Get The Lowest Refinance Rates Without Overpaying

Getting the lowest refinance rates means you’ll lower your mortgage payments while stuffing less cash in your lender’s pockets. The problem is that focusing only on refinance rates often gets you the most expensive out-of-pocket fees. Here are several tips to help you avoid common mortgage mistakes when shopping for the lowest refinance rates from today’s best mortgage lenders.

Don’t Pay For The Lowest Refinance Rates

The most frustrating part about shopping for a mortgage lender is finding trustworthy refinance rate quotes. Part of the problem is that many homeowners approach loan officers by “fishing” for refinance rates. If you go into the negotiation asking for 3.5% many shady loan officers will smile and tell you “Sure, I can get you that refinance rate” while loading you up with discount points and fees.

If you’re not paying attention it’s very easy to pay too much for things like the loan origination fee, administrative fees, mortgage loan processing, underwriting and commitment fees. Many of these are pure garbage and do nothing but boost the lender and broker’s profits at your expense. Some loan officers refuse to waive fees because the lender will take that amount out of their commission. Remember that fees vary from one lender to the next and shopping around can help you pay less at closing.

How to get an honest refinance rate quote

Most lenders quote refinance rates that include discount points. You can find the origination fee and any discount points in section A on Page 2 of your Good Faith Estimate. The third party charges you’ll encounter like title insurance, attorney fees or escrow don’t matter when shopping for refinance rates. These fees are out of your lender’s control and cannot be negotiated. The first fees you need to look at when comparing quotes from today’s best lenders are found in box 1 and 2 of section A.

This is where you’ll find discount points and the loan origination fee along with any Yield Spread Premium. If you’d like a sample of the new Good Faith Estimate to look at you can download one from the HUD website using this link: Sample Good Faith Estimate

Every now and again I get a snotty comment from someone chastising me for talking about Yield Spread Premium. “YSP is illegal now” they’ll say, “You should do your homework.” Fact is that Yield Spread Premium is NOT illegal now and is the first item disclosed in box 2.

The credit or charge for the interest rate of % is included in “Our origination charge.” (See item 1 above.)

The credit they’re talking about here for taking a higher interest rate IS Yield Spread Premium and when present is being used to pay the loan origination fee in box one…but I digress.

Oh by the way, don’t let a pushy loan officer distract you with the “Total Estimated Settlement Charges A+B” on the Good Faith Estimate, you’re interested in section A.

Getting an honest quote for the lowest refinance rates boils down to the type of quotes you’re requesting. Try to get quotes with the same lock period from identical programs with zero points from different lenders. Requesting quotes from identical programs, conventional 30-year fixed to conventional 30-year fixed for example, is the only way to make an apples-to-apples comparison of different refinance rate quotes.

Go hunting for the lowest refinance rates, not fishing

Before you do anything else make sure you choose a program and stick with it. Don’t let a fast talking broker confuse you by quoting refinance rates across different programs. Don’t approach a broker asking for a specific refinance rate, that’s fishing which as you know gets you higher fees. In the end if you’re fishing for the lowest refinance rates the lender will be reeling you in, not the other way around.

Paying for refinance rates is rarely a good idea. What’s the point in getting 4.0% instead of 4.125% if you have to pay thousands of dollars to get there?

Avoid basing your decision on the Annual Percentage Rate alone. APR is simply the most manipulated marketing tool in your lenders arsenal. More often than not the mortgage with the lowest APR comes with the highest out-of-pocket expenses thanks to the way lenders factor in discount points.

Finally, lock your refinance rates smartly. Time is money when it comes to closing and the longer you lock the higher your refinance rates will be. Have a discussion with your loan officer about how long the lender is averaging to close refinancing and factor this into your decision.

Remember those junk fees we talked about for things like processing, rate lock and administrative fees? While you’re having a discussion about the rate lock period is a good time to discuss junk fees as well as the loan origination fee. If your loan officer is unwilling or unable to waive or negotiate to pay less consider taking your business elsewhere.

