Mortgage Refinance Costs Paid By Lender With Lender Credit

Lenders Can Pay Borrower’s Mortgage Refinance Costs With Lender Credit

All mortgage loans, whether they are purchase or refinance mortgages, have closing costs. Homeowners who are thinking of refinancing their current mortgage will have mortgage refinance costs associated with their refinance. Some states have higher closing costs than other states due to higher title charges and government fees such as transfer stamps.

Here are examples of mortgage refinance costs

  • Title charges
  • Transfer stamps
  • Recording fees
  • Pre-paids
  • Homeowners insurance premium
  • Discount Points
  • Origination fees
  • Appraisal fees
  • Other third party charges

Net Tangible Benefit To Borrower

In order for a loan officer to be able to refinance a mortgage for a homeowner, there needs to be a net tangible benefit to the borrower. Lower mortgage interest rates alone does not mean that the borrower has a net tangible benefit.

Here are some things that borrowers needs to consider before refinancing

  • How long is the homeowner intending on living at the present home being considered to refinance
  • How much are the mortgage refinance costs?
  • How long will it take for the borrower to recoup the mortgage refinance costs?

The total mortgage refinance costs is dependent on the following

  • Mortgage interest rates
  • Discount Points
  • Location of property: Some states and/or counties are more expensive
  • Other third part closing costs

Discount Points

Homeowners who do not intend on moving and not refinancing their home loan again can benefit by getting a lower mortgage interest rate by buying down the rate with discount points.

Borrowers can get lower rates by paying points.  One discount point is equivalent to 1.0% of the loan amount.

Case Scenario

Here is a case scenario on buying down mortgage rates with discount points:

  • $100,000 mortgage, the mortgage refinance costs might be between $3,000 and $6,000
  • Mortgage refinance costs involves title charges, origination fees, pre-paids, and other closing costs
  • Say par rate is 4.0% but borrower can pay 2% of the loan amount, or 2% in discount points which is $2,000 to get a 3.75% rate
  • Buying down the rate may or may not be beneficial to the borrower depending on the time it takes to recover and reach the break even point
  • If the borrower saves $2oo per month, it takes them 10 months to reach the break-even point to make up the 2% discount points or the $2,000
  • Homeowners not intending on keeping the property for a certain period of time, it may not be beneficial for them to refinance as well as buy down the rate with discount points

Lender Credit To Cover Mortgage Refinance Costs

Many homeowners do not even consider on a refinance mortgage loan because they feel that they might have to come up with the mortgage refinance costs separately.  That is absolutely not the case.

Closing costs on refinances can be covered in three different ways

  1. Mortgage Refinance Costs can be paid by homeowner at time of closing with cash to close
  2. Closing costs can be rolled into the mortgage loan balance
  3. Closing costs can be paid by lender with lender credit towards closing costs
  4. On home purchases, closing costs can be paid with sellers concessions by sellers towards buyer’s closing costs

Loan officers can go over the best option program with borrowers.  Rolling the closing costs into the loan might not work for some refinance mortgage loan borrowers because they might not qualify because it exceeds the maximum FHA and/or Conventional Loan Limits.

FHA Streamline Refinance With No Closing Costs

Homeowners with a current FHA Loan can do a FHA Streamline Refinance with no closing costs.

Here Is How FHA Streamline Refinance Works

  • No credit score required: Only credit requirement is that homeowner be timely with their current FHA Loan for past 12 months
  • No income verification: Debt to income ratio is not an issue
  • No home appraisal required: FHA does not require a new appraisal because under FHA eyes, they are already insuring the home and why would a new appraisal be required with the same property that they are insuring
  • All closing costs will be covered with lender credit and paid by lender. Not every mortgage company offers lender credit. The Gustan Cho Team covers all closing costs on FHA Streamline Refinances
  • Borrowers get to skip two mortgage payments once they do a FHA Streamline Refinance
  • Most FHA Streamline Refinances take two weeks to close

Homeowners who have mortgage interest rates of higher than 4.5% can benefit with FHA Streamline Refinance with no mortgage closing costs. Please contact The Gustan Cho Team at 800-900-8569 or text Gustan at 262-716-8151 for faster response. Borrowers can also email their mortgage inquiries to gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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