Compare Mortgage Lenders - Avoid Borrower Remorse

by Kari in Portland, Oregon

Ask Kate how to compare HARP mortgage lenders and avoid borrower remorse: Let's talk about how to shop for a mortgage! If you feel you aren't equipped to accurately weigh one lender's offer against another, take heart and keep reading! Kari from Portland, Oregon who felt the same sent me these thought provoking questions which I have answered below.


With this guidance and a little elbow grease on your part, you can learn to shop and compare mortgage plans like a pro, whether the program is HARP, Fannie Mae, FHA, VA, or private money.

And in case you haven't guessed, this is the purpose of my website... empowering homeowners to take charge of their loan process! After all, how else will you get your best mortgage rate?

What Are Our Mortgage Options?

By Kari in Portland, Oregon
Compare HARP Mortgages and Avoid Borrower Remorse

Hi Kate,

My husband and I have two mortgages that are backed by Fannie Mae. We are interested in refinancing through the HARP program (we are eligible).

But looking through your website, it looks like two mortgages can't be combined into one loan. Your help would be helpful on few items below:

1) Is there a way to combine two mortgages into one loan? If so, what's the best way?

2) What's the difference between working with a bank, mortgage company (national like, Chase vs. local like, Unitus), and private mortgage companies, or lenders that you've listed in your directory? Does one offer better rate, or flexibility than the other?

3) How much closing cost is 'normal' based on $275K loan?

4) Are there any specific fee/cost within the closing cost that shouldn't be included, or reduced through the HARP program?

5) We recently received an offer through our current mortgage company (who services the loan) 4.99% APR with zero closing cost. What do we need to understand and know before considering this option?

Thank you so much! Kari

***zz-portrait-left.shtml*** Ask Kate answers: How to Compare Mortgage Lenders and Avoid Borrower Remorse

Hi Kari,

Yes! Thought provoking questions! Let's move right to the answers!

I recommend reading my entire response first and then going back through it to follow the links to more in-depth help on my website.

1. HARP Refinance Guidelines for 1st and 2nd Mortgages

The HARP refinance program is for 1st mortgages only. That means a borrower cannot pay off a 1st and 2nd mortgage by rolling them together into a new 1st mortgage.

So your only HARP choice is to refinance the 1st to lower the monthly payment. This will require cooperation from the lien holder of the 2nd who needs to agree to a subordination agreement. You can read more about this requirement at HARP 2 Refinances and 2nd Mortgages.

2. Compare Different Categories of Mortgage Lenders

In most cases, you are free to use any participating HARP lender for the refinance. When the program first began, homeowners were forced to refinance through their current loan servicer. Removing this restriction increased competition which resulted in lower cost.

As with any type of mortgage refinance, borrowers should ask friends and relatives for lender referrals and shop rates and fees strategically. Theoretically, there should be no difference between national and local lenders. But I strongly recommend conscientious comparisons before choosing a lending institution because indeed, huge differences do exist both in cost and service.

As a convenience for borrowers, I provide a mortgage directory on my website. Loan originators in the directory should also be qualified by borrowers, just as you would interview a lender referred by a friend.

Private money lenders on the other hand are a different breed. They often loan to applicants who do not fit traditional lending guidelines of Fannie Mae, Freddie Mac, FHA, and VA financing. This flexibility comes at a price though, namely higher interest rates, runaway closing costs, and inferior loan terms such as prepayment penalties.

These programs with flexible loan approvals may be a life-saver for less qualified borrowers. But the offers fall under the principle of buyer beware and thus the documents need to be scrutinized carefully.

3. Rule of Thumb for Average Mortgage Costs

The cost of getting a home loan is going to vary from program to program and borrower to borrower. Even so, I gravitate to the 3% principle - fees should run less than 3% of the total amount borrowed.

But keep in mind, the size of loan amounts, loan-to-value ratios, debt-to-income ratios, and credit scores are just a few of the parameters that adjust the base cost of refinancing.

Here is an efficient way to shop. Because a Good Faith Estimate (GFE) is the backbone of any home loan transaction, studying the form will help you uncover an abundance of information and assist in analyzing refinance fees and interest rates.

Request a quote from 3 to 4 lending institutions. But know this! GFEs must be based on the identical interest rate for an accurate comparison of the true cost. Otherwise you are comparing apples to oranges.

4. HARP Refinance Closing Costs

HARP rates and fees should mirror the cost of traditional refinance programs. In fact, one charge called a Loan Level Price Adjustment (LLPA) is lower on the HARP program under certain circumstances.

Go here for the scoop on Home Affordable Refinance Program's lower LLPA and other underwater refi features.

5. The Truth About No Cost Refi Programs

Claims of no closing cost refinancing can be deceptive. Approach carefully. If the program has truly eliminated all charges, any upfront deposits should be refunded at closing and your loan amount (amount owed before refinancing) should also remain unchanged at closing.

The same principle holds true for the number of years remaining before your balance is paid off. In other words, if you currently have 20 years left to pay off your mortgage, increasing the term to 30 years becomes a cost to you.

What should you be watching for? Here are three biggies: balloon payments, adjustable rates, and crushing prepayment penalties.

6. How to Lock in Your Mortgage Rate

Lastly, I want to address a crucial step in the loan process that you may be overlooking - the process of locking in the mortgage rate. When can you lock? For how long? Is there a fee to lock? Are there special provisions to float down the rate if financial markets improve? What about lock extensions if the transaction closes late?

Do not accept verbal explanations to your inquiries. Insist on answers being pointed out to you in writing within your signed and dated loan disclosures.

Get more questions to ask your loan originator to prepare for locking your mortgage rate. Follow the links in each question for more guidance.

Remember! This is your mortgage, not the lender's mortgage! It's a fact that only you will be responsible for paying back this enormous sum of money. So read, study, compare, and guard your homeownership by following my blog, for up-to-date information free of bias and independent of lender influence.

Best wishes for a healthy mortgage,


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