What is the best bank to use to refinance your mortgage?

The rate market is on fire and it’s a great time to lock in a low fixed rate. My last video was on loan products and in today’s video I will be talking about who are the best refinance lenders out in the market. The answer is pretty simple, go with the mortgage refinance company that gives you the lowest rate, lowest closing costs and great service. The service part you may not figure out right away, but loan terms are easy to compare with different lenders.

This is not organic food, so you can work with all mortgage lenders and the brand name does not matter as long you are getting great terms: low closing costs and a low interest rate. After the 2008 crash, no lender is allowed to originate a primary use mortgage that has a prepayment penalty. If you are refinancing your primary home mortgage it is against consumer law for lenders to have tricks up their sleeves, so you can rest assured that no shady business is happening behind the scenes. For adjustable rate mortgages you have to pay attention to what the terms are: when rate will change and how high can it go. But even on these types of loans there are no prepayment penalties when refinancing your mortgage for your primary property.

Now moving to our main topic of the day; finding the best mortgage lender for you. First I would like to list out what types of lenders are out there and what they are good at! It does not matter if you are refinancing your mortgage or purchasing a home, these types of lenders shine in their niche even though all lending companies carry most loan products. So there are 2 types of mortgage companies, mortgage brokers and banks. Mortgage brokers don’t use their own money to fund, they table fund and use companies which are called wholesale lenders to fund their loans. In essence they bring relationships to wholesale lenders that eventually fund and close the loan. Banks usually lend their own money, and this type of lending is called retail banking. Easy way to remember is; you can walk into Bank Of America so it is called retail banking but you cannot walk into a wholesale lenders office, you will have to go through a Mortgage Broker, so it is called Wholesale banking.

Before I highlight which type of banking (wholesale or retail) would best fit your needs, let’s first figure out which loan products are out there and which one you have. Loans fall under three categories based on the loan size, first one is called convention conforming, then you have conventional high balance and then you have Jumbo Loans. Here are numbers for Alameda, Santa Clara and San Francisco counties; loan amounts that are at or below $509,999 are conventional conforming loans, loan amounts between $510,000 – $765,599 are considered conventional high balance loans and loan amounts at $ 765,601 or above are considered jumbo loans.

So if you have a conventional conforming or a high balance loan it is best to start your search with a mortgage broker because they are going to be the most competitive on those kinds of loans. If you are in a jumbo category it is best to consult with a big bank as that is their niche and they excel in those types of loans. Banks usually portfolio lend (lend with your own money), so they can take more risk on the larger loan amounts and have more aggressive rates on the jumbo loans. A lot has changed after COVID, with a lot of large lenders being very strict on the jumbo loans and the rates on those have also taken a hit and are not as competitive. But the real estate market has stayed strong throughout these times and we are seeing things starting to come back to normal. Stay informed and always keep your options open.

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