The first attribute of the best bank to refinance your home is a willingness to make the loan. Many banks that used to do a lot of mortgage refis now do fewer. Another essential attribute is a willingness to give you a low refinance rate. There are several other aspects of "best," such as an efficient refinancing process, good customer service and accurate record-keeping, but a willingness to lend and to do so at competitive rates may be most important.
There was a time when the best source of a mortgage loan, either the initial first mortgage or a refinance, was your neighborhood bank. Now, however, the "neighborhood bank" is likely to be the local branch of a conglomerate. Unfortunately, big banks lend homeowners less than they used to. A QualifiedMortgage.org article notes that in 2010 the five biggest U.S. banks lent homebuyers about two-thirds of total mortgage funds, but that by 2014 they lent only about half the total.
There's no harm in applying to the big guys: Bank of America, Citibank, Chase, Wells Fargo or BNY Mellon. But it's not necessarily the case that your best mortgage deal is going to come from them. You may find that smaller banks, regional banks and larger credit unions will look on your application more favorably. This is particularly true for smaller borrowers -- homeowners refinancing for less than $250,000 -- and those with FICO scores below 740. Bank of America, for example, adjusts its loan rates upward in response to your ZIP code and lower credit score. Smaller banks tend to do this kind of credit-score-weighted interest rate calibrating a little less thoroughly. They may either give you a loan at their "going" rate or turn you down altogether.
There are a couple of ways to find the best rates. Online sources, Bankrate among them, have mortgage rate tables that tell you each bank's current rates. These change frequently, so as you go through the refinance process, keeping checking. Note that most of these loan-rate sites ask you to input your FICO score, ZIP code, down payment percentage and loan purpose -- whether first mortgage or refinance. All of these factors will affect your loan rate. Refinance rates tend to be slightly lower than original first mortgage rates. They'll also ask you to specify if your refi is a VA or an FHA loan. Loans insured by Veterans Affairs or by the Federal Housing Administration generally have lower rates than those that are not.
From Mortgage Broker to Loan Originator
While it's still possible to go through a local mortgage broker to find your best refi, these days it''s often more efficient to go to one of the larger online loan origination sites, such as Lending Tree. These companies constantly monitor lenders' rates and policies and quote the five to nine lowest-rate lenders that will likely give a loan to someone with your loan profile. While Lending Tree doesn't publicize its business model, one evaluation site notes that Lending Tree charges each lender $27 for a referral and up to $1,000 for each successful application. Even though the lender rather than the borrower is charged, ultimately these fees increase the cost of your loan. However, Lending Tree's fee is still less than a traditional mortgage broker's fee, which is often 1 percent of the loan amount.
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