Sounds simple enough right? Your loan officer is not your friend (unless they really are) so don’t let them confuse you with slick marketing tricks like quoting across different programs with different fees and lock periods.

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You can learn more about getting the lowest refinance rates from today’s best mortgage lenders without overpaying 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.

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Mortgage Refinance Denied? What You Should Do Next

Have you tried taking advantage of low refinance rates from today’s best mortgage lenders only to have your mortgage application denied? Unfortunately having a good payment history alone isn’t enough to get you qualified for mortgage refinancing. Depending on the reason your lender had for denying your mortgage refinance application there are steps you can take to get an approval. Here are several tips to help you get qualified for mortgage refinancing without paying unnecessary points or fees after having a lender deny your application.

Why Was Your Refinance Application Denied?

The most common reasons for having your mortgage refinance application denied are having poor credit or an insufficient loan-to-value ratio. For most denials it’s simply a lack of home equity. If you’re underwater or your debt-to-income ratio is too high refinancing is going to be more difficult, but not impossible thanks to government refinance programs like the Home Affordable Refinance Program (HARP).

If your bank denied your refinance application there are still options. Mortgage lenders are required to provide you a written explanation for the denail. Once you know what the issue is leading to your denial you can fix the problem and reapply.

Different mortgage lenders have different standards for underwriting home loans so if one lender denies your application and you’re a good candidate for mortgage refinancing you could find approval with another lender.

Fixing Denials For Poor Credit & Too Much Debt

If the problem is your credit score or your debt-to-income ratio the only thing you can do (unless you’re underwater) is to start paying down your debts. The quickest way to boost your credit score and lower your debt-to-income ratio (especially if it’s over 45%) is to pay down all of your credit cards below 30% of your credit limit.

If you have collection accounts or other negative information try and negotiate with the creditors to have the negative information removed. If your debt-to-income ratio is above 60% it’s not going to be worthwhile applying until your situation improves.

It is possible to qualify for mortgage refinancing with less than perfect credit or debt-to-income; however, you won’t like the refinance rates and fees lenders quote you. Invest the time cleaning up your credit reports and paying down your debts to qualify for the best refinance rates.

Help For Underwater Homeowners

If you’re having trouble refinancing because you owe more than your home is worth, hence the term “being underwater” and haven’t already looked into the government refinance program known as the Home Affordable Refinance Program (HARP), you’re in for good news.

Even if you applied for HARP refinancing when the program first came out and were denied the program was recently overhauled by President Obama removing many of the barriers to qualifying with HARP 2.0.

The only catch is that your home loan has to be owned by the government (Fannie Mae or Freddie Mac) and they must have it before June 1st, 2009. If you meet that requirement you only need to be making all of your payments on time. You’re allowed one late payment out of the last 12 BUT your most recent six payments need to have been made on time to qualify.

When the program first came out many underwater homeowners were not HARP eligible because there was a limit of 125% loan-to-value. This limit has since been removed and it doesn’t matter how underwater you are as long as your loan-to-value is greater than 80%.

If you don’t qualify for the Home Affordable Refinance Program because of the Fannie Mae/Freddie Mac requirement you still have options. Cash-in mortgage refinancing is a possibility depending how far underwater you are.

With a cash-in refinance transaction you’re bringing cash to the closing table to buy down your loan-to-value ratio to an acceptable value. If this isn’t possible because you don’t have the cash on hand or are too far underwater to make it work another option could be HARP 3.0.

HARP 3.0 is the next version of the program and is rumored to remove the Fannie Mae/Freddie Mac requirement opening the program up to anyone. The great thing about HARP is there is no credit check or appraisal required making the program very similar to an FHA streamline refinance.

If you are HARP eligible you might be frustrated to find your existing lender denies your application. This is because some lenders have their own program overlays, additional requirements enforced for their participation in the program.

