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How to Shop When Refinancing Your Mortgage
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By David L Wexler
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Maryland.com
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Let's start with what not to do. Never call a mortgage company and say, "What is your rate?" In doing so, you essentially tell the loan officer that you are not an experienced mortgage shopper, thus opening yourself up to those who would take advantage of an inexperienced shopper. Before you call any mortgage company, you should answer the following questions:
What do you want to accomplish by refinancing? Is your goal simply to save money by lowering your payment on your existing mortgage? Or do you want to change your financial picture by combining your first and second mortgages into one mortgage, consolidating credit card debt, liquidating your equity for investment purposes, or getting cash-out to improve your home?
Will you consider an Adjustable Rate Mortgage or other mortgage type in order to better accomplish your goal, or are you simply more comfortable with a fixed rate?
How much do you owe on your current mortgage?
Do you escrow for your taxes and insurance with your current monthly mortgage payment? If so, you should identify the breakdown of your monthly payment into the principal and interest payment, and the amount collected for escrow.
How much is your house currently worth? It is important to have an idea of the current value of your home so that the Loan Officer can place you into the best program possible. In doing so, you will ensure that you get an honest and appropriate estimate of how the new loan will meet your goal and what to expect as a new monthly payment.
Once you have this information, you are ready to call the mortgage company. Provide the loan officer with the information you have compiled, listen to their proposals, and evaluate how well your goal is met. Make sure you request a copy of a Good Faith Estimate, which will show the proposed interest rate, closing costs, and monthly payment breakdown. Have the Loan Officer explain which costs are to be rolled into the new loan and which are to be paid prior to closing (out-of-pocket). Be wary of companies that require more than $350 (for appraisal and credit report) to be paid up front.
Once you have received Good Faith Estimates from two or three mortgage companies, it is time to make a decision. You should be prepared to review the estimates and then lock in all in one day because interest rates do change daily. If one company has lower rates and closing costs but you call to lock the day after you receive your quote, that company can say rates have increased, putting you back at square one.
A bit of advice: If two mortgage companies are comparable in rates and costs, evaluate your interaction with them. Who were you most comfortable with? A good loan officer makes all the difference in a smooth refinance transaction. Ask how quickly they can get the Good Faith Estimate to you and hold them to it. You are an important customer, and a good Loan Officer will make sure you are their top priority. Good luck and happy hunting.
David L Wexler is Sr. Vice President of the Erie Financial Group, a full service mortgage brokerage firm licensed in Maryland, Pennsylvania, Washington, DC, and Virginia. Erie Financial Group closes all types of mortgages: conventional, FHA, VA, Home Equity Loans, commercial, B/C credit. You can reach David Wexler at 301-538-8804.
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