How to Find the Best Refinance Companies
You know that refinancing your mortgage will enable you to lower your mortgage payment, save you thousands of dollars over the lifetime of your loan and maybe even shorten the amount of time it will take you to pay off your debt – not to mention put a few more dollars back in your pocket at the end of each month. Now, you just need to get a new loan so you need to find a lender. While walking into the local bank and asking to borrow money may help you reach your goals, putting a little more effort into the process is likely to be a good investment.
Finding the Right Lender
Banks and credit unions are the entities that most often come to mind when homeowners think about refinancing, but they are not the only potential sources. Consumer finance companies, savings and loan institutions and other entities also offer mortgages. Sorting through the large variety of lending institutions and offerings available in the marketplace is well worth the effort. Taking the time to choose the right lender can make a big difference in the amount of money you will spend in fees to obtain a loan as well as in mortgage interest over the lifetime of the loan.
When beginning your search for a lender, keep in mind that loan officers get paid off of the transaction that you make. That doesn't make loan officers bad people; it just means that you should do a little work on your own to make sure you understand the full variety of available options in the marketplace and the pros and cons of each of them.
Mortgage brokers can help you compare the services of many lenders and work to secure you the best rate. They are paid a fee by the borrower (that's you) to provide assistance with finding a mortgage and facilitating the loan origination process. They are also paid a fee by the lender in exchange for bringing business to that lender. As with bank loan officers, making a sale is how they get paid. Here again, a little knowledge and some comparison shopping are likely to serve you well. A small difference in your interest rate can add up to huge savings over the term of your mortgage. And, as with many traditional financial services, there are now several online tools available to help you avoid broker fees.
To find lenders and look up rates, try our mortgage calculator tool:
Key Consideration #1: The Costs
The key items to consider when selecting a mortgage lender are costs and service. Understanding the terms of your loan (the amount of the monthly payment, the number of years until it's paid off, the interest rate, fees, whether or not a prepayment penalty is accessed if you pay off the loan early) will provide insight into the various costs.
That's why a review of your good faith estimate the lender provides is key. The good faith estimate is a legally mandated document designed to protect borrowers by requiring lenders to provide standardized disclosure of the costs associated with a loan. This written estimate details the costs you will be required to pay at closing, including the cost for all points, processing, legal fees, filing and closing fees.
While the law does not dictate the price that each lender charges for the various services they offer, the good faith estimate does provide a useful tool for comparison shopping. One loan provider may charge more for legal fees and less for filing fees. Another may have lower overall fees but charge a higher interest rate. A careful review of good faith estimates from the lenders you are considering will help you find the best deal.
Key Consideration #2: The Service
On the service side, getting your questions answered in a timely and accurate way is an important element of the process. Obtaining a loan requires quite a bit of paperwork, as well as the collection and dissemination of a significant amount of personal information. Having a single, reliable point of contact for your questions can make the difference between a smooth, easy process and a tough experience.
Having the loan ready in time for your closing is another important consideration. Final documentation is often unavailable until days or even hours before the closing, and coordinating the schedules of the various parties involved in the transaction can be a challenge. A dependable lender will help to keep everything on track and on time and make a significant contribution to your personal peace of mind.
At one time, researching and gathering the information you need was a time-consuming process requiring visits to multiple lenders or hours on the telephone. While those options are still available, technology has helped to make the process much easier. With online mortgage rate calculators, like the one below, you can hop onto a site and find convenient ways to compare lenders and gain insights into the range of interest rates available for the sort of loan you're seeking.
The Best Digital Refinance Companies
Comparing loan terms and characteristics isn't the only thing you can do online. Nowadays, many of the best lenders are virtual refinanciers – doing business exclusively via the web. What you lack in the personal face time, you make up for in more advantageous rates, since these firms don't have the overhead expenses of brick and mortar institutions, advocates argue. Three of the top include:
Quicken Loans is a Detroit-based lender that has become a household name thanks to an impressive branding effort. The company is known for having competitive rates and several unique mortgage products not offered by its competitors. It offers mortgages in every state across the country, and it’s one of the largest online retail mortgage lenders, according to National Mortgage News, a publication that assembles quarterly rankings for the mortgage industry. Its mortgage product offerings include fixed-rate, adjustable-rate and YOURgage – which offers repayment terms that you can customize beyond the typical 15- and 30-year mortgages provided by most companies. You can choose any loan term from 8 to 30 years (in one-year increments) and get a fixed rate. This can be especially advantageous to those refinancing a mortgage: If you have, say, 23 years left on your current loan and want to refinance but do not wish to reset your term to 30 years, or take out a 15-year loan (which will bring higher monthly payments), you can obtain a 23-year loan, thus maintaining your existing term but at better rates.
