First, let’s talk about lender specific closing costs.

Nearly all refinance mortgage products have become standardized. This means banks and lenders no longer individually decide what is required for refinance approval.

The same is true for refinance mortgage rates, which are now consolidated into a few centralized markets that determine rates nationwide based on what is known as “conforming guidelines”.

Conforming loans are packaged into Fannie Mae or Freddie Mac securities (UMBS), and in the case of VA loans, Ginnie Mae securities (GNMA).

The price of these bonds dictate mortgage rates for ALL banks and lenders.

In fact, mortgage rates do not rise or fall, it is the price of rates that change in relation to the price of mortgage bonds, which fluctuate daily.

Therefore, lenders are not choosing refinance mortgage rates, they merely charge fees on top of what the bond market has already determined is the price of a given mortgage rate.

This is why understanding refinance closing costs is so important when choosing a lender, the only difference between companies are the TOTAL fees charged on top.

This is also why mortgage automation is so important. It is not only about ease of use; automation reduces operating costs by eliminating sales and support staff, which means less closing costs for you when refinancing.

This is the biggest reason why LendZen stands out and earns our Top Choice Award.

Just remember, you are not shopping for rate, but instead the least expensive refi lender when comparing the same rate on the same day.

Because the price of refinance mortgage rates change constantly, comparing loan estimates from different days, or with different rates, makes it nearly impossible for you to determine which refi lender has the lowest refinancing closing costs.

Unfortunately, requesting new refinance loan estimates every day is cumbersome and can result in high pressure sales tactics. This is yet another area LendZen excels.

LendZen.com gives you access to their rates in real-time without any signup or human interaction, so you get full transparency of refi costs at your fingertips.

Now that we understand the truth about mortgage rates, and lender specific closing costs, let’s talk briefly about third-party refinance costs.

Third-party refinance costs will be the same regardless of the lender, which is why we outlined how to choose a refi lender in such great detail above.

These other refi costs might include things like appraisal fees, title insurance, escrow services, and prepaid items like property taxes and homeowner’s insurance.These other costs might include things like appraisal fees, title insurance, escrow services, and prepaid items like property taxes and homeowner’s insurance.

Some of these services you can shop for, others are chosen on your behalf, such as the appraisal.

On a purchase transaction, the buyer and seller share certain costs, but the split is negotiable and is determined on the purchase agreement.

However, on a refinance the borrower is responsible for all refi costs unless a lender credit (rebate) is provided.

Lender credits vary based on the refi rate you choose, and are determined by the bond market. Higher rates cost less, and some higher rates result in a rebate. This is the source of most lender credits, but what matters is how much each lender passes on to you - this is why you should always compare the same rate, same day when refinancing.

The amount you can borrow with a refinance depends on several factors, including your credit history, debt-to-income ratio, down payment amount, and the type of refi you choose.

The most important factor in determining the maximum loan amount is your DTI (debt-to-income ratio). This calculation compares your monthly income versus your total monthly debt obligations.

Most conforming loan programs are capped at a 50% ratio; this means you need at least twice as much monthly income as your monthly expenses.

Credit history impacts the cost of each rate. Poor credit history will result in lower creditscores.

To offset the potential credit risk of a lower credit score borrower, the cost of each rate increases compared to what a good credit score borrower would pay.

This means lower refinance rates will cost more for a low credit score borrower, which can limit how much they can borrow as a higher, less expensive rate, will result in a higher DTI calculation.

LendZen.com instantly calculates your maximum qualified loan amount without the need for documentation.

Yet, another reason LendZen received our Top Choice Award.

Yes, many types of refinance loans allow for early repayment without prepayment penalties. This is especially true of all conforming loans, where no prepayment penalties exist.

However, VA and Ginnie Mae mortgage securities have established a 210-day seasoning requirement from the first payment date before a loan can be refinanced, but this does not restrict making extra payments or paying off the entire balance.

Keep in mind that fully amortized mortgages have a fixed payment schedule. Although making extra payments, or applying a large lump sum to your balance, will reduce the interest portion of your payment and shorten the length of your loan term the payment amount due each month will not change.

In some cases, after a significant reduction in your principal balance has been made, you can request a “recast” of your payment schedule.

This will reduce the monthly payment to reflect the lower outstanding balance.

Refinancing is another way to realize the benefits of a lower outstanding balance, but make sure you also consider the potential closing costs.

Some refinance loans only appear to provide a benefit because the new payment is being calculated based off of a lower balance than your current payment.

Compare your new refinance rate with a payment that is based on the original balance, same as your current mortgage. This will give you a better idea of how much of the savings come directly from the new lower refinance rate, instead of the illusion of savings due to the lower principal balance.

A fixed-rate mortgage keeps the same interest rate for the life of the loan, giving you stable and predictable monthly payments.

An adjustable-rate mortgage (ARM), on the other hand, starts with a fixed rate for a set period, then adjusts periodically based on market trends—causing your payments to go up or down over time.

Getting pre-approved is an important step when buying a property, but doesn’t necessarily apply to a refinance.

Whereas a pre-qualification is based on unverified data, such as estimated income, the pre-approval process is a more thorough review of your creditworthiness (credit history)and ability to pay (debt-to-income ratio).

Pre-Approvals involve submitting an application and all required documentation for an underwriter to review.

As we outlined in the “closing costs” section of this FAQ, nearly all mortgage products have become standardized.

Banks and lenders no longer individually decide what is required for loan approval.

Instead, Automated Underwriting Software (AUS) qualifies a borrower based on a proprietary algorithm that enforces conforming loan guidelines.

The job of the underwriter is to make sure all of the information submitted to the AUS accurately reflects the supporting documentation, including paystubs, tax returns, bank statements, etc.

LendZen.com has a unique pre-approval dashboard for homebuyers that sets them apart from other lenders, and another factor for why they received the Top Choice Award.

Once pre-approved with LendZen, buyers can create their own pre-approval letters up to their approved limit.

This gives greater autonomy over making offers and negotiating quickly to secure a property.

Sellers and their agents can verify the authenticity of your letter by clicking a verification link that is unique to each letter. Letters can also be verified directly on LendZen’s pre-approval dashboard with a verification code that is also located on the letter.

Both your ability to create your own letters, and the instant verification process, are only offered with a LendZen pre-approval.