While there’s always a focus on finding the best possible interest rate for a loan refinance, other factors are also important: the easiest process, low fees, and good customer service. Historically, most homeowners have gone to large national banks to refinance their homes, but this is not as true today. To maximize your chances of getting approved, it's important to explore all options for refinancing, which can include looking at non-traditional lenders.
The neighborhood bank was once the first place where homeowners would look for a mortgage, whether a first mortgage or a refinance. Today, the neighborhood bank is likely to be a local branch of a large conglomerate such as Bank of America, Chase, Citi, Goldman Sachs or Wells Fargo. However, these banks are closing a smaller share of home loans than they used to, especially for refinancing. Industry newsletter Inside Mortgage Finance reported that the five largest banks in the United States lent only about half of total mortgage funds in 2013, down from about two-thirds of the total amount in 2010.
There's no reason to avoid applying for a refi with the large banks, but you shouldn't restrict yourself to them. You may find that smaller banks consider your application more favorably, in part because they place a higher value on your business. Broadening your search to include local, state and regional lenders may allow you to qualify for a loan when a larger bank would turn you away, or offer you a higher rate.
A mortgage broker is a middleman between the borrower and lender. Brokers typically work with multiple lenders, which can improve your chances of approval and of getting a lower rate. Brokers often can provide you with access to out-of-state lenders or to those with specialized services.
Just be aware that refinancing through a broker can incur additional closing costs that you won’t see when working directly with a bank. Sometimes lenders pay those additional costs directly to the broker, but in other cases the broker may pass them on to you. It’s also important to know if brokers have an interest in the loan they’re recommending to you, which was a common occurrence before the most recent housing bust. The latest federal laws on lending have made this practice less frequent, but you still need to be your own advocate by asking brokers lots of questions.
Loan originators continually monitor the interest rates and policies of a large number of lenders. Thus, they are able to provide you with a list of lenders who offer the lowest rates to borrowers with your profile. It’s important to understand an originator’s business model, just as it is with brokers. Originators typically charge lenders a small fee for each referral and a much larger fee for approved applications. While lenders pay these fees directly to the originator, the fees will ultimately increase the cost of your loan. Nevertheless, these fees usually are less than the typical broker’s fee of 1% of the loan value.
Some credit unions refinance mortgage loans.. Credit unions serve a particular group of people such as those who live in a certain area or who work for a certain company. For those groups, credit unions may be easier to deal with than a major bank. Inside Mortgage Finance reports that credit unions have become fairly aggressive in pursuing mortgage loans, because they see it as a good use of their assets. Focusing on a particular demographic allows credit unions to reduce their overhead and pass the savings on to their customers. Visit MyCreditUnion.gov to locate credit unions in your area that you’re eligible to join.
Use Figure for your mortgage refinance
If you’d like to skip working with a bank or credit union to refinance your mortgage, Figure has a fantastic option. You apply for our mortgage refinance online, making the process quick to complete. Your refinancing application can close in as few as 10 days. We also have a dedicated support team to help you through the application.
Our refinancing process is simple, clear, and streamlined. If you want to learn more, head over to our mortgage refinancing information page.