When refinancing a home mortgage, the goal is to get the lowest rate possible. But there are several matters to consider in finding the best interest rate.
Here is one BIG question to consider:
Should I use my current banking institution?
The short answer is, “Probably not.”
If you go through your bank or credit union, you will have to settle for the rate that your bank is charging. Your bank or credit union is a one-trick pony when it comes to refinancing a mortgage
The price is the price.
Your best bet is to use a mortgage broker. Mortgage brokers have the ability to shop the lender market for you and match you and your specific financial picture to the best loan program you can qualify for.
Just because your next door neighbor was able to refinance at 5.5% interest rate with 1% in closing costs doesn’t mean that you can.
Your mortgage rate will greatly depend on your income, your credit rate, and your work history. Your closing costs will depend upon the lender and the loan program you use.
You’ve always heard, “It’s wise to shop around.”
This is never more true than when refinancing a mortgage. And shopping around can be tricky if you don’t know a lot about the hidden costs that can be associated with securing your new mortgage.
A mortgage broker can compare apples to apples when she shops for you.
For instance, say you shop on the internet and find a great 5% interest rate on a loan offer from ABC Mortgage. So you hurry and sign up with ABC Mortgage before the rate goes up.
Then, as you get close to your day of closing on the new loan, you get an e-mail notice giving you your “cost to close”—that is the amount of money you must bring to the closing table in order to pay these nice people for structuring your new loan. You open up the e-mail, and find out that it is going to cost you $10,000 to get this great 5% rate—-
SCAM ALERT — A mortgage broker should never charge you to check your credit and work up a “good faith estimate” for you. If any loan officer ever tries to charge you for a credit check or an estimate, this is NOT a lender you want to use. Cross them off your list immediately and move on down the line.
To find a good mortgage broker in your area, you can always shop on-line, or you can ask any realtor. Most of us have a friend or relative who is a realtor. If you don’t know a realtor, ask around among friends and family. Chances are, you’ll find one quickly. Realtors have to work closely with lenders on real estate transactions, so they can give you the names the lenders with which they have had the best experiences — honest, reliable, local lenders with the best rates.
Another question you should consider when shopping to refinance your mortgage rate is:
What are the costs involved in refinancing my mortgage rate?
• Attorney fees
• Termite inspection (and treatment if infestation is found)
• Origination fees
• Application fees
Ask your lender for a “good faith estimate”. The estimate is on a form with all fees spelled out for you line by line.
Good faith estimates can be confusing, and lenders know this, so don’t be shy about asking your loan officer to explain any item or items on the estimate.