There’s a major craze going on right now that’s rivaling the obsession over Pokémon Go.
But in this game, the goal isn’t to capture creatures. It’s to catch the best rate you can to refinance your mortgage.
With rates approaching historic lows — again — many homeowners are racing to refinance their mortgage. Last week, the Mortgage Bankers Association (MBA) reported an 11 percent jump in refinances compared with the week before. The association also reported that refinancings accounted for 64 percent of all mortgage applications, up from 61.6 percent the previous week.
As you shop for a loan — and you most definitely should — here are some tips to help you make the best decision:
Know what other borrowers are being offered. It helps to be informed. Rates change frequently. Knowing what interest rates other loan applicants are getting can help you negotiate and steer clear of a financial company that might be looking to gouge you.
Look at the weekly rate data put out by Freddie Mac and the MBA.
Each week, Freddie Mac surveys lenders nationwide, culling information on points and rates for 30-year and 15-year fixed-rate products as well as 5/1 hybrid adjustable-rate mortgages, or ARMs. The survey is based on conventional conforming home-purchase mortgages with a loan-to-value ratio of 80 percent. Freddie Mac polls about 125 types of lenders.
The MBA says its survey covers more than 75 percent of all U.S. retail residential mortgage applications. To find its weekly report, go to mba.org and look under “MBA News.” Click the link for the latest mortgage application release.
You might notice that the numbers from the MBA are higher than what Freddie Mac reports.
“As opposed to Freddie Mac, which tracks purchase rates only, MBA’s application survey tracks rates for purchase applications as well as refinance applications, and rates on refinances tend to be a bit higher,” said MBA’s chief economist, Mike Fratantoni.
Another factor that might lead to differences in average rates is discount points, which is a way borrowers lower their interest rate in exchange for an upfront fee. One point equals about 1 percent of the loan amount.
Here’s what Freddie Mac reported as of July 14:
● A 30-year fixed-rate mortgage average was 3.40 percent.
●A 15-year fixed-rate was 2.72 percent.
●A 5/1 year ARM was 2.76 percent.
And here’s the data MBA reported last week:
●The average interest rate for a 30-year fixed-rate mortgage with a conforming loan balance ($417,000 or less) was 3.60 percent.
●The average rate for a 30-year fixed-rate mortgage for a jumbo loan (more than $417,000) was 3.61 percent.
●A 30-year fixed-rate mortgage backed by the Federal Housing Administration was 3.53 percent.
●A 15-year fixed-rate was 2.88 percent.
●A 5/1 ARM was 2.78 percent
Know where to shop around. Average interest-rate figures give you a general idea of what others are being offered. But what matters is what rate you can get.
Of course, check with your current lender, but don’t just stop there. One site I like to consult is bankrate.com. On the home page, look for the box on the right that says “Compare Rates.” Click on the tab for “Refinance,” and you’ll see below the national listings a field that says “View rates in your area.” Type in your Zip code to find offers from lenders.
Keep in mind that what you are eventually offered will depend on your personal situation, which includes your credit profile.
Know the numbers. I hate writing this as much as you probably hate hearing what may seem obvious. But time and again, I see people refinance without truly understanding their loan deal.
Someone was bragging to me that he refinanced and didn’t have to pay “anything.”
You may not have to put up money at the closing, but your loan costs something. Don’t think a “zero-cost” or “no-closing costs” loan means you didn’t pay anything. Lenders get paid.
When you get your loan estimates, study the documents carefully. That “no-cost” loan might mean you are paying a higher interest rate. Or you’ve agreed to roll the cost of the refinance into the loan, which could also mean paying more interest over the life of the loan. However you structure your loan, know the numbers, for real.
While you’re on bankrate.com, plug loan-estimation information into the site’s mortgage refinance calculator.” Try a few scenarios — zero points, points, rolling the cost into the loan — to compare your refinance costs long-term.
Refinancing is about the numbers. Sure, rates are super low right now. But if you’re not looking in the right places, you won’t win at this game.
Write Singletary at The Washington Post, 1301 K St. NW, Washington, D.C. 20071 or firstname.lastname@example.org. Comments may be used in a future column, with the writer’s name, unless otherwise requested. To read more, go to http://wapo.st/