If you’re going to be in the house for a long time, you might be better off paying the fees and possibly even points to buy the rate down even further. Of course, there’s nothing that says you can’t do another no-cost refinance in a year or two if rates continue to fall, but realize you’ll always be paying 1/8 to 1/2 a percent higher for your no-cost mortgage than a “market-rate” mortgage where you pay the fees.
You only need a score of 740 to get the best rates on mortgages. We were getting some sweet offers in the mail for credit card freebies a month or two ago (you know, $300 with your first purchase, or 25,000 miles to sign up with another 25,000 after putting $2K on the card) so we actually applied for 5 credit cards just two weeks before initiating our refinance. It dropped our score a little, down into the 770s, but that was still plenty high to refinance. We had to give a quick explanation and show a couple of statements, but no big deal. Now, I don’t recommend applying for credit cards the same month you try to get a mortgage, but if you pay your bills, your credit score will take care of itself.
# 8 Shop Around for Your Mortgage
This is a major purchase and it is easy to save a few hundred dollars in fees and can be quite easy to save thousands in interest over the course of the loan. It’s amazing that we’ll go to another store to save 50 cents on bread but won’t look at multiple lenders for a purchase where it may cost thousands of dollars less at one bank than personal loans in Nevada online another. Remember to check with all lenders on the same day, and look at rate, points, AND fees.
I recommend you first check with a mortgage broker to see what they can do for you. Take a look at lenders/banks who have traditionally had great rates like those from our WCI Recommended Mortgage Lender list or perhaps your local credit union. Finally, approach the bank that currently owns your mortgage and let them know about your best offer. Ask for a loan modification. They might just knock the rate down on your loan with no hassle and no expense. Probably not, but it’s worth a try. What they will usually do is give you a significant discount on the closing costs. The bank that owned my mortgage offered me a 1/4 point discount (about $900) which almost beat out Rate One, the new mortgage lender.
# 9 The Best Mortgage for You Might Not Be the Same Type of Mortgage You Had Before
Many times it will make sense to refinance into a 15-year or even a 10-year mortgage after paying on a 30-year mortgage for a few years. Perhaps you had a 30-year doctor mortgage but now your income has increased, or you simply paid down enough principal that you can now afford the higher payments of a shorter-term loan. You may save up to 1/2% on a 15 year over a 30 year. If you’re just a few years from paying off your mortgage, you could even get a 3/1 or a 5/1 ARM. It’s fixed for 3-5 years, and if that’s all the longer you’ll be paying the mortgage, that’s good enough. You might also be able to get out of a jumbo mortgage or get rid of PMI when you refinance depending on how much you still owe.