Mortgage lender participation in the Home Affordable Refinance Program is voluntary so if you receive a HARP denial keep applying. You’re bound to find a lender without program overlays to approve your application.

FHA Mortgage Refinancing Is Another Option

If your mortgage refinance application is denied because of your credit consider an FHA home loan. The FHA has easier standards for credit and loan-to-value ratios that could get your mortgage refinance application approved. The downside of FHA home loans is that they require mortgage insurance which can add hundreds of dollars to your monthly payments.

If you’re an eligible veteran and haven’t already used your VA mortgage, what are you waiting for? The VA home loan is hands down the best mortgage product on the market today and does not require mortgage insurance.

Risks of Mortgage Refinance Denial

According to industry watchdogs homeowners who have their mortgage refinance application denied are more likely to face foreclosure or simply walk away from the home. If you’re struggling to make your payments and cannot qualify for any of the options or government refinance programs available contact your lender. There may be modification or payment plan options available that will help you avoid going through a foreclosure.

Refinance Rate Shopping Matters

One common mortgage mistake is overlooking lender fees. Many homeowners are so happy to get an approval they don’t bother questioning fees. If you pay too much at closing for things like the loan origination fee or discount points it can be difficult or even impossible to break even recouping your closing costs.

If you never break even recouping your out-of-pocket expenses you’ll be losing money no matter how attractive the refinance rates. Getting your mortgage refinance application approved is only the first step when it comes to getting the best deal.

Pay close attention to the fees found in section 800 of your Good Faith Estimate and make sure you’re comparing zero point quotes. Shopping for the lowest refinance rates AND fees will ensure you’re getting the maximum benefit from your new home loan.

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You can learn more about paying less for mortgage refinancing by avoiding unnecessary lender fees and discount points 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 without overpaying…

7 Mortgage Mistakes That Make You Feel Dumb

If you’re considering taking advantage of today’s lowest refinance rates the mortgage process can be expensive and intimidating. There’s a lot to take in and mistakes can cost you thousands of dollars. Many homeowners take the easy way out by focusing on just one aspect of mortgage refinancing like getting the lowest refinance rates. With that in mind, here’s a list of seven common mortgage mistakes to avoid when refinancing your home.

  1. Neglecting To Do Your Homework
  2. For most of us our homes are the single largest purchase we make…ever. Despite this many people barrel through refinancing like they’re buying a kitchen appliance. This approach almost always results in overpaying at every turn.

    Investing the time necessary to learn about home loans and mortgage refinancing will help you avoid common mortgage mistakes like paying discount points or comparison shopping with the Annual Percentage Rate.

    Understanding how your credit affects your mortgage rates, your home loan’s amortization, mortgage insurance and the Truth-in-Lending disclosures will save you a lot of money as a homeowner.

    Using a basic mortgage calculator when budgeting for your mortgage payment also helps choose a term length that saves you money without stretching your budget. Not sure where to start doing your homework? My Underground Mortgage Videos have the information you need to avoid paying lender junk fees in one place for just an hour of your time.

  3. Not Checking Your Credit First
  4. The refinance rate quotes you get when shopping for your next home loan are based on your credit. If the refinance rates you’re being offered are higher than what lenders are advertising the likely culprit is your credit score.

    Before you do anything else when refinancing the first thing you need to do is check your credit reports for errors. Nothing will sink your credit score faster than having negative information incorrectly reported on your credit reports. Visit to get free copies of your credit reports once per year.

    Most banks and credit unions offer low cost credit monitoring services that allow you to monitor changes in your credit score. Once you’ve reviewed your credit reports and are satisfied that they’re accurate the quickest way to improve your credit score is to pay down the balances on all of your credit cards below 30% of the credit limit.

    Be sure and allow enough time for the new balances or corrections to affect your credit score before you begin shopping for the lowest refinance rates; this is where a credit monitoring service can come in handy.

