Mortgage Refi Journey Started

I wondered out loud last Monday why I couldn’t find a no-cost refi deal for a 15-year fixed rate mortgage at 4.5%. Reader Raghu commented that he got an offer for 30-year fixed at 4.875% with a 0.125% escrow waiver fee.

I called the mortgage broker he referred to me but the broker is not licensed in my state. I also remember that Raghu wrote about his refinance experience last December. I actually commented on a few of his posts back then because he had listed my blog as one of his favorites.

Raghu mentioned in his posts last year that he went with National Mortgage Alliance (NMA), which is an Upfront Mortgage Lender certified by the Mortgage Professor. NMA lends in all 50 states and Washington DC. When I checked NMA’s no-cost refi rates, I was offered 30-year fixed at 4.875% and 15-year fixed at 4.5%, both with a one-time 0.125% escrow waiver fee and $120 in document preparation and government recording fees.

If I agree to use escrow, then I just pay $120, which is not strictly no cost, but close enough. Other places I checked all want at least $2,000 in closing cost for the same rate. Score! Thank you Raghu!

Doing a mortgage refi with a company I never dealt with before makes me uneasy, especially when its rate and fees are so much lower than others. If I do a loan application, I have to give out my Social Security number and a lot of personal information. What if an ID thief sets up a web site to collect mortgage applications? What if it’s a bait-and-switch? But because NMA is certified by the Mortgage Professor and because Raghu said his closing went smoothly, I think NMA is legit.

I’m going to document this refinance journey and let you see how things pan out. If you haven’t refinanced lately, perhaps it’s time to consider doing it.

Wednesday 4/22/2009. Looked up loan rate and fees from NMA. Requested that a loan advisor contact me. Received an e-mail and a phone call within a few hours but I was too busy with work to reply.

Thursday 4/23/2009. Spoke to the loan advisor. Received a Good Faith Estimate (GFE) by e-mail showing the closing cost will be credited except a 0.125% escrow waiver fee and $120 in doc prep and government recording fees. Same as what I got online, good. Asked a few questions:

  • Can appraisal be waived? – Fill out an application first. Then wait for a preapproval from the automated system.
  • Is there a prepayment penalty? – No.
  • Are there any non-refundable fees upfront? – A $300 deposit is required to lock the rate. It will be credited at closing. If you don’t close, the deposit becomes non-refundable if an appraisal is performed. Fair enough. Appraisal costs money.

I called the mortgage broker I used many times in the past. He couldn’t beat the deal. Filled out application online with NMA in the evening. Gave a credit card number for the $300 deposit for locking the rate.

Friday 4/24/2009. Got an e-mail from the NMA loan advisor saying their automated system says an appraisal is needed. Stupid computer! But the loan advisor offered some additional credit toward closing. OK, that’s good. Got a few more e-mails for this and that. All taken care of. The loan advisor replied all my e-mails promptly. When I called her, she always answered. My calls never got to voicemail. So far so good.

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Comments

  1. TIE says

    Am I understanding correctly that you have to use an escrow account and that is why they are willing to credit you 0.125%? It has been a while since I used an escrow account so maybe you can refresh my memory: do you receive interest on the account? If not, then that explains how they recoup the 0.125%. They get the interest. You pay the opportunity cost for money tied up in escrow. I think that’s why I don’t like escrow. Plus, I’ve had companies mess up payments out of my escrow account.

    I’m not saying you shouldn’t take a deal with escrow. I’m just commenting on the issues. It would be interesting to include the cost of opportunity in the effective rate you’re getting. You’d have to estimate how much money will sit in escrow and for how long before it is used for taxes and insurance, and what you would have otherwise invested that money in over that time.

    If my memory is poor on who gets escrow interest, let me know. That changes the opportunity cost a little.

  2. Harry Sit says

    TIE – The choice of using escrow (aka impound) or not is with me. If I don’t use it, they charge me a one-time fee of 0.125% of the loan amount. If I use it, I save that fee. That’s the deal. With all my previous mortgage refinance (I lost count: this will be the 7th?), I never used escrow. I have not decided whether to use escrow this time. I don’t have to make the decision about escrow/impound for a while. When I do, I will write about it!

