BILL'S ANSWER
You are wise to do your homework before committing to a loan. Many borrowers fail to ask questions or comparison shop, and end up paying a more for their loans than if they would have shopped around.
First, I would also strongly encourage you to compare rates and offers from multiple lenders. You can apply with Bills approved lender network here, to find the best loan available.
Fees You Will Pay
I cannot estimate precisely how much you should expect to pay for a mortgage refinance. The appropriate amount of the closing costs for a potential loan is much more difficult to judge, as the amount of closing costs are generally calculated as a percentage of the loan amount. On average, closing costs range between 3% and 6% of the total amount of the loan, according to the Federal Reserve.
There are variety of refinance fees you should expect to pay. Some are charged by your lender, such as an application fee, a loan origination fee, or any points you pay to buy down the loan rate. Other fees are charged by third parties, such as the fees you pay for title insurance, flood certification, and a title search.
There is no uniformity in how fees are named or listed. A lender can advertise that it charges no application fee up-front, but may hit you with a document processing fee on the back side. It is your responsibility to carefully review each loan proposal you consider, to compare the various costs listed and make sure that you are not overpaying.
Good Faith Estimate
One tool you can use to compare loans is the Good Faith Estimate (GFE) that lenders are required to provide you. Federal law requires your lender to give you a GFE within three days of your loan application. A GFE is not a guarantee; it's an estimate that is supposed to give you a good idea of what kind of fees you can expect to pay. Keep in mind that the good faith estimate does not include such out-of-pocket costs as state mortgage taxes, homeowners insurance and property taxes, which you may be expected to pay at the time of closing. In fact, your total tab at closing could be more than originally estimated.
The GFE gives you a basis to compare different loan proposals and also gives you something to compare to the actual loan documents you sign at closing. If you notice that the final costs are nowhere near what showed on your GFE, that should be a warning sign that something is wrong.
Right of Rescission
You have three days, from the time you sign your closing documents, to change your mind and cancel the loan. This is called your 'right of rescission.' Right of rescission applies to refinance loans and not purchase loans and exists to protect you from being pressured to sign loan documents that are not in your interest. The three days gives you a chance to review the documents with a third-party, to make sure that you are happy moving forward with the loan.
Yield Spread Premium
Federal law now makes it easier for you to figure out what a mortgage broker is earning from your loan. A broker can no longer receive a fee from you and one from the lender the lender that is processing your loan. In the past, a broker could steer you towards a higher interest rate and collect a fee from the lender and you would be none the wiser. This fee is called the 'yield spread premium' (YSP). Now, you can see the costs the broker is charging you or collecting from the lender.
I invite you to visit the Bills.com Home Refinance Resources page, to learn more about refinance loans. If you enter your contact information in the Bills.com Savings Center at the top of the page, I can have several pre-screened mortgage lenders contact you to discuss the options available to you.
I hope this information will help you Find. Learn. Save.
Best,
Bill
August 24, 2009
August 23, 2009
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