re: Mortgage Refinance - Tips to get best rate?

Ask them what the yield spread premium (YSP) is on the rate they're quoting you is. Quick lesson:

Lender quotes you % rate off of a matrix updated weekly and sometimes during that week. It's based on your middle score in your tri merge credit report and the amount of money you want to borrow for your home, based on the % of your home's overall value. This second metric is expressed as "Loan To Value."

Lower Rate = Better for Buyer

Higher Credit Score = Lower Rate (Creditworthiness pays off)
Higher Loan To Value/LTV = Higher Rate (Riskeier to loan you more $)

So Middle Credit Score + LTV = Your "Par" rate on the matrices they receive from their lenders weekly.

But you don't get quoted "Par" pricing on your rate. Why you ask? Because loan officers need to make money, and the more they make the better for them. So they shift out a few basis points (read, increase your interest rate incrementally) in order to sell you an interest rate on your mortgage that's actually higher than what you qualify for.

The bigger the difference between par pricing and the rate you lock and close at, the more money the broker and lender make. The key is not to knock your head off and be uncompetitive, but to still earn enough to make a living.

The amount they're paid on your interest rate is referred to as the "Yield Spread Premium," and unless you ask they're not required to tell you how much they made in YSP on your loan.

A note: you cannot ask someone working on commission to offer you a product where they don't get paid. Now, one way to achieve as low of an interest rate as possible is to pay a certain amount of money based on your loan size, credit etc, and "buy your rate down." This still allows for profit on the interest rate and allows you to reduce your interest rate simultaneously.

They can also charge closing fees (Usually on Line 801 or 803 on your sample HUD 1 Settlement Statement in your Good Faith Estimate and your Closing Paperwork). But that is disclosed to you and you see that amount (if you know where to look...which you now do).

Another note: What a lender/broker makes on the interest rate is called "the back end." The "front end," are the closing costs you see on paper at closing. Both the front end and the back end are capped by federal and state laws governing lenders.

At any rate, asking the lender what is your Par pricing is, and how much he is being paid on your rate with an understanding of this concept will make most lenders gulp or roll their eyes and groan. But it can save you money.

Good luck.