Securing the best interest rate for your new home loan, refinancing loan or home equity mortgage is a top priority. At the time of this writing, loans are at or near forty year lows. (Jan. 2009)

Your lowered payment could mean extra monthly household cashflow; just as important, a low-rate refinance could potentially eliminate $50K-$100K or more in interest, over the life of your 30-year mortgage loan.

Experts recommend that you not refinance unless you can lower your current rate by at least two percentage points. This is because the costs of refinancing are sometimes prohibitive and take too many years to recapture.

Depending on the size of the loan, a couple of percentage points can change your monthly payment amount by hundreds of dollars. However, don’t forget that things like loan fees, origination fees, customer service and loan turnaround time should also factor into your final decision.

Questions to Ask Your Potential Lender

1)  What is the current interest rate for Minnesota mortgages and refinances?

2)  What is the procedure for locking a rate? How long will it lock? Can I get the lock in writing?

3) Is this a fixed rate or adjustable rate?

4) Prepayment penalties?

5)What are the origination fees?

5)  How many points are required to get this rate?

6)  What is the loan application fee?

7)  What is the appraisal fee?

8)  What is the loan turnaround time?

9) If the rate is a variable or adjustable rate, what is the underlying market index?  What is the margin (the percent added to the index rate)?

10) Any other miscellaneous fees?

Your interest rate is important, of course.  Just keep in mind that expensive loan fees can have the effect of ruining that so-called great interest rate!

Large lender or Local Bank/Credit Union?

Your local bank or credit union may look like an attractive idea for your next mortgage loan.  However, you may be required to come in and fill out paperwork in person.  Also, you will be applying to one lender, instead of multiple lenders, if you choose this route.  This is not always the best way to shop around for the best mortgage program.

Each credit inquiry temporarilly lowers your credit scores. Too many inquiries, spaced too close together, and a lender may refuse to extend a loan at all.

Online national lenders have multiple funding sources.  So not only can you fill out an application right now, day or night, your application will be matched against multiple available programs.
In most instances, your credit report is pulled only once, instead of multiple times.

Should you refinance? A financial expert on Fox network in Chicago offers some thoughts, just days after Christmas, 2008.

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