Mortgage Refinancing - Low Doc Programs

Refinancing is similar to applying for an original mortgage, so you can expect to pay similar costs. For a traditional refinance, you may have to pay in the range from 3% to 6% of the principal on your mortgage.

Many lenders offer a "no-cost" refinance in which the fees and other costs are absorbed in the new mortgage. This means that you may have limited or no out-of-pocket costs at closing, but the lender may increase the interest rate or add the cost to the principal amount you borrow thus increasing your monthly payment.

Check with the lender to see if "no-cost" financing is offered. Under this plan, you don't pay many of the typical costs, but the interest rate on your mortgage may be higher.

Sometimes a new appraisal will not be necessary, and some fees and closing costs may be waived. If you refinance through your original lender, some fees can be negotiated—such as title search, application fee and credit report review. Sometimes, a new lender may also be willing to negotiate those fees. And, in some cases, a lender may offer "no-cost" refinancing, which means most of the up-front processing and closing fees are not required. In these cases, however, the lender will typically charge a higher interest rate.

You may be able to save paying some fees by talking to more than one lender and selecting the one that best meets your refinancing needs at the lowest cost.

Refinancing costs may include:

A loan application fee and credit report. Consumers typically pay $75 to $150 for this report although there have been reports of credit fees as high as $350. (If your are self employed, you will need a second business report that costs between $55 and $100) which covers the initial cost of processing your loan request and checking your credit history.
A title search and title insurance. This charge will cover the cost of examining the public records to confirm ownership of the property. It also covers the cost of a policy, usually issued by a title insurance company, which insures the policyholder in a specific amount for any loss caused by discrepancies in the title to your property. Be sure to ask the company carrying the present policy if it can re-issue your policy at a re-issue rate. You could save up to 70 percent of what it would cost you for a new policy. (Owner's Title Insurance is usually not included on your Good Faith Estimate because it is not a requirement of the lender. Most closing attorneys will include the charge for that policy on your Settlement Statement. You may elect to refuse the coverage at closing.)
A fee to have your property re-appraised (unless you refinance with the same lender). An appraisal is a written analysis of the estimated value of a property prepared by a qualified appraiser. An appraiser is a person who is qualified by education, training and experience to estimate the value of real and personal property. The "appraised value" is a term used to define the home's fair market value and is based on the appraiser's knowledge, experience and analysis of the property.
A new survey of your property to confirm that no changes to the land or physical structures have been made that would affect its potential sale.
A loan origination fee, which covers the lender's work in evaluating and processing your loan. This fee may be expressed in "points," with each point equaling one percent of the mortgage (for example, one point on a $200,000 mortgage would equal $2,000).

This may also be billed as “documentation preparations.” Some lenders could charge a variation of prices for this, some charge underwriting fees, processing fees and documentation preparation fees, which regularly work out to be less than 1% of the loan amount.
Discount points lower your interest rate. Each discount point equals one percent of the loan amount. For example, one point on a $150,000 mortgage equals $1,500. Points are paid up front at closing.
Pre-payment penalties, which some mortgages carry for paying off the loan before the term has expired. A prepayment penalty on your present mortgage could be the greatest deterrent to refinancing. The practice of charging money for an early pay-off of existing mortgage loan varies by state, type of lender and type of loan. Prepayment penalties are forbidden on home loans from federally chartered credit unions, FHA and VA loans and some other home-purchase loans. The mortgage documents for your existing loan will state if there is a penalty for prepayment.

There are two types of pre-payment penalties: hard and soft. The hard pre-payment penalty goes into effect whether you sell your house or refinance the mortgage. A soft penalty only applies if you refinance the mortgage; not when you sell the house.
In some loans, you may be charged interest for the full month in which you prepay your loan.
Mortgage insurance. Otherwise known as PMI, how much you put down (or how much equity you have in your home) determines this amount. Twenty percent down eliminates mortgage insurance.
Other fees, depending on the type of mortgage refinancing you are seeking, may include a VA loan guarantee or FHA mortgage insurance.
Estimated pre-paid amounts for state and local taxes and hazard insurance—paid to escrow.
Lender’s attorney's review fees. You may choose to hire your own attorney to review documents and to represent and guide you through the stages of this transaction. If you do, you will have to pay your attorney out of your own pocket.