{"id":632,"date":"2012-03-26T11:34:04","date_gmt":"2012-03-26T16:34:04","guid":{"rendered":"https:\/\/david.bookstaber.com\/Interests\/?p=632"},"modified":"2020-01-04T19:01:21","modified_gmt":"2020-01-05T00:01:21","slug":"time-to-refinance-your-mortgage","status":"publish","type":"post","link":"https:\/\/david.bookstaber.com\/Interests\/2012\/03\/time-to-refinance-your-mortgage\/","title":{"rendered":"Time to Refinance your Mortgage?"},"content":{"rendered":"<p>If you haven&#8217;t refinanced in the last year it&#8217;s probably worth looking into.  Interest rates depend on many factors, which I&#8217;ll list shortly, but &#8220;headline rates&#8221; (i.e., those available to borrowers in the best circumstances) are under 4% for a 30-year fixed mortgage, 3.25% for 15-year fixed, and about 2.5% for 5- or 7-year ARMs.<br \/>\n<!--more--><\/p>\n<h3>Factors that affect the rate you can be offered<\/h3>\n<ul>\n<li>Loan amount.  If you are trying to borrow more than <a href=\"https:\/\/www.efanniemae.com\/sf\/refmaterials\/loanlimits\/\" title=\"Loan Limits for Conventional Mortgages\" target=\"_blank\" rel=\"noopener noreferrer\">the conforming loan limit<\/a> (currently $417k in most parts of the country) then you are looking for a &#8220;jumbo&#8221; mortgage, which always carries a higher rate because it can&#8217;t be easily resold.<\/li>\n<li>Loan-to-value (LTV): The ratio of your loan to your property&#8217;s assessed value.  You&#8217;ll get the best rates with LTV < 60%.  Anything above 80% carries extra premiums.<\/li>\n<li>Your credit score.  Scores above the mid-700s are considered &#8220;prime&#8221; and qualify you for the best rates.<\/li>\n<li>Employment history and income:  You need to show that you have stable income sufficient to cover the loan.<\/li>\n<li>Cash reserves:  You need savings sufficient to cover the loan during a period of unemployment.<\/li>\n<li>Purpose of the loan: Best rates are for financing your primary residence.<\/li>\n<li>Cash-out refinancing: This generally increases the cost of the loan.<\/li>\n<li>What state the property is in.<\/li>\n<\/ul>\n<h3>How to shop for a mortgage<\/h3>\n<p><a href=\"http:\/\/bankrate.com\">Bankrate.com<\/a> gives the broadest view of lenders.  The problem is that you may waste your time contacting some of those lenders because they have listed &#8220;teaser&#8221; rates and then tack on excessive fees.<\/p>\n<p>I just refinanced my mortgage using <a href=\"https:\/\/www.costcofinance.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Costco<\/a> where quality control should be a little tighter and lenders listed agree to make their most competitive prices.  If you go through Costco you should expect to pay the lender less than $600.  I will cover other costs shortly.<\/p>\n<p>In any case, while shopping for a mortgage do not give out your social security number or consent to a credit check until you have picked a lender you actually intend to use: Every lender that runs a credit check can reduce your credit score by 5 points.<\/p>\n<p>When contacting prospective lenders just give them the information they would need to produce a good-faith estimate (GFE).  Since a GFE is now a regulated and legally-binding item they won&#8217;t actually give you a &#8220;real&#8221; GFE until you start an application with them, but they can give you something like it if you give them enough information to price a mortgage.  When I call lenders I simply ask something like, &#8220;Can you give me rates and fees for the following:<\/p>\n<ul>\n<li>Refinancing a mortgage with a $200k balance on my $400k single-family primary residence in Pennsylvania.<\/li>\n<li>Assume that my credit scores are prime (i.e., above 750), and that I will clear underwriting for debt, income, and assets.<\/li>\n<li>Quote me rates without points.<\/li>\n<\/ul>\n<p>The most important number I&#8217;m looking for is their interest rate, and in order to make it easy for me to compare across lenders I ask for rates with &#8220;no points.&#8221;  (&#8220;Points&#8221; are up-front premiums for a lower rate, which may make sense to pay when you close the loan, but which only confuse things at the shopping stage.)<\/p>\n<p>The second thing I&#8217;m looking for are their fees.  This is where it can be tricky depending on which state you are in.  There are a lot of fees involved with processing a loan, but when it comes down to it there should only be 3 parties collecting money during the transaction:<\/p>\n<ol>\n<li>The lender\/broker.  As I mentioned before, their fee should be under $600, and it covers their cost of underwriting and processing the loan.<\/li>\n<li>The appraiser.  Independent appraisals are now effectively mandatory, and shouldn&#8217;t vary across lenders.  Typically you are billed directly by the appraiser.  For my recent refinance this was $375.<\/li>\n<li>The title\/transfer company.  This is the biggest variable by state, and is usually highly regulated.  I just refinanced in Pennsylvania, so what follows is only necessarily true there:  Bizarrely, title insurance rates are set so high that profit margins are above 70%.  Lenders tell you that you can choose your own title company but that since rates are regulated you may as well use theirs.  Not so fast: Call the company that last insured\/processed your mortgage, tell them you&#8217;re refinancing and that if they can offer you any concessions you&#8217;ll choose them.  They may not be allowed to offer you a discount on the title insurance premium, but mine waived almost every other charge they are legally entitled to levy, saving me $500 (and still keeping a handsome profit for themselves).<\/li>\n<\/ol>\n<p>If you go ahead with an application be ready to sign absurd numbers of disclosures and authorizations, and to produce a lot of documentation.  For my refinancing I had to provide the following:<\/p>\n<ol>\n<li>2009 and 2010 Federal tax returns (all pages) <\/li>\n<li>2009, 2010 and 2011 W-2s <\/li>\n<li>3 recent pay stubs <\/li>\n<li>Recent mortgage statement <\/li>\n<li>Savings account statement covering last 60 days<\/li>\n<li>Copy of driver licenses <\/li>\n<li>Copy of social security cards <\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>If you haven&#8217;t refinanced in the last year it&#8217;s probably worth looking into. Interest rates depend on many factors, which I&#8217;ll list shortly, but &#8220;headline rates&#8221; (i.e., those available to borrowers in the best circumstances) are under 4% for a 30-year fixed mortgage, 3.25% for 15-year fixed, and about 2.5% for 5- or 7-year ARMs.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[49],"tags":[],"class_list":["post-632","post","type-post","status-publish","format-standard","hentry","category-finance"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/po3d1-ac","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/posts\/632","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/comments?post=632"}],"version-history":[{"count":6,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/posts\/632\/revisions"}],"predecessor-version":[{"id":1675,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/posts\/632\/revisions\/1675"}],"wp:attachment":[{"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/media?parent=632"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/categories?post=632"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/tags?post=632"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}