With interest rates at near historic lows, this is a great time to obtain a mortgage or refinance your home. Whether you are refinancing your home to lower overall costs, lower your monthly mortgage payment, gain cash by unlocking your home equity, change from an adjustable rate mortgage, or eliminate your private mortgage insurance, now is a great time to refinance. There are costs involved to refinance, and knowing how to perform and performing your research is necessary to be in a position to get the best mortgage.
Know Your Credit Score
One thing to do before you begin to research mortgage loans is order your credit report from one of the three credit bureau. Once you have your credit report in front of you, you will want to look over the report to determine if there are errors. If you happen to find errors, contact the agency to discuss your findings as well as send them a written request to correct the errors.
Get Multiple Quotes
One of the first places to begin your research is your current mortgage lender. Contact your lender to discuss their interest rate and closing costs associated with refinancing your mortgage. It is important to not only jot down the information you receive, but also ask for a Good Faith Estimate and Truth in Lending Statement.
Gather no less than two additional quotes, and with each, request the lender to provide you with a Good Faith Estimate and Truth in Lending Statement. One convenient source to obtain quotes is on the Internet. Lenders offering Internet quotes will require you to disclose your Social Security number.
Once you’ve gathered quotes, compare each quote. There will be different costs associated with refinancing, and the lowest interest rate loan is not necessarily the cheapest. Associated costs include:
- Application fee: anywhere from a hundred dollars up to $300.
- Appraisal fee: anywhere from a few hundred dollars up to $700.
- Loan origination fee- the loan origination fee is based on the principal of the loan and can be up to 1.5 percent of the loan.
- Points: A point is one percent of the total mortgage amount. Lenders may charge up to three percent of the loan principal. For instance, if your mortgage amount were $100K, one point would equal $1K. Points paid on the loan may be tax deductible.
- Inspection fee, title search, survey fee, attorney review fee, and insurance fee: $1500 to $2500.
When you compare loans, take a look at any points associated with refinancing your loan. You may find the loan with the lowest interest rates makes up for it in the number of points charged to refinance. To determine the overall cheapest refinance, take a look at the APR which is the total costs associated with the mortgage for a full year.