Mortgage rates are low, but that doesn’t mean you don’t have to look for even lower rates when you refinance. A mistake is to take the first offer you hear because it’s lower than your current rate. Of course it’s lower than your current rate: Rates are at historic lows. But why not save an extra $25, $50, or even $100 per month on top of what you are already saving with a refinance? Those kind of savings are available to the hardcore shopper.
Sadly, though, most refinance mortgage rates shoppers refuse to actually shop.
Here’s how to know you got the best deal available at the time.
10-step plan to lower refinance mortgage rates
1. Know thy adversary.
The lender wants to maximize profits, just like anyone in business. Your goal is to cut costs and save money. Your goal and the lender’s goal are on a collision course. If you’re not educated about the process, the lender will win. But you can become equal in the match-up. The lender has experience but you have leverage. You can take your business elsewhere. If you have good credit, a solid income and reasonable debts you’re a valued commodity. Lenders will fight to make you happy.
2. Check your credit.
An incorrect or outdated item can lower your credit score. That can mean a higher interest rate and bigger monthly mortgage costs. Maybe even a declined loan application. You are entitled to see one free copy of your credit report from each of the three leading credit reporting agencies (CRAs) every 12 months. The three big CRAs are Equifax, Experian, and TransUnion. Go to AnnualCreditReport.com to get your free credit reports.
3. Know your number.
Decide how much you want to drop your rate or payment. But don’t stop there. You may be able to get an even lower rate with these strategies.
4. Prep your docs.
Lenders will ask for documentation to give an accurate quote. Get digital copies of everything. Download everything you can online. For paper-only items, scan them in or grab the Adobe Scan app and turn smartphone pics into PDFs. Gather everything including:
- Pay stubs (the last two and any new ones you receive)
- Bank statements (all pages, including blanks)
- Retirement and investment account statements
- Copy of your ID
You may even need tax returns, but if you’re salaried, probably not.
Having this paperwork in your digital hand can allow your loan to be processed more quickly.
5. Capture online quotes.
Do some preliminary shopping online before you speak to anyone. Print out or save to PDF all the rate quotes you find online and hold the lender to the rate you see. Document every screen. Don’t settle for bait and switch.
6. Apply with 4-5 lenders.
Apply with lenders that gave you upfront quotes online. Find other lenders that need more documentation to quote you. Give each lender enough information to pull credit and review your financial profile.
7. Ask for the online application portal.
It could take days to submit full applications and documents to this many lenders. But some may require all your docs to give you an accurate quote. Cut down the time by finding or asking for the lender’s secure online portal. Upload your documentation to each lender’s website.
8. Analyze fees.
A lender can give you a low rate, but charge very high fees. Find the best rate/fee combo by receiving a loan estimate (LE). By law, the lender has to send you a completed LE within 3 days of a full application. This is a government mandate to help consumers shop.
9. Look for “guaranteed” lowest rate deals.
Scour the internet for rate-matching promises, “beat-the-competition-by-0.25%” claims, and similar marketing tactics. Legally, a lender can’t say they have the lowest rates. But if they say it, hold them to it. As you search, get a written quote of the lowest rate and fee structure that you find. Then cash in on another lender’s guarantee. They will be sorry they made such claims, but you will receive a ridiculously low rate.
10. Go back to all the other lenders and show them that ridiculously lowest rate.
Make them match it. Then go back to any other lender with a “best mortgage rate” guarantee. Make that lender go even lower.
In the end, you get an extremely low rate and typically, the lender loses money on the deal. But a promise is a promise. Consumer lending laws are strict. If a lender promises a rate, fee, or rate match, make them prove it!
Get your lowest rate
Refinance mortgage rates are ultra-low, but you can push them lower with hard-core shopping techniques.
You shouldn’t feel bad: You’re the consumer and you should exercise your right to choose your service provider based on rate and fees.