Table of Contents
- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Comparing Mortgage Refinance Offers
Many people are talking to multiple lenders about refinancing their mortgages.
They are trying to compare one mortgage versus another. You can’t just look at the interest rate, APR, or the closing costs.
In this post, we will understand what you should be looking at so that you can accurately and properly compare the mortgage refinance offers.
Comparing mortgage refinance offers is only for people who are looking to shop around for the deals.
If you have a trusted mortgage lender that you are being referred to, or has been there for you for all your financial needs, you can skip this comparison as long as you know that your lender or loan officer is providing you with a fair deal.
Compare Apples to Apples
When you are comparing two or more mortgage refinancing offers, it is important to compare apples to apples.
You cannot compare a conventional mortgage to an FHA loan, or compare a rate and term refinance where you are just lowering your rate to a cash-out refinance.
If you do such cross-comparison you are going to compare apples to oranges and end up getting more confused, which might lead to taking the wrong decision.
So make sure that you are comparing two loans side by side that are going to accomplish the same goals.
Read the Estimates and Quotes Carefully
Something really important that you read upfront is the Fine Print.
Because of the refinance frenzy that is been going on, you may have seen ads online, on TV, on billboards, or received solicitations in the mail for refinancing your home.
However, all of these have fine print and you must read the fine print because every single time you read the fine print, you’ll see that the offer or the solicitation that you are getting probably doesn’t even apply to you.
Typically those solicitations are going to have points included. They are going to show you the super low rate but then when you read the fine print you come to know that it includes two or three points.
That is real money that you have to pay to buy down the rate advertised.
The next thing is Loan to value. A lot of these solicitation comes with a low rate, which may include an LTV requirement mentioned in the fine print.
For example, the interest rate advertised is only for people who have 50 percent equity in their homes.
Many people that are looking to refinance may not have that much equity in their homes.
You also need to be careful about the credit score requirement. The advertised interest rate in a solicitation could only be available for people with a specific credit score or higher.
if you do not have the score required to get that advertised interest rate, that offer will not be applied to you.
Interest rates depend on a lot of factors. Every person can get qualified for a different rate.
Make sure that you read the fine print so that you become more knowledgeable about the process and do not fall for the bait.
Should You be Comparing APR?
APR can be manipulated, and it is not accurate without knowing how long you will keep the mortgage.
The most important thing that you realize as a homeowner about APR is that it is not even a great comparison tool even if you understand it because the APR is based on you keeping the loan for the entire term (15,20,30 years).
However, if you sell or refinance the property before the signed term your APR changes. So looking at APR to compare multiple refinancing offers may lead to making an incorrect decision.
What to look for in Loan estimate for fair Comparison?
A loan estimate is a standardized federal document provided by your loan officer that has all the different fees laid out and all the information about the offer that the lender is proposing for your refinance.
This is where you can do a fair and effective comparison side by side as this includes the interest rate, payment break down, estimated closing cost, escrows, and prepaid items.
You may want to look at the loan estimates that you have received from the lenders and look at the loan type, the interest rate, is it a fixed rate or adjustable rate, monthly payments, escrows, prepaid items, and PMI.
Comparing Cash to Close
The cash to close is the last line on the first page of the loan estimate. The cash to close will show how much money you have to bring on to the table to close this loan.
This would include closing costs, prepaid, and escrows. If one of the lenders have not put the right loan amount to cover your escrows and prepaid, you might have to bring cash to close the loan.
Comparing cash to close would help you to determine which lender is providing you with the lowest closing cost.
Conclusion
Comparing refinance offers can be confusing because you might not have complete knowledge about refinancing and comparing.
You can use our ‘mortgage comparison tool’ to do a fair comparison to ensure you get the best offer for you to refinance.
When you do the comparison in the right way, the chance of you saving money automatically increases.
