August 27th, 2018 6:42 AM by Jackie A. Graves, President
earn the best refinance rate on your mortgage, build your credit score, shorten
the term, resist a cash-out refi and get multiple quotes.
the hunt for the best mortgage refinance rate, there are some things you can
control and some you can’t. Rates moving up just when you’re about to refi?
Can’t control that.
But there are at least nine things you can do:
Credit report errors
happen more often than you might imagine, says Mary Anne Daly, senior mortgage
advisor for Stearns Lending.
“I ran credit
for someone who had a state tax lien and a charge off,” Daly says. “They said,
‘This isn’t mine. I don’t know anything about this.'”
remembers clients who had a credit score of 623. Their credit report had
mistakes, and the customers wondered if an improvement in their score
would be worth the effort of correcting them. By wiping the errors from their
history, their credit score improved to 660, and the borrowers saved $95 a
month on their home loan.
Daly says to consider asking your credit card providers to
increase your available credit. Using a smaller percentage of your available
credit lowers your credit utilization
ratio and can earn you a better interest rate.
consumer credit can be liberating, but you should continue making small
purchases on your credit cards from time to time. Even if you pay the balances
off each month, it shows you manage debt responsibly, which can actually
improve your credit score, Daly adds.
tickles me,” Daly says of such loan gimmicks. “There are no free lunches.” All
lenders will charge fees, whether they are paid upfront, rolled into the loan
balance or built into the loan’s interest rate.
uncommon for closing costs to be tacked on to a loan. Joe Burke, a loan officer
with Guaranteed Rate in Chicago, says paying them out of pocket can lower your
that expanding your loan term may not be in your best interest.
already paid seven years into a 30-year fixed, for instance, putting you into a
new 30-year fixed may not be the best financial decision,” he says.
Moving from a 30-year mortgage to a 20-year or even a 15-year
term can earn you a lower mortgage interest rate, not to mention reducing
interest payments over the life of the loan.
“A lot of people don’t know that,” Daly adds. She tells of
customers who were considering several options on a mortgage. They had 10 years
left on their loan, and they thought it wouldn’t make sense to refinance. Daly
showed them that refinancing to a 10-year loan term with a lower mortgage rate
would save $45,000 in interest, without significantly changing their monthly
“They were just
thrilled,” Daly says, “paying a little bit more [each month] but saving all of
A cash-out refinance allows
you to draw some of your home’s equity as a part of a new loan. But it also
increases your loan-to-value ratio.
That will raise your interest rate in most cases, Daly says.
believe it or not, we have a little bit of a crystal ball” about how mortgage
rates may behave in the very short term, Daly says. That can be tied to major
economic news, policy announcements or government reports.
After conferring with your loan advisor about an estimated time to
closing, ask about a mortgage rate lock,
which will prevent rising rates from affecting your mortgage while the loan is being
processed — which can take weeks.
“One of the
questions that we’re always asking people is, ‘How long do you plan on staying
in the home?'” Burke says. “I think that’s a very important question that a lot
of people don’t ask.”
For example, if
you know you are going to be selling your home in five to 10 years, an
adjustable rate mortgage, with an introductory rate lower than that of a
fixed-rate loan, may be the right choice, Daly adds.
than one lender may be the most powerful way to earn the best refinance rates.
Getting just one additional rate quote could save borrowers an average $1,500
over the life of a loan, according to research by Freddie Mac, a government-sponsored
entity that helps fund the mortgage market.
lenders could save you about $3,000, Freddie Mac says.
rates that seem unusually low may have discount points built in, which you
would have to pay for upfront.
But advertised rates that seem unusually low may have discount points built
in — that’s when you pay upfront to get a lower interest rate. For the lender,
factoring in discount points may be a ploy to drive business, but for
borrowers, the points can be a part of a loan strategy.
“Most of the
time, we find that the buy-down doesn’t make sense,” Daly says. To see if
discount points work in your situation, consider your monthly payment savings
against how long it will take to recoup the fees — and how long you expect to
stay in a home.
borrowers often fixate on a low rate but miss important details in loan terms
disclosed in the fine print.
“Looking at APR is absolutely one of the best ways to go,” he
says. The stated annual percentage
rate of a loan includes the interest rate you’ll pay on the
loan, plus all fees. You’ll have to complete an application with each lender
you’re considering to get all the information that impacts your offered APR.
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