Why this checklist exists
A refinance quote is only useful if you know what you are comparing. CFPB explains that a Loan Estimate tells you important loan details and can be used to compare offers from different lenders.
This checklist turns that idea into a refinance-specific review process.
Step 1: Confirm the basic loan structure
- Loan amount.
- Loan term.
- Fixed rate or adjustable rate.
- Rate-and-term, cash-out, VA IRRRL, FHA streamline, jumbo, investment property or second home.
- Whether taxes and insurance are escrowed.
Step 2: Compare lender-controlled costs
Focus on origination charges, points, lender credits and the interest rate. These are the easiest parts of the quote to misunderstand because a lower rate can come with more upfront cost, while a lender credit can reduce upfront cost in exchange for a higher rate.
Step 3: Separate true costs from timing items
Prepaids and escrow setup can affect cash to close, but they are not always the same as lender fees. Ask whether a charge is a true loan cost, a government/recording charge, a title/settlement charge, prepaid interest, insurance, taxes or escrow funding.
Step 4: Calculate break-even
Divide the refinance cost by the monthly savings to estimate the simple break-even period. If the break-even period is longer than the homeowner expects to keep the loan, the refinance may not work even if the payment is lower.
Step 5: Ask these questions before locking
- What is the rate with zero points?
- What is the quote with a lender credit?
- What changes if I take cash out?
- What changes if the appraisal comes in low?
- Which costs can change before closing?
- What is my total payment including taxes and insurance?
- How long is my break-even period?
Official-source notes
CFPB consumer resources explain that borrowers should compare Loan Estimates, closing costs, interest rates, points and lender credits together. CFPB also explains that points usually lower the interest rate in exchange for more money at closing, while lender credits can reduce upfront costs in exchange for a higher rate.
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