If you’re into financial news, or you’re looking to buy a home or refinance, then I’m sure you’ve heard that mortgage rates are once again at five year, historical lows. Hearing that has got everyone looking to see if they can save themselves a little bit of money by refinancing.
People who have had any credit repair or debt relief done recently stand a pretty good shot of saving some money each month if they’ve been able to boost their credit score. Obviously the internet is a great resource, and a great place to start.
What You’re Doing Wrong
A lot of homeowners shop for the lowest mortgage rate by collecting what’s called a Good Faith Estimate from anyone and everyone in an attempt to figure out which one has the lowest fees and rates. Others simply use the APR as their guide.
The problem with both of these approaches is that they’re relying on misleading information that’s likely a lowball estimate. The APR and Good Faith Estimates are often used to entice unsuspecting homeowners into overpriced mortgages.
Who You Want to Be Weary Of
It helps a bit if you understand who you shouldn’t be working with when you’re looking to refinance. It doesn’t matter if you’re looking for the lowest mortgage rate refinance from a bank, broker, or one of those Internet giants like Lending Tree; they all make money the same way when arranging home loans.
Banks don’t have to play by the same rules as other loan originators thanks to a loophole in the Real Estate Settlement Procedures Act. The loophole means that banks are basically exempt from disclosing their profit margins and markup of your home loan. And why would you do business with any lender that doesn’t have to play by rules intended to protect you from predatory lending practices?
You also want to avoid mortgage broker banks. They’re created to exploit the same loophole enjoyed by banks. When the RESPA laws were changed to exclude banks many mortgage broker restructured their business to operate similar to banks and became exempt from the same disclosure laws. If you find a broker that closes home loans in the name of their own company instead of a wholesale lender you’ll know you’re dealing with a broker bank instead of a mortgage broker. The only reason a mortgage broker would choose to operate their business a broker bank is to take advantage of homeowners with undisclosed junk fees and markup.
Getting the Best Rates
So after you’ve eliminated banks and broker banks, you’ll see that brokers are probably your best bet. Find one with access to wholesale mortgage rates. Many brokers will tell you that you can’t refinance your home with a wholesale rate because they mark up interest rates to get a commission from the lender. You’re going to want to make sure that you do your homework and ask questions.
