When it comes to getting the lowest refinance rate, there are a few key questions to ask your lender. Being informed about your specific situation will help you get the inside scoop on how to manage your refinance and get the lowest refinance rate.
When evaluating refinance lenders, be sure to ask these questions and think critically about how their answers compare to a trustworthy lender.
Getting the Lowest Refinance Rate: Are Your Refinance Loan Officers Licensed with State Regulators?
Believe it or not, some mortgage loan officers are not licensed by regulatory authorities. Many homeowners don’t realize the benefits of working with a licensed loan officer or understand the risk of working with an unlicensed one.
In order to get licensed, a loan officer must pass a challenging written exam that was created by the lender’s primary regulator. Secondly, a loan officer must pass an FBI background check. And finally, the loan officer has to pass a personal financial background check.
Why is this important to you? You don’t want to work with someone who has access to all of your financial documents and knows every detail about your income, assets, employment, social security number, but isn’t able to pass an FBI background check or personal financial background check. With a licensed loan officer, you’ll have the highest quality of professional guidance on what is likely the biggest financial transaction in your life.
Do You Employ Your Own Appraisers for Refinances, or Do You Outsource Your Appraisal Work?
When seeking out the lowest refinance rate, most homeowners don’t realize the importance of having an accurate appraisal of their home. An accurate home appraisal is crucial for refinancing, and it’s even more important on a home purchase.
Your loan structure includes items such as your loan program, the amortization period, and your loan-to-value ratio (LTV). The LTV is the by-product of your appraised value vs. your loan amount. If your loan amount is $90,000 and your appraised value is $100,0000, you have a 90% LTV. Aside from your credit score, your LTV is the biggest factor in determining your refinance interest rate. If your appraised value is flawed, and reflects a lower value for your home than what it really is, your interest rate can go up—even if the rate was locked.
Appraisers that are employed directly by the lender are typically more accountable for the quality and accuracy of appraisal reports. Whereas outsourced appraisers are detached from the lender and arguably less accountable for their quality and accuracy.
Can You Guarantee My Refinance Interest Rate or Closing Cost?
One of the unfortunate aspects of the mortgage business is the idea that some lenders train their loan officers to intentionally under-quote the interest rate or closing cost in order to convince the borrower to move forward with them for their refinance.
As you search for the lowest refinance rate, keep in mind that a lender cannot lock in an interest rate until the borrower has completed the application, which usually take a few days. Unscrupulous lenders know you cannot lock your refinance rate during this initial application period and they low-ball your refinance interest rate or closing cost on the premise that you won’t want to apply with any other lender after you’ve applied with them. These unscrupulous lenders are the exception and not the rule, but plenty of them exist to cause you harm. To avoid being a victim of the lenders like these, get the guaranteed closing cost and refinance rate in writing.
Can You Guarantee My Refinance Closing Date?
In today’s regulatory environment, not all lenders can close a mortgage in a 30-day period. A fair amount of lenders need 45-60 days to process the transaction and close. If your refinance interest rate is locked based on the idea that your loan will close in the next 30 days, you’ll have a dilemma if it doesn’t (on a purchase, this is a more significant problem because the purchase agreement calls for a specific closing date).On a refinance, you’ll need to extend your interest rate lock, and that can cost you hundreds or even thousands of dollars.
Look for a lender that will guarantee your refinance closing date and become responsible in the event that the mortgage doesn’t close in 30 days. This way, if the lender guaranteed the closing date, and if you have to extend your interest-rate lock, you can do so at the lender’s expense, and not yours.
These questions and answers should provide you with a good foundation of how to receive the lowest refinance rate . Work with licensed lenders who employ their own appraisers, and can guarantee your refinance closing cost and date.
Using these standards when evaluating refinance lenders will help you partner with a lender who has your best interests in mind when it comes to getting the lowest refinance rate. Learn more about what the refinance process looks like for you, and other tips on how to refinance to a lower interest rate.