time it’s going to take to recoup your closing costs by dividing your total out-of-pocket expenses by the amount your payment is going down each month. I say approximate because this method doesn’t take in to consideration any changes in your home loan’s term-length. Term-length is the amount of time you have to repay the mortgage (most people choose 30 years without considering the benefits of a 15-year home loan) and along with mortgage rates determines your payment amount.

If you shorten your term-length, say going from a 30-year fixed rate to a 15-year fixed rate home loan you’ll break even much more quickly than the calculation allows. Conversely, if you extend your term length say going from 15-years to 30 or worse yet 40 years, the calculation is no longer valid because you’re never going to break even.

Bottom line for today: the less you pay for mortgage refinancing the better off you’ll be. You can learn more about getting the best deal on your next home loan by checking out my free Underground Mortgage Videos.

How to Shop for the Lowest Refinance Mortgage Rates

Are you looking for the lowest refinance mortgage rates and want to avoid paying unnecessary fees? Do you know how to spot lender junk fees correctly using your Good Faith Estimate and HUD-1 Settlement Statement? Here are several tips before you refi to help you get the lowest refinance mortgage rates from the best mortgage companies like Amerisave without leaving money on the table at closing.

Refinance Mortgage Rates Online

The Internet is an excellent resource for shopping for the lowest refinance mortgage rates if you go about it correctly. The problem is that many homeowners approach mortgage refinance rate shopping in the same manner they approach shopping for a kitchen appliance. Most of your neighbors collect a few Good Faith Estimates, squint at them until one in the morning and choose the offer with the lowest interest rate. This approach often results in overpaying thousands of dollars in unnecessary discount points and junk charges.

What Fees Are Legitimate & Which Are Junk Fees

Every home loan has fees you’ll be required to pay at closing. Even those no fee refinance offers trade paying closing costs for a higher monthly payment. The closing costs you’ll pay for mortgage refinancing fall into the following four categories:

  1. Mortgage Lender Fees
  2. Government Fees
  3. Escrow and Pre-paid Interest Fees
  4. Third Party and Title Fees

How can you tell which are legitimate and which are junk? Government fees are unavoidable and are required by the State, County, or town you’re living. No one’s happy paying property taxes and other charges; however, the government fees you find on your Good Faith Estimate and HUD-1 are all legitimate and should not vary among the best mortgage lenders.

Escrow fees will vary from one lender to the next as many lenders have different guidelines for prepaying property taxes or insurance. These fees, including interest fees, are usually based on how much you’re borrowing.

The most common mortgage mistakes come from lender fees and third party expenses. Lender fees include any discount points required to lock your refinance mortgage rates and the rate lock fee charged if any. Rate lock fees, application fees, processing fees, and document prep or courier fees are all junk fees and should be questioned and negotiated away.

How to Use Your Good Faith Estimate Correctly

Lenders are required to give you the Good Faith Estimate (GFE) which is supposed to include all closing costs and fees up front, when you submit your application for mortgage refinancing. There is a 72 hour waiting period from the time your lender receives your application before they can start billing you for fees like a home appraisal. New disclosure laws require the Good Faith Estimate to be accurate; however, keep in mind that this document is still just an estimate given in good faith.

The final word on lender fees comes with your HUD-1 Settlement Statement that will reflect anything that changed since you received the Good Faith Estimate. You might be able to negotiate a lower loan origination fee for example, or find that your attorney fees have gone up because your application required additional work. If anything does change on your Good Faith Estimate after you receive it, the lender has to provide you an update and your closing will be delayed by three days. You can use the additional time to compare offers from various lenders if you’re finding too many changes to lender fees.

What to Expect Closing on Your Mortgage Refi

You’ll get a copy of the HUD-1 Settlement Statement at closing showing all charges, including what you’ve already paid. Pay close attention to the mortgage loan origination fee which is the commission paid to the broker arranging your refi. The HUD-1 is the final word when it comes to fees and should not differ from any updates you received on the Good Faith Estimate. Take your time and carefully review the HUD-1 Settlement Statement to make sure everything matches what you’ve been promised, including your refinance mortgage rates.

Your mortgage lender is required by law to provide you the HUD-1 Settlement Statement 72 hours prior to closing to give you time to review the document. (It used to be 24 hours prior) The change gives you time to scrutinize everything and not be rushed closing on your new home loan.

If you enjoyed this post, I’d be very grateful if you’d help it spread by emailing it to a friend, or sharing it on Twitter or Facebook. Thank you!

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You can learn more about getting today’s lowest refinance mortgage rates without overpaying by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started lowering your payment without leaving money on the table at closing…