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Top 5 Mortgage Refinancing Tips

In the refinance world, there are good loan officers and bad ones. Choose a bad one and the results could be disastrous. Let these 5 tips help you sort out the good from the bad. These tips apply to conventional refinances, for HARP 2.0 details, visit its page.

1. Scrutinize your Good Faith Estimate (GFE)
If you don't know what should be on the GFE, find out because that's what you'll be paying for. The GFE should include full disclosure and an estimate of all fees including processing fees, lender fees, appraisal and title fees, origination points and, most importantly, YSP or Yield Spread Premium. If you don't understand YSP and how it affects how much you pay, find out. It's a common way loan officers take advantage of unsuspecting borrowers.

2. Discuss all fees in advance
What you'll pay for extends well beyond the interest rate. Don't get so consumed by the interest rate you're quoted that you forget to talk about the fees that go along with your quoted rates. These front-end and back-end fees determine how much the loan officer earns - usually as commission - from making the loan. The more you pay, the more the loan officer earns. Be careful what you agree to.
 

3. Know your loan options
There are many to choose from and they all have benefits and drawbacks. It takes time to learn the differences between ARMs and fixed rate mortgages and all the variations. You may also be qualified for and FHA home loan or perhaps a VA Home Loan Besides these popular options, you'll also find HELOCs, Hybrid options and more. Your loan office should explain the differences and you should take notes. You can also do a lot to educate yourself about the options.

4. Choose the loan that's best for your situation
Before a loan officer can get paid, he or she needs to complete a loan. Most are driven by commission which means they're inclined to write loans in a way that ensures they make the most money. But guess who pays that money? You do. That's why you need to know exactly how much the loan being offered will cost you. One way is to perform an analysis of cost-to-savings benefits.

5. Ask a lot of questions
Go beyond the basic "What's the interest rate?" and really drill the loan officer in order to find the lowest refinance rate. It's the only way to weed out the good ones from the bad. Find out how many years they've been in the business. Ask what their experience and qualifications are. Ask their opinion of the market, both currently and where they think it's headed. As the loan officer speaks, pay attention. Note the person's thoroughness and professionalism. If it's not there, or if the person sounds annoyed, consider moving on to someone else. If you do, be sure to ask these questions, again and again!

Follow these 5 easy tips and you will be well on your way to a great home loan refinance experience.

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