  5. Not Shopping Around From Today’s Best Mortgage Lenders
  6. You’d be surprised how many of your neighbors don’t put out the effort to shop around for their mortgage. Most simply pick the lender advertising the lowest APR in your area. Others simply rely on their bank as a matter of convenience. Either way the majority of your neighbors paid too much for their home loans.

    Truth be told mortgage offers and fees vary significantly from one mortgage lender to the next. Most lenders have their marketing department structure their home loan offers and manipulate the Annual Percentage Rate with discount points to make them seem more attractive. This is why choosing the mortgage quote with the lowest APR often gets you the highest out-of-pocket expenses.

    Don’t assume that major banks like Bank of America or Wells Fargo will have the best deals. Often you’ll find the lowest fees come from local community based credit unions, many of which have membership open to the public.

    Bonus Tip: Never choose a mortgage based on the Annual Percentage Rate. Base your decision on the fees found in section 800 of your HUD-1 Settlement Statement AND zero point refinance rates.

  7. Choosing a Mortgage Solely Based On Refinance Rates
  8. This is probably the single most common mortgage mistake and it’s easy to understand why. The refinance rates you get along with term length affect what your payment will be month in and out. You might think the fees you’re paying are a small price to pay for getting the lowest payment; however, they can quickly turn that low refinance rate into an expensive mistake.

    This is why the break-even point is so important with mortgage refinancing. Basically if you’re not able to recoup the fees you’re paying for loan origination and any unnecessary discount points you’re going to be losing money no matter how low your interest rate.

    You can approximate your break-even point by adding up all of the fees you’re paying at closing and dividing by how much your mortgage payment will go down each month. Suppose you’re saving $80 a month by refinancing and it’s going to cost you $4,000 to close. Your break-even point is 50 months, ($80/$4000 = 50) which is just over 4 years.

    If you sell or refinance again before breaking even you’re going to be losing money no matter how attractive the interest rate. It’s worth noting that this calculation is only valid if you keep the same term length when refinancing. That is, choosing a 30-year fixed rate mortgage to replace your existing 30-year mortgage. If you choose a home loan with a longer term-length it’s going to be impossible to break even because of the higher finance charges over the lifetime of your home loan.

  9. Not Considering ALL Closing Costs
  10. There are more fees to consider than your loan origination fee as well as tax considerations. Remember while getting today’s lowest refinance rates might do wonders for your monthly payment your mortgage interest tax deduction is going to be much smaller come April.

    Other considerations include mortgage insurance, which can drive your payment up by hundreds of dollars, property taxes, and your homeowners insurance.

    This is why using a mortgage calculator when refinancing can help you plan your budget, which needs to include all of these secondary expenses.

  11. Not Paying Attention To Your Closing Documents
  12. Closing on a new mortgage is all about paperwork. There’s a contract to sign and a whole lot of disclosure documents. The truth-in-lending disclosure statement, Good Faith Estimate, and the HUD-1 Settlement Statement can be confusing and often have different amounts for the same fees.

    Remember your Good Faith Estimate is only an estimate and could change fore your sign the final documents. (Pay close attention to and question all section 800 fees.)

    When it comes to fees your HUD-1 Settlement Statement is the final word and should be carefully reviewed to make sure there are no surprises.

    What can you do if you’ve closed and find something on the HUD-1 that’s not correct? You have three business days to change your mind when refinancing before the mortgage loan is funded. You can walk away at any time during three business days (including Saturday) and you’ll probably only be out the application or rate lock fee.

    This period is your mortgage refinancing three-day rescission period so if you catch something after closing your have a parachute if you want to walk away from the loan. Loan officers don’t like to talk about the rescission period but if you’d like to execute your rights you’ll need to notify both the lender and your broker in writing (by fax).

  13. Giving Into a Pressure Sales Pitch
  14. Don’t let a pushy loan officer or mortgage broker pressure you into a bad home loan. Remember these people are salespeople and their commission often depends on how much you’re paying (or overpaying).