  3. Raghu says

    I was surprised to see may name here. Right now I’m locked at 4.875% No Closing, No Escorw (without escrow waiver fee). After dealing with refinance since Nov 2008, I came a thing or two about how to find brokers and places that has offer lowest rate. But, one thing is for sure, if you are willing to spend time and play the game asking brokers to match the rates, you can ultimately get better rates.

    I plan on writing more on how to get brokers to lower the rates.

  4. Harry Sit says

    Raghu – Great work for getting rid of that escrow waiver fee. You got a better deal than I did. Right now my NMA deal has an escrow waiver fee. Because they offered me a little more money (still less than the escrow waiver fee), I settled for “good enough.” I look forward to reading your posts. Thank you again for leading me to NMA. I gather you didn’t have any problem with them last time. If there’s anything I should be aware of, please let me know (use the contact form if you don’t want to say it publicly).

  5. Kate says

    we are refinancing, and are also facing a fee for declining escrow; I am perplexed as to why they charge a fee for this? We haven’t used an escrow acct for the last 11 years, and we are refinancing with the same mortgage co…..

  6. Harry Sit says

    Kate – I heard a loan with escrow is easier to sell to Fannie Mae or Fannie Mae charges the originator a fee if the loan doesn’t have escrow. The originator is passing the fee down to the borrower.

  7. Harry Sit says

    Betty – NMA is a lender in Georgia. The link is in the 3rd paragraph. They lend to all 50 states.

  8. Nitlsu says

    TFB – Thanks for this series of posts on the no-cost refi. I spoke with my mortgage broker who sorta was giving me the same speech about how “no cost” refis are no longer feasible…and I am glad to have run into your blog and looks like NMA still has the “no cost” refi.

    My question is….more than a year after you wrote this blog…are you still happy about your refi experience? Any problems since? Has NMA re-sold your mortgage to some other bank?

  9. Harry Sit says

    Nitlsu – Yes, I’m still happy. I did it one more time with NMA a few months ago. No problems. NMA sells the loan as soon as it’s closed. Your very first payment will be made to another bank.

  10. Heather says

    Hi TFB, did you have to pay an appraisal fee any of these times? If so, was it extra? Or is that absorbed by the negative point too?

  11. Mark says

    Great info in your blog. I am in the process of working with NMA on a no-cost refi right now and it seems that the lender credit varies daily. For my loan amount of 180000 it was $2450 when I first got the quote but in the week since then it has dropped to $2100.

    This means that my total estimated closing cost+interest rose from $189 to $564. That would mean more money out of my pocket….any suggestions?

  12. Harry Sit says

    Mark – Yes it does change daily because the market changes daily. If you paid the $300 to lock the rate when you applied, they will give you the credit at the time they give you the preapproval. Once that’s done, it’s locked. If you didn’t lock, you are subject to the daily fluctuations. In the grand scheme, $350 isn’t a big deal. Just make sure you lock the rate and fee.

  13. Cindy says

    TFB – You mentioned that you spoke with some other no-cost refi lenders whom NMA matched. Can you list some of those? I am working with NMA but I don’t fee like I am getting the best deal out there.

  14. Harry Sit says

    Cindy – That was Raghu, not me. It looks like AmeriSave is less expensive. I have never dealt with it though.

  15. Heather says

    Hi TFB,

    In working with NMA they want to know if I prefer working with a specific title company or their own. Who did you end up choosing? I am not sure if there are any pros/cons in going with one over the other.

    Also I am suspecting that all the costs associated with the title company were included in the quote correct?

  16. Harry Sit says

    Heather – If the cost is the same, you are better off using a local company of your choice. See Mortgage Refinance Completed. I used NMA’s company because the one I found locally would charge more. If you use theirs, the cost is included in the quote. If you use your own which charges more, you will have to pay the difference.

  17. BogleontheBrain says

    TFB,

    Just locked with NMA @ 4.5% in early, however the lock period is for 30 days. In reading your timeline, I think it would be unreasonable to expect my loan to close within 30 days. How was this handled with your loan?

  18. Harry Sit says

    @BogleontheBrain – The refi in 2009 took 42 days because of a delay by the appraisal company. NMA extended the lock at no cost to me for it wasn’t my fault. My next refi with NMA in early 2010 only took two weeks. So it’s not unreasonable to close in 30 days. You can ask your loan officer if he/she thinks the loan can close in 30 days and what if it can’t due to factors out of your control.

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