What is the starting process for refinancing a home?

April 3, 2009 2:21 PM

I've decided it makes sense to refinance my mortgage. I'm going to call the mortgage broker I used for my initial mortgage. a) Where else should I call (and how do I find them?) b) What questions do I need to make sure I ask of everyone?

I know the common stuff, fixed interest, no points, probably going 30-year, but may see if I can afford 15-year.

posted by davebug to work & money (12 comments total)

Normally I'd also say consider an ARM, but in this market that's crazy talk. I hear of people getting 30 year fixed 4.75% interest mortgages.
posted by davr at 2:29 PM on April 3

You should probably take a look at your credit rating to get an idea of whether or not you're going to get offered the best deals. It's sometimes worth doing some things to improve your rating first.
posted by GuyZero at 2:30 PM on April 3

Be aware that points are a way of lowering your interest rate, which will lower your monthly payment. Yeah, it's more up front, and it tends not to actually change the amount you pay in the long term (you're front-loading interest, not increasing your downpayment), but it can make your month-to-month budget more affordable.

Beware closing costs. Don't let them nail you on hidden fees, etc. You might do better to apply directly to a bank and avoid brokerage charges. Brokers have to make money somehow, and as they aren't actually putting up any of the capital, this takes the form of fees. Consider checking with your retail banker to see if they're interested.

Whoever winds up providing the financing will probably want to appraise your house to make sure it's still worth approximately the amount you're looking to borrow; depending on where you are, this may actually be a problem, as housing prices have plummeted in the past six months. If you're worried about this, you might consider doing a weekend of maintenance and touchups before applying.

Other than that, it's a pretty straightforward transaction.
posted by valkyryn at 2:31 PM on April 3

This Recent NYT Article may be of interest to you.
posted by willnot at 2:41 PM on April 3 [1 favorite has favorites]

I've always tried for no points and when I forget to ask, they sneak them in on me.
posted by notned at 2:44 PM on April 3

If you have a penalty for refinancing, calculate how much you'd save by keeping your current rate and instead making a balloon payment on the mortgage (using the amount you would have paid with a penalty). Look at how much it saves you over your term and over your amortization. For us, it made more sense to do a balloon payment.
posted by acoutu at 2:49 PM on April 3

I would try to find a credit union in your area that you're eligible to join and see what they can do - our CU has great rates, ridiculously low fees ($850 mortgage initiation fee (as opposed to $1400-1600 we were finding at most brokers), really low filing fees) and nothing was hidden at all.
posted by pdb at 3:10 PM on April 3

Just a tip: Don't forget the appraisal costs on the place for the refi. Make a list of the improvements you've made since the orig loan, iand mention them to the appraiser in case s/he overlooks them.
posted by artdrectr at 4:03 PM on April 3

I would talk to a few local banks and/or credit unions. Here are some questions

* What is the interest rate quote received? Does it include an origination fee and/or discount points? What is the APR?

* Is there a broker fee associated with the loan?

* Does the interest rate include a prepayment penalty of any type?

* Will the lender guarantee the terms in writing?

* Can you give me a Good Faith Estimate I can compare with other offers?

* What is the rate-lock period? Is it at least 60 days?

* Can you breakdown the following fees for me?
- Application Fee
- Commitment Fee
- Lender Document Prep Fee
- Underwriting Fee
- Appraisal Fee
- Credit Report Fee
- Processing Fee
- Flood Zone Certificate Fee
(Once you get these, you can total all these up.)

Here's a couple of things you should know to make sure you can compare apples to apples.

What is APR (Annual Percentage Rate)? -- All lenders are required by law to publish an APR in addition to their interest rate. The APR takes into account origination fee, discount points, and other lender charges, and adjusts the interest rate to reflect these additional costs. It's usually higher than the interest rate. You will find comparing APRs to be more telling than comparing interest rates alone.

What is a Good Faith Estimate? -- The Good Faith Estimate is also a legally required document provided to all borrowers as part of the application process. This document summarizes the costs and fees of borrowing and is th emost accurate way to compare different loan options.

Best of luck
posted by davidamann at 4:34 PM on April 3 [5 favorites has favorites]

Ask them how long they'll take to close the deal. We recently refinanced and it literally took three months. Our credit is excellent and we have a very good situation all around, but banks are being ultra cautious these days.
posted by Dragonness at 7:23 PM on April 3

Try Amerisave for comparison shopping and transparent information on fees. We used them to buy, and there were no surprises. Truly honest dealers. Also, the "Mortgage Professor" is a terrific resource.
posted by palliser at 10:40 AM on April 4

Our process took over three months, and I wouldn't expect the lender to tell you the truth about or be able to guesstimate how long it will take. The underwriters are overloaded.
posted by mozhet at 6:58 PM on April 4 [1 favorite has favorites]