To get a reliable refinance quote,
be prepared to frame your question properly.
You can save yourself hassle and confusion – and possibly a great deal of money – by learning to ask the right question that will get you a reliable, comparable rate quote.
Example of the right question:
“I want a rate quote for a refinance. I estimate the value of my property to be $800,000. It is a duplex and it is my primary residence; my middle credit score is 714. What interest rate can I lock in for 30 days on a 30-year fixed rate mortgage, with a loan amount of $640,000 on a cash-out refinance. As per the good faith estimate, I want to know your origination charge and the cost or credit for this rate. I want a credit to cover the closing costs for this refi.”
Using the Shopping Toolkit worksheets will assure you receive an accurate rate quote. If you ask for a quote without clearly laying out your specific situation, you will probably get a generic quote that reflects the most optimistic possible assumptions – which may or may not apply to you. Loan pricing depends on numerous parameters, and many impact loan pricing.
Below is a list of the information you will need to formulate your question. The Borrower Information worksheet in the Shopping Toolkit will help aggregate this information.
- Estimated value:
A lender needs to know the loan-to-value to provide a quote. An accurate estimate is important. The most reliable source is a local real estate agent who is familiar with your property and the current market.
- Property type and use:
- single family
- 2,3 or 4 unit
- primary residence
- second home
Important note: be sure to mention any unique property considerations, for example: geodesic dome, leased land, manufactured or modular housing, low owner-occupancy in a condo, unpermitted additions, remodel in progress, flood zone.
- Credit score:
You will need three credit scores from a tri-merge mortgage credit report. The lender will use the middle score to price the loan. If there are two borrowers, the lender will use the lower of the two middle scores.
- Rate lock:
30 or 45 day locks are the most common. Thirty days is usually long enough to close a refinance. If the market is busy then a 45 or 60 day lock may be necessary.
- Loan type:
It’s very important to have reviewed all your loan options and settled on the one that is best for your situation. Loan type can also affect how much you qualify for. Type of loan: fixed or ARM; if fixed, 30 year or 15 year; if ARM initial rate fixed for 1, 3, 5, 7, or 10 years.
- Loan amount:
conforming loans, high-balance conforming loans, and jumbo loans. There are important loan amount cutoffs that can make a big difference in your rate. Check current conforming limits here.
- Transaction type:
Refinance with cash-out, or a refinance with no cash-out, known as a rate-and-term refinance. In a refinance, what defines cash-out is not simply the payoff on the old loan. Your new loan can be larger than the old loan by enough to cover closing costs, you simply can’t take money out of escrow after the close. Because cash-out loans generally have a higher rate, you want to be careful not to accidentally lock in on a loan amount that will give you cash back out of escrow if that’s not what you intended. Also, if you are paying off any kind of a second mortgage, HELOC or HELOAN, your refinance may be considered cash-out even though you aren’t receiving money at close of escrow. The rules on this can vary, so it is very important to find out your lender’s policy if you are paying off any subordinate financing.
- Loan pricing – charge or credit:
You can pay one or more points to lower the rate; pay no points; or get a credit back to cover some or all of the closing costs. Using a credit to cover the closing costs in a refinance is typically referred to as a ‘no-cost’ loan. Each lender you contact should be able to provide you with pricing options. Review the loan pricing page.
When you provide the above information to a lender, the quote you get will be clear, accurate, and comparable.