How do I apply for a mortgage refinance?

January 10, 2016 10:26 AM

I've always been told to shop around for a mortgage. I have one and want to refinance, so what does shopping around mean? Is that still good advice?

I have a mortgage on a house in Seattle. It has FHA mortgage insurance and I should now be well under 80% loan to value so it is time to refi. (I have to refinance, mine is a newer FHA loan wherein mortgage insurance will never drop.)

How do I do this? Do I go to the places I want to shop and put in an application and have them run my credit? I don't want to use a mortgage broker because I want to get the loan from a place that services its own mortgages (my current servicer is horrible and I'm aiming to avoid that). Do I tell each place that I have applied elsewhere? All three credit unions list rates and fees on their respective web sites and all are very close to each other.

My current strategy is to apply at the three credit unions I want and then tell all three that I will go with whichever place has the best combination of rate and fees. Or do I just go with who advertises the better charges?

posted by fireoyster to Work & Money (12 answers total)

I don't know exactly how things work in Washington, but when we went to a mortgage broker in California, he found a loan through our own bank that we couldn't reach through its retail services, and the broker did not service the loan. I'd work with that guy again in a heartbeat.
posted by infinitewindow at 10:35 AM on January 10, 2016

I can't recommend using a broker enough. I have used a guy who's office is in Issaquah if you're interested.
posted by humboldt32 at 10:47 AM on January 10, 2016

I have found credit unions very easy to work with for mortgage loans. You really don't have much to lose by applying at all 3. Just do them all in a really tight timeframe (same day) so that your FICO score won't take too much of a hit from all the inquiries. If they're all advertising similar rates, then what you're really looking for is how much it would cost you in fees, and which mortgage person is most responsive (it's really useful to be able to actually be able to talk to your mortgage person sometimes).
posted by rabbitrabbit at 12:19 PM on January 10, 2016

I will add that it ALSO won't hurt to have a broker see if they can beat the locals. Last time I needed a mortgage, I applied both with my credit unions and with a broker. The numbers worked out very similar, so I went with the local credit union, but honestly, no lender is absolutely guaranteed to not sell your loan (even if they promise they won't) so for me, it's purely about the numbers. You really have nothing to lose by seeing what a broker could get for you.
posted by rabbitrabbit at 12:22 PM on January 10, 2016

Do be aware, though, that even your friendliest, locally-est credit union will likely sell your mortgage to a random servicer as soon as it closes.
posted by Ausamor at 12:24 PM on January 10, 2016

I did a refinance many years ago. In my case, I had only owned the house a bit over a year and interest rates had dropped in that time to a 25 year low. My "shopping around" process involved calling a few banks to see who would even do a refi in that situation. I only found one bank that would.

So, if it were me, I would start by gathering info on things like loan rates and other relevant details and probably apply to the one that sounded like the best deal, keeping others in mind as back up plans. Shopping around does not need to involve multiple loan applications.
posted by Michele in California at 12:38 PM on January 10, 2016

I cannot say enough good things about Aimloan.com. You can get all the rates without even providing a phone number, and they don't sell the loan, so you won't have to deal with the "servicer of the month" problem.
posted by wnissen at 1:34 PM on January 10, 2016

I refinanced twice, once with the broker who originally set up my purchase and then with my own bank, a local credit union. I found the credit union experience to be simple and easy, got a great rate, and generally didn't do a lot of shopping around. The broker experience was also easy, but the rate was higher than I believe it should have been.
posted by migurski at 2:03 PM on January 10, 2016

The phrase you want is "portfolio lender" - this means they'll keep your loan on their books and service it themselves. Credit unions will also often sell their loans. Places may retain the servicing on them if they do sell them.
posted by skycrashesdown at 6:27 PM on January 10, 2016

No one will contract not to sell your loan or servicing. (Many portfolio lenders sell the servicing while retaining the loan.)

The bank that holds your loan and servicing can change their outsourcing or processing contractors or fire every everyone who used to do the work and replace them with the bottom of the barrel in some new city.

Go for the lowest all-in cost. It's the only thing you control.
posted by MattD at 7:56 PM on January 10, 2016

We refinanced with our personal checking bank from our Mortgage proivider (US Bank), and the minute it closed, US Bank bought it back, it was weird. We had shopped around a bit getting some preliminary quotes from several places, and they at the time had the best sum.
posted by nickggully at 8:12 PM on January 10, 2016

So, you don't have to do a full application to get enough information to compare lenders. If you know your income, your mortgage, the value of the house and your credit score, you should be able to get a quote from potential lenders. What you need from the lender is the interest rate, the points and the fees if it is a fixed rate mortgage. If it is variable rate, you will need to find out the details of what it is based on and how it adjusts. If your credit is good, you can get quotes on-line or by phone.

It really isn't hard to get a sense of your alternatives by checking out one or two on-line mortgage brokers and calling a few local people. In different markets and at different times, you may find better prices from different types of lenders - local, national banks, credit unions, on-line mortgage sources, brokers.

If you have a lower credit rating, be careful because they may quote their best rate and then come back and say that you don't qualify which means your earlier comparisons are irrelevant.

By the way, when rates were falling, we refinanced several times with a broker and ended up getting our mortgage mostly sold to big banks, including Wells Fargo. One time, we had approached Wells Fargo to see if we could refinance directly with them, got a lower rate from broker and then ended up with Wells Fargo (at the lower rate then we could have gotten directly).
posted by metahawk at 10:33 PM on January 10, 2016