Should I Refinance Now Or Will Rates Drop Again?

Do you feel like you’ve missed the boat on the lowest refinance rates and are asking the question “Should I Refinance now or wait for mortgage rates to go down again?” It’s not unreasonable to question home refinance rates and fees when the so-called experts keep saying that rates have already bottomed out. So if you’re struggling with the question “Should I Refinance” here are several tips to help you and find the best deal while avoiding unnecessary lender fees.

Should I Refinance My Mortgage?

Refinance mortgage rates started going up several weeks ago. Do you feel like you missed the boat and are hoping they fall again? Recent history suggests when there’s an upturn in mortgage rates they reverse direction, even when the experts claim they’ve bottomed out. Mortgage refinance rates always seem to find a way to spiral lower.

Many financial advisors are saying a downward correction is unlikely to happen this time. The Federal Reserve is planning to cut back spending money to boost the economy’s recovery, which is why refinance rates fell so low. When news about the economy is good the bond market is weak which usually means higher mortgage rates.

The opposite is also true and one thing you can count on in this country is bad economic news, which means lower refinance rates.

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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 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.

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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.

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Here’s a quick sample to help you get the best mortgage refinance rates without overpaying at closing…

A Practical Guide To Negotiating For The Lowest Refinance Rates & Fees

Everyone knows that shopping for the lowest refinance rates will get you a better deal. What most people don’t know is that you can negotiate the terms of your new home loan when refinancing. In fact, negotiating fees and terms while shopping for the lowest refinance rates will get you the best deal if you go about it properly.

Here are several tips for getting the lowest refinance rates without paying unnecessary fees at closing.

Refinance Rates Can Be Deceiving

There are fees you can negotiate when refinancing that directly impact your bottom line (think payment amount). The two most commonly overpaid refinancing costs include the loan origination fee and discount points. Mortgage brokers and loan officers generally work for a commission. They receive part or all of the loan origination fee which could be split with a bank or lender. The more you pay for the loan origination fee the less benefit you’re getting from finding the lowest refinance rates because you’ll spend more time recouping your higher out-of-pocket expenses.

Discount points directly affect the refinance rates you’re getting as a way of buying down your interest rate. Most banks and lenders quote rates that include discount points meaning you have to pay the fee in order to get that particular interest rate. One full discount point is one percent of your loan amount; however, it’s common to find refinance rates quoted with varying fractions of a point.

Refinance rate shopping only makes sense if you’re making an apples-to-apples comparison of offers across lenders and it’s extremely difficult to do this with points in the mix. Should you agree to pay discount points? Refinance rates are still near the lowest levels in history so there is very little gained from paying points for anyone but your lender.

Always start your negotiation for the lowest refinance rates and fees with a zero point quote across several different banks and lenders.

Mortgage Refinance Rates Can Be Negotiated

The interest rate you get can also be negotiated especially when working with a mortgage broker. Your broker works from daily rate sheets from a variety of lenders and has a degree of freedom when quoting refinance rates just like the sticker price on your car. It’s worth mentioning that not all loan officers have the freedom to make concessions on refinance rates. This is why I recommend you start shopping with small community-based credit unions and independent mortgage brokers.

Closing Costs & Third-Party Fees

You will encounter fees refinancing your mortgage that cannot be negotiated. This includes taxes and fees paid to your State for transfer and recording the deed or a survey. Your appraisal fee cannot usually be negotiated because this is done by an independent appraiser that you have no say in selecting. When it comes to services for title searches and your homeowners insurance, inspections and attorney fees you have a voice in selecting who you’re working with, meaning you could shop for services with lower fees. Once you compare third-party fees from several lenders you’ll get a sense for what’s reasonable and which lenders are padding their fees.

How to Haggle With Mortgage Lenders

Shopping for the best deal on the lowest refinance rates is difficult because different lenders have different fee structures. Some lenders even invent names for their fees just to confuse inexperienced homeowners. There are also junk fees that you have no business paying like fees for copies and couriers.

You can find a list of the fees on your Truth-in-Lending disclosure form and on the HUD-1 settlement statement. It’s a good idea to go over each fee line-by-line with your loan officer and question everything.

Want the best deal refinancing your home loan? Question Everything.

Once you’ve done this you can approach your loan officer with rival lenders’ offers as leverage for negotiating. “This is what lender XYZ is offering with these fees. I’ll pay you this amount for this mortgage rate.”

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

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Here’s a quick sample to get you started finding the lowest refinance rates AND fees from today’s best mortgage companies…

Locking vs. Floating Your Mortgage Refinance Rates

Want the lowest mortgage refinance rates for your next home loan and aren’t sure if you should lock or float? Locking or floating your refinance rates at the wrong time could cost you if you find yourself on the wrong side of the market. Here are several tips to help you decide if you should lock or float mortgage rates to get the best deal on your next home loan.

The First Rule of Locking Mortgage Rates

Don’t panic. Mortgage refinance rates are at the lowest levels seen in sixty years and it’s unlikely they’ll go up anytime soon. The refinance rate you lock (or float) will determine how much your payments will be and in part how good of a deal you’re getting. Fees are a more important indicator of how good a deal you’re getting when mortgage refinancing but I’ll get to that in a moment.

While it’s not the most important discussion you need to have with your lender, when and whether to lock your refinance rates is an important one. Some lenders assume automatically that you’ll want to lock because they don’t want to explain to you why refinance rates went up. For many homeowners locking is a no-brainer, if you’re offered refinance rates of 4.5% and you’re happy with that they’ll lock it for you.

Once you’ve locked a fixed rate mortgage you’ll know what your payment will be for the duration of your home loan.

Wait, don’t mortgage rates change every day? It’s true refinance rates fluctuate on a daily, even hourly basis. So if I float my refinance rate and interest rates go down my payment will be less right? That’s correct; however, if rates go up and you’re floating your payment will go up also.

Either way, locking or floating your mortgage rates is a risk. Is it possible to time the market and get the lowest possible refinance rates? Some brokers will tell you that it is possible, usually when they’re trying to close the deal on you becoming their customer. Truth be told, there are just too many variables to accurately predict which way mortgage rates are going; however, you can make broad assumptions if you’re so inclined.

There is a broad rule of thumb when it comes to mortgage rates: bad economic news generally means lower rates. That’s why refinance rates are so low right now.

There Are More Important Things to Worry About

If you’d rather sleep at night and find a mortgage quote you like, lock the rate and don’t worry about floating. This is why refinance rate shopping is so important. Where should you be focusing your energy instead of trying to time the market?

Sure the refinance rates you lock are important; however, the most important aspect is the fees you pay to get that interest rate. Overpaying at closing because you didn’t pay attention to the loan origination fee or agreed to pay unnecessary discount points make it difficult, even impossible to break even recouping your out-of-pocket expenses. If you never break even on closing costs you’re losing money no matter how well you timed floating your interest rate.

That’s why shopping for refinance rates AND fees that don’t include comparing discount points is more important. What’s the best way to shop from today’s best mortgage lenders? I always recommend starting with community based credit unions as they tend to offer better deals than giant lenders like Bank of America or Wells Fargo. If you’re short on cash you can accept a higher mortgage rate to get your closing costs paid with Yield Spread Premium.

However you pay your mortgage fees it’s important to make sure you’re not overpaying if you want the best deal on your next home loan.

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You can learn more about paying less for mortgage refinancing by avoiding points and junk fees 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 companies 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.

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.

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