Quicken also offers a Rocket Mortgage. Everything from the initial application and credit check to scheduling your home appraisal is done online. (If you get stuck along the way, you still have the option of calling a toll-free number and speaking to a live loan officer.) It's a completely online process that allows you to be approved for your home purchase in minutes. The company aims to close a majority of its loans within 30 days, and it has an A+ rating with the Better Business Bureau (BBB).
Guaranteed Rate offers an online mortgage application process that is similar to Quicken Loans' Rocket Mortgage. You can even complete your initial application and view your credit scores with the three major bureaus for free, all on your smartphone. Based on what your credit qualifies you for, the mobile app allows you to select an interest rate and fee structure, and lock it in early in case rates increase. In most cases, you have the option to pay a higher up-front origination fee to receive a lower interest rate, or you can pay a lower fee, sometimes even no fee, and take a higher rate. (The general rule of thumb is, the longer you are planning to keep the mortgage, the more you should pay up front for a lower rate, since paying less interest benefits you more over time.) Guaranteed Rate, as of 2016, was rated A-plus by the Better Business Bureau and received majority five-star reviews on finance and real estate websites such as Bankrate.com and Zillow.com.
LoanDepot is a direct mortgage lender, meaning the company itself provides the funds at closing rather than simply serving as a middleman, farming the loan out to a third party. There is one fewer person that has to be paid, which often translates to a better deal. Along with its competitive rates, loanDepot offers the ability to obtain a rate quote on its website in seconds. It employs a no-steering policy, prohibiting its loan offers from trying to talk borrowers into a different type of loan to earn a bigger commission. The company is rated A-plus by the Better Business Bureau.
Fast closings are a big selling point for loanDepot. And, even if you have had some hard times or slip-ups with your bills in recent years, a mortgage from loanDepot may not be out of reach: The company offers approvals to customers with credit scores as low as 580.
No-Closing-Cost Refinance Lenders
Despite what a company may indicate in its promotions or on its website, every refinancing incurs fees. However, there are mortgages that let borrowers avoid paying closing costs. Instead, the comparable fees are built into the mortgage interest rate, causing it to be slightly higher than that of a conventional mortgage.
Even so, a no-closing-cost mortgage may be an opportunity for borrowers who don’t have the cash to cover the closing fees to obtain the refinanced mortgage they need to stay in their home. It can also be attractive to individuals who plan to move within than five years. Since, with a traditional mortgage, it typically takes five years for a borrower to recoup his closing costs, the higher mortgage rate with a no-cost instrument isn't significant, and may, most likely, work out to be less expensive than paying than the upfront closing costs.
Two leaders in the no-closing-cost refinancing field include:
LendingTree is among the top-ranked companies for borrowers seeking a refinanced mortgage. Basically, it's a huge search engine. On LendingTree.com, individuals seeking a refinanced mortgage can use the refinance calculator to input the specifics of the type of property the loan is for, the value of the property, the amount of the original loan, and the start date and term of the loan. Once all necessary information is calculated, they can receive up to five loan offers from different lenders.
Citigroup offers CitiMortgage. Though it does charge an application fee, the company is one of only a few of its kind to offer pre-approval. While each case is different, CitiMortgage’s rates are well below the average lender in basic test cases, based on borrower credit rating and specifications for the loan. For example, in a recent search, borrowers with a single-family home in Atlanta, valued at $250,000 and with a desired mortgage of $200,000, could obtain a 4% 30-year fixed-rate mortgage with an annual percentage rate (APR) of 4.2%. These rates involve a borrower with a good-to-average credit score and a current mortgage balance of $20,000. With closing costs, this borrower would pay approximately $1,300 per month. Current clients of Citibank, which backs the loans, could receive benefits or credits toward these rates or toward closing cost fees. Waiving closing costs, while a major option with CitiMortgage, must be discussed one-on-one with an agent in person or over the phone.