3 Easy Tips For Getting The Best Refinance Mortgage Rates

Sure, getting the best refinance mortgage rates is important. One of the most common mistakes you can make is paying unnecessary fees to get lower refinance mortgage rates. Here are several easy tips to help you pay less for your next home loan from today’s best mortgage lenders.

Shopping For Refinance Mortgage Rates

Getting the lowest refinance mortgage rates is important because you want the lowest monthly payment. Shopping around for lower refinance mortgage rates and fees is the best way to make sure you’re paying less for your home loan than your neighbors. Here are 3 easy tips to get you started.

  1. Check Your Credit Reports First
  2. Before you do anything else you want to make sure that negative or inaccurate information in your credit reports won’t stop you from qualifying for the lowest refinance mortgage rates.

    When is the last time you visited AnnualCreditReport.com? The law requires the three credit monitoring bureaus (Experian, Equifax and TransUnion) to give you a free copy of your credit reports every year. You won’t get a credit score without paying for it; however, you can get free access to your TransUnion credit score with no strings attached at CreditKarma.com.

    If you find inaccurate or outdated information in your credit reports each of the credit bureaus has a way to file disputes online. You’ll need to allow enough time for the correction to be reflected in your credit score before you start shopping for refinance mortgage rates.

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Can a Mortgage Broker Get You The Lowest Refinance Rates?

If you’re scouring the earth for the lowest refinance rates you might wonder if you should be dealing with your bank, an internet giant like Amerisave, or enlisting the services of a mortgage broker. There are many options for your next home loan ranging from local credit unions to independent bankers and they all seem to quote different amounts for lender fees and services. Here are several tips to help you find the right person to arrange your next home loan with the best combination of the lowest refinance rates and fees.

Should You Focus On Getting The Lowest Refinance Rates?

Shopping for the lowest refinance rates is not only a pain in the neck but requires a lot of legwork. Big banks like Bank of America and Wells Fargo used to be a fast and convenient but these days you’re looking at a 90+ day backlog on your refi.

One of the most common mortgage mistakes is focusing only on getting the lowest refinance rates at the expense of fees. The problem with refinance rate shopping is that it’s difficult to make apples-to-apples comparisons of multiple lenders, especially when they’re trying to hard sell you.

Once you get past loan officer pitches the question becomes can the lender get the job done or will it drag out for six months?

This is where recent recommendations from friends and neighbors come in handy about their experiences refinancing with lender XYZ. There are a lot of un-reputable mortgage lenders and brokers out there that not only abuse their customers with fees but do not complete the transaction with any sense of urgency whatsoever. If you choose a lender like this you could miss out on snagging that low refinance rate.

Mortgage rate shopping is a lot of work but the payoff could save you thousands of dollars from unnecessary fees AND get you a lower payment amount.

If you’re short on time and patience when shopping for refinance rates one shortcut is to use a mortgage broker as a middleman between yourself and potential banks and lenders. Instead of interviewing 25 mortgage companies, banks and credit unions the broker can do that legwork for you.

Think of your mortgage broker as your personal home loan shopper, with loads of industry contacts and access to programs and offers the average Joe would never know about. The down side is that mortgage brokers don’t work for free and the ones that tell you that the lender pays their commission need to be treated with a healthy dose of skepticism.

Can Your Mortgage Broker Get You a Better Deal?

If you’ve done any amount of shopping for refinance rates you might find that banks and “direct” mortgage lenders offer lower rates than independent bankers and mortgage brokers. Refinance rates get confusing when banks and lenders quote discount points and varying fees in their offers. If you want the best deal for your next home loan you should investigate all your options before choosing any one lender.

Mortgage brokers are a useful tool for vetting offers that include unnecessary discount points and junk fees for a cost. How much is reasonable to pay for the mortgage broker fee? One percent for the loan origination fee is standard but you may be able to negotiate to pay less. I’ve personally reviewed small community-based credit unions that charge as little as $400 for the loan origination fee so shopping around for a broker is also important.

What about those brokers that claim the lender is paying their commission? What could possibly wrong with having someone else pay the broker’s commission? The problem with these “slick” offers is that while it’s true the lender is paying the broker commission, the reason they’re paying it is because you’re accepting higher not the lowest refinance rates. Yield Spread Premium was never outlawed as some homeowners incorrectly believe and is alive and overcharging your neighbors to this day.

The only thing that changed when it comes to Yield Spread Premium (YSP) is that the broker cannot charge you the origination fee AND accept lender paid compensation. It has to be one or the other.

There’s no easy answer to argument of Banks vs. Mortgage Brokers because your answer will depend on your individual situation, the market and whether or not you’ve found a good, trustworthy mortgage broker.

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You can learn more about getting the lowest refinance rates without paying unnecessary fees or markup by checking out my Free Underground Mortgage Videos.

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Here’s a quick sample to get you started with today’s best mortgage lenders without overpaying…

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.

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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.

  • Underground Mortgage Videos
Here’s a quick sample to get you started avoiding lender junk fees and unnecessary points on your next mortgage loan…