Do you remember graduation requirements for mathematics when you were in school? Unfortunately how to apply for a loan wasn't included. Otherwise you would have learned how to evaluate a home mortgage refinance.



If you are looking to refinance your mortgage for the best interest rate and lowest monthly payment at the least cost, you must be prepared to ask specific questions.

Now here's the catch. If you don't know what you want, how will you know the questions to ask? Asking the best questions depends on knowing what you are trying to accomplish before you talk with a loan officer and being prepared to express it in two or three brief sentences.

Consider a common sentence uttered when hunting for a home mortgage refinance. Hi, I should let you know I'm shopping for the lowest mortgage rates. But doesn't this leave a mortgage broker guessing as to your underlying purpose? Certainly, everyone wants the best rate. Who would call a mortgage company asking for the mediocre interest rate of the day!

So let's examine how to express the specific reason for your refinance. These are a few examples. Perhaps you have an adjustable rate mortgage with payments scheduled to rise. Another reason may be that your current fixed rate mortgage is high relative to today's rates and you are hoping that you can take advantage of the current interest rate environment. Another example may be a cash out loan for necessary improvements and repairs around the house.

#1 Begin with the obvious. Know what you want before you call the mortgage lender. It is without question that a broker already assumes the best deal is your underlying priority. Help the loan representative assist you by giving specific reasons for your home mortgage refinance.

#2 Best practice calls for checking with two to three mortgage companies. This is important even if you already know a lender. Consider the extra time taken as self-education.

#3 Prepare a cheat sheet with questions you would like answered. Your cheat sheet should focus on the main topics of current interest rates, length of the loan, prepayment penalties, total costs involved, time to process, and estimated monthly payments including taxes and insurance.

#4 Regarding interest rates, ask your loan officer to quote a current 30 year fixed rate mortgage as if someone were to make application and lock in an interest rate that specific day. For homeowners intending to pay off the home mortgage refinance more quickly, ask the same question for a 15 year fixed rate mortgage.

#5 Just as crucial, remember the prepayment penalty issue. A prepayment penalty is a fee charged by the lender to pay off the loan early or in some cases, for reducing the loan balance faster than its normal amortization schedule. Even without plans to accelerate the pay down of your loan, you still need to know the answer to this question. So no matter how simple you might think it sounds, always ask about a prepayment penalty. You deserve to be in the loop on your home mortgage refinance.

#6 When it comes to expense, a written Good Faith Estimate is your best indicator. If you are comparing programs such as a 30 year fixed rate mortgage to a 15 year fixed rate mortgage, you need a Good Faith Estimate for each mortgage rate refinance product. Ask for a GFE before loan application and prior to ordering your credit report. Even though being an initial estimate, important details regarding interest rate, costs, fees, and payments will be disclosed on a Good Faith Estimate. Requiring a GFE is the best way to compare loan products as well as evaluating home mortgage refinance lenders.

#7 And finally, there is no such thing as a no cost refinance. Just because no money comes out of your pocket, it doesn't equal cost free. Most of the time a no cost home mortgage refinance simply means the fees were folded into a higher loan amount or greater than current rate.

So do your homework before calling for a mortgage rate refinance. After all, it is all about your home and your mortgage. You deserve the best!