• Know what other borrowers are being offered. It helps to be informed. Rates change frequently. Knowing what interest rate other loan applicants are getting can help you negotiate and steer clear of a financial company that might be looking to gouge you.
Look at the weekly rate data put out by Freddie Mac and the MBA.
Each week, Freddie Mac (www.freddiemac.com) surveys lenders nationwide culling information on points and rates for 30-year and 15-year fixed-rate products as well as 5/1-hybrid adjustable-rate mortgages, or ARMs.
The MBA says its survey covers over 75 percent of all U.S. retail residential mortgage applications. To find its weekly report, go to www.mba.org and look under “MBA News.” Click the link for the latest mortgage application release.
You might notice that the numbers from the MBA are higher than what Freddie Mac reports.
“As opposed to Freddie Mac, which tracks purchase rates only, MBA’s application survey tracks rates for purchase applications as well as refinance applications, and rates on refinances tend to be a bit higher,” said MBA’s chief economist, Mike Fratantoni.
• Know where to shop around. Average interest rate figures give you a general idea of what others are being offered. But what matters is what rate you can get.
Of course, check with your current lender, but don’t just stop there. One site I like to consult is bankrate.com. On the homepage, look for the box on the right that says “Compare Rates.” Click on the tab for “Refinance” and you’ll see below the national a field that says “View rates in your area.” Type in your ZIP code to find offers from lenders.
Keep in mind that what you are eventually offered will depend on your personal situation, which includes your credit profile.
• Know the numbers. I hate writing this as much as you probably hate hearing what may seem obvious. But time and again, I see people refinance without truly understanding their loan deal.
Someone was bragging to me that he refinanced and didn’t have to pay “anything.”
You may not have to put up money at the closing, but your loan costs something. Don’t think a “zero-cost” or “no-closing costs” loan means you didn’t pay anything. Lenders get paid.
When you get your loan estimates, study the documents carefully. That “no-cost” loan might mean you are paying a higher interest rate. Or you’ve agreed to roll the cost of the refinance into the loan, which could also mean paying more interest over the life of the loan. However you structure your loan, know the numbers, for real.
While you’re on bankrate.com, plug loan estimation information into the site’s “Mortgage Refinance Calculator.” Try a few scenarios — zero points, points, rolling the cost into the loan — to compare your refinance costs long-term.
Refinancing is about the numbers. Sure, rates are super low right now. But if you’re not looking in the right places, you won’t win at this game.
Michelle Singletary welcomes comments and column ideas. Reach her in care of The Washington Post, 1150 15th St. N.W., Washington, DC 20071; or singletarym@washpost.com.
