Most of the time, it's a good idea to refinance when the new mortgage rate is 2% lower than the old one. Even if the difference in interest rates is only 1% or less, it may still be a good idea. Your monthly mortgage payments can go down if you get a lower rate. At 8.5%, your payment on a $100,000 loan, excluding taxes and insurance, would be about $770. If the rate dropped to 7.5%, your payment would drop to $700, saving you $70 per month. Your savings depend on how much money you make, how much you spend, how much you borrow, and how the interest rate changes. Your reliable lender can help you figure out what your choices are.

When a loan is refinanced, most lenders charge fees. So, if you only plan to live there for a few years, your monthly savings might not be enough to cover these costs. For example, a lender charged you $1,000 to refinance your loan, which saved you $50 per month. It would take you 20 months to get back what you paid in the beginning. Some lenders will charge a slightly higher-than-average interest rate on loans to refinance, but they won't charge any fees. This will depend on how much interest you pay on the loan you already have.

The application fee is usually between $250 and $350, and the origination fee is usually 1% of the loan amount. Most of the time, the costs of the title search, title insurance, lender fees, etc. will be the same as they were with your current home loan. The total cost could be as much as 2% to 3% of the loan amount. If you don't have the money to pay the fees that come with a loan, you can look for lenders who offer "no-cost" loans with a slightly higher interest rate.

One point is equal to one percent of the loan amount, so one point on a $100,000 loan is $1,000. Points are fees that must be paid to a lender in order to get a mortgage loan with certain terms. Discount points are fees that are paid upfront to lower the interest rate on a mortgage loan. Lenders may talk about costs in terms of basis points, which are hundredths of a percent. One point, or 1% of the loan amount, is equal to 100 basis points.

Yes, as long as you plan to live there for at least a few years. Paying discount points to lower the interest rate on a loan is a good way to reduce the amount you have to pay each month and possibly increase the amount you can borrow. But if you only plan to live there for a year or two, the money you save each month might not be enough to cover the cost of the discount points you paid for upfront.

From the time you apply for a loan to the time you pay it off, mortgage rates can change. If interest rates go up quickly during the application process, the borrower may have to pay more than expected for their mortgage. So, a lender can let a borrower "lock in" the loan's interest rate, which guarantees that rate for a certain amount of time, usually 30–60 days, and sometimes for a fee.

There is no way to know how interest rates will change at any given time, but your lender may be able to guess where they are going. If you think that interest rates will change in the near future, it might be a good idea to lock in your rate so that you can get the loan. Or, if you can afford a higher loan payment or lender's lock fees, you may want to let interest rates "float" until the loan closes.

Even if you have bad credit, you can still get a home loan. A lender will think that you are a risky borrower, so they will charge you a higher interest rate and expect you to put down more money, usually between 20% and 50%. The higher your costs will be, the worse your credit history is.

Not necessarily. If you've been late with your payments less than three times in the past year and none of them were more than 30 days late, you still have a good chance of getting a competitive interest rate. Most lenders will understand if this is because you got sick or changed jobs, but you will need to explain why.

When choosing between lenders, there are two important things to think about:

  • Quality of Service – This is especially important for first-time homebuyers, who will have a lot of questions about the whole process of getting a loan and the different loan options available. Find a lender you can trust who has great customer service skills and ask questions even before you fill out an application.
  • Cost of Services – You should ask potential lenders right away how much they charge for their services and if there are any fees. They should be able to give you information and help you through the process of getting a loan so that you feel confident that you made the right choice by going with them.