    Despite new regulations intended to protect homeowners many lenders and mortgage brokers engage in deceptive practices intended to push you into an overpriced home loan.

    Pressure sales tactics include steering you to a mortgage with junk fees including unnecessary discount points. Rate lock fees, administrative fees, application fees and processing fees are all garbage and can be negotiated away as a condition of getting your business.

    Even if you don’t have the cash to pay for closing and are accepting higher refinance rates in exchange for having the lender pay your closing costs you still need to pay attention to the fees you’re being charged. Anything you’re paying out-of-pocket or trading for a higher interest rate reduces the benefit you’re getting from mortgage refinancing.

    Finally, make sure you’re getting everything in writing, including your rate lock. If you don’t have your mortgage terms and lock in writing it never happened. Don’t expect a lender to honor any terms that you don’t have in writing up front.

Click Here For More Details…

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

  • Underground Mortgage Videos
Here’s a quick sample to get you started refinancing with today’s best refinance rates without paying junk fees…

Credit Score for Mortgage Refinancing

If you’re considering mortgage refinancing you might wonder what credit score you need to be approved. While much has changed since 2006, there are things you can do to make sure your credit score isn’t holding you back from low refinance rates from today’s best mortgage lenders. Here’s what you need to know about credit scores when it comes to getting the best deal mortgage refinancing.

Your Mortgage Rates Are Credit Based

If you’re shopping from the top mortgage lenders like Amerisave or NFCU Mortgage Rates and the quotes you’re getting are coming in higher than what you’re seeing advertised, your credit is likely the culprit. Most of the quotes you see advertised are based on a credit score of 720 or higher with a favorable loan-to-value ratio. If you’re sitting at 620 you can still be approved for mortgage refinancing, although you might be disappointed with the results.

So what credit score do you need for mortgage refinancing? The Federal Reserve recently conducted a survey of lender executives that sheds some light on the matter.

Long gone are the boom days of 2006 where all you needed to get mortgage approval was a heartbeat. Lending standards have tightened significantly for homeowners south of 700; however, the extent of lending standards changing across the industry remains unclear.

The survey conducted by the Federal Reserve indicates that there are lenders out there willing to approve borrows with credit scores in 600 range. Homeowners with better scores are more likely to find offers with much lower refinance rates and fees; however, it often takes a little legwork to find lenders with the lowest closing costs including loan origination fees.

720 or Better? Your Outlook is Sunny

If your credit score is 720 or better 90% of mortgage lenders surveyed indicated their best rates were available to borrowers without paying discount points. More favorable mortgage refinance rates are available if you’re willing to pay for them. Paying discount points at closing will lower your mortgage rates by .25 percent for every point you pay. Remember one discount point is one percent of your loan amount.

Sub 680 Means Fewer Refinancing Choices

If your credit score is less than 680 it’s going to be more difficult to find lenders willing to approve your mortgage refinancing. Banks and lenders willing to approve you will charge you a premium when it comes to interest rates and fees.

If you’re sitting at 620 there are banks out there willing to approve your refinancing application; however, you’re going to be disappointed with the results. The best advice for homeowners in this situation is to start cleaning up negative information found in your credit reports. Many credit unions offer credit counseling to their members, a benefit worth using.

This survey by the Federal Reserve demonstrates the importance of shopping around for both refinance rates AND closing costs when refinancing, especially the loan origination fee. You might be surprised to learn that when it comes to mortgage refinance, the fees you pay at closing are the most important aspect of the loan.

If you’re unable to recoup your out-of-pocket expenses paid at closing because you’re paying discount points or overpaying the loan origination fee you’re going to be losing money no matter how favorable your interest rate.

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 discount points by checking out my free Underground Mortgage Videos.

  • Underground Mortgage Videos
Here’s a quick sample to get you started finding the best deal for next home loan without leaving cash on your lender’s table…