Mortgage Refinancing Questions

by Scott from St. Louis, Missouri USA

Hi Kate, I have mortgage refinancing questions and appreciate the free advice, as I'm knee deep in the refi of my house. We've owned it for 4 years. I have a conventional 30yr loan, but it was a 85/5/5 split. Sale price was $212,000.

I put down 5 percent. Then got a 6.375 percent on the main loan of $172,000 and 9.999 percent line of credit for the remainder, thus avoiding PMI (Private Mortgage Insurance).

Obviously with the market where it is, there is a great opportunity to save some dollars through a refi. Especially for me to consolidate the loans. That said, I don't mind paying someone for their services to do so, just worried, like everyone else, that I'm somehow getting worked over with "fuzzy math", etc.

And you can't blame us. There is so much mistrust out there with what's happened in the market, that the industry has no one to blame but themselves. Unfortunately, I am still feeling like we are at the mercy of the lenders. With that, you offering free advice is extremely appreciated.

I'm now looking at an FHA since the value of the house has gone down with the rest of the market. Still confident that even with a low end estimate, it'll appraise well over $210k (again, original loan amount was $202k, and I have 4 years worth of payments in).

I've spent countless hours talking with direct lenders, mortgage brokers, etc., even shared my quotes / GFEs (Good Faith Estimates).

All direct lenders tell me that brokers are crooked and I'm getting screwed, and how no one else can get a better rate than the direct lender which intuitively makes sense, then again, that doesn't mean they are offering me the best rate, and what else are they going to say.

However, the mortgage brokers seems to be working a heck of a lot harder (providing me lots of good and useful data for comparison and education, and his Good Faith Estimates / Truth In Lending (GFE / TIL) disclosures are better in each category - closing cost, interest rate, APR, and total cost of the loan.

My Mortgage Refinancing Questions -- 1

So who do I believe?

As of today, GFE is being quoted at 5 percent on a 30 year FHA, with MIP Fees of $3388 being rolled into the loan. And then being quoted bringing $1430 to close, plus whatever escrow comes out to, plus daily interest rate of $27.35.

However on the TIL, it's now showing 5.620 rate. From your earlier articles, I understand that the broker is making a yield spread premium on the .620 percent, but not sure if this is reasonable or not.

My Mortgage Refinancing Questions -- 2

In your opinion, is this spread excessive or fair?

Sorry for so much info, but thought Question 1 would be helpful for the community at large, and answering Question 2 would go a long way with putting me at ease.

Again, your expertise/insight is greatly appreciated!

Sincerely, Frustrated in St. Louis

P.S. My credit score is at 800.

Kate Answers: Mortgage Refinancing Questions

Dear Frustrated in St. Louis,

First of all I'd like to offer my hearty apology for being so tardy answering your question. I was called out of town on a family expedition which ended up longer than anticipated.

So here's the scoop, Scott, to answer your mortgage refinancing questions so pertinent to today's market.

Answer 1 to Mortgage Refinancing Questions

Unless you are a person with innate aptitude for discerning truthfulness, you will need to compare numbers to decide between lenders and brokers.

Compare numbers methodically. Request Good Faith Estimate and Truth in Lending disclosures from broker and lender on the same day, based on locking the rate for the same period of time. Inform them of the possibility that you could be locking your mortgage rate that day.

Next, compare principal and interest payments, financed closing costs, cash out of pocket, and loan amounts. Sounds too simple? Be assured this will take take some elbow grease on your part.

Base your request for the disclosures on one of these three criteria.

1. Same mortgage rate


2. Same monthly house payments, or


3. Same loan amount

How else can a homeowner compare apples to apples?

Answer 2 to Mortgage Refinancing Questions

Yield spread premiums are not actually calculated by subtracting interest rate from APR.

Using the new Good Faith Estimate disclosure, go to the Adjusted Origination Charges. This will include yield spread premiums as either a charge or a credit. It also includes other lender charges.

But don't get distracted with who is making what. Lenders and brokers do not always use the same lingo making comparisons dicey to say the least. Stick to the numbers.

Keeping your eye on the ball, compare principal and interest payments, financed closing costs, cash out of pocket, and loan amounts.

As far as deciding what is fair, that is a subjective judgment based on individual preferences. Just remember, closing costs are negotiable.

Again, my apologies for being tardy with a reply. Please write again if I can be of assistance.

Click here to post comments on Scott's letter.

Best Wishes,








Your mortgage refinancing questions are important. You can Ask Kate anything you want regarding real estate or mortgage financing. All questions welcome!

Hop back to Ask Kate Credit, Mortgage and Refinancing Questions from Mortgage Refinancing Questions

Return to Prime-Real-Estate-Articles from Mortgage Refinancing Questions

Help Spread the Word

Please come back and visit often. Help me spread the word by sharing Mortgage Refinancing Questions with your friends using these easy social bookmarking buttons.

The information you obtain at Prime-Real-Estate-Articles.com is not, nor is it intended to be, a substitute for financial, real estate or legal advice. You should consult an attorney, accountant, lender or real estate agent, as applicable, for advice regarding your individual situation. Comments and opinions found here are not necessarily those of this site.