Last week on 6/1/2011, I requested quotes from two brokers and two banks to refinance my 30-year fixed jumbo-conforming mortgage. The criteria for my refinance is that it has to be no-point and is either no-cost or has very low-fee.

Broker H

I have worked with broker H for previous refinances before. She quoted me a rate of 4.375% with a 0.375% fee.

Broker A

This broker was recommended to me from a co-worker. She told me the rate was 4.375% with no-point and no-fee at that particular instance, but the rate was valid only on that day and it was already too late to prepare the documents to lock in to that rate. She requires an upfront $25 for the credit report and another $50 to submit the loan (which will be reimbursed at closing).

Bank of America

I received a quote of 4.75% for a no-cost no-fee loan. My current loan is 4.625%, so this option is a no-no.

First Internet Bank of Indiana (FirstIB)

Based on many good reviews, including that from TheFinanceBuff, I have been watching the online rate quote from FirstIB. The online rate quote on this particular day was 4.375% with ~$1200 fee.

What I did

I decided to wait for a better rate from the brokers, and at the same time, to submit the application with FirstIB and wait for the right moment to strike.

FirstIB does not charge a fee to submit the online application, so it was a relatively easy decision, with the only “cost” being a hit on my credit report.

I submitted the online application with FirstIB’s Gary (who has received many good reviews). I received a call back from Gary about 3 hours later. He told me the rate had improved after my application was submitted, and the new rate was 4.375% with a $5000 credit. This credit can be used to pay for the closing costs (estimated to be $3000), with the remainder going into the impound account to pay for future property taxes and insurance.

Since this mortgage rate and fee scenario met all my criteria, I locked the rate with Gary on the spot. Gary told me that he expects the refinance to close in 25 days.

I am keeping my fingers crossed and will post the timeline once my refinance with FirstIB is completed.

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• January 17, 2010 — Refinance Completed (2)
• November 5, 2009 — Refinance Still In Progress (0)
• September 29, 2009 — Refinance Started (1)
• January 19, 2010 — Junk fees in AT&T landline service (0)
• November 16, 2009 — Reverting back to using checks instead of ACH (1)

The following is the timeline:

• Week 1 :9/28 Mon: Applied for Star One’s 20-year fixed loan at 4.75%.
• Week 1: 10/2 Fri: Star One’s 30-year fixed mortgage dropped from 4.875% to 4.75%.
• Week 1: 10/3 Sat: Instead of re-locking the rate, I applied for a new 30-yr 4.75% mortgage with Star One. This cost an additional $12 for the new credit reports. Re-locking the rate would have cost me $250.
• Week 2: 10/6 Tue: Sent off the check to Star One to pay for the appraisal. Also faxed in some supporting documents.
• Week 2: 10/7 Wed: I wanted to use an online title company EntitleDirect.com. However, the processing officer from Star One informed me that Star One’s policy is that the signing must be done in a title company office. Consequently, I dropped the idea of using EntitleDirect and picked Chicago Title, the title company which closed my previous refinance with Bank Of America.
• Week 2: 10/10 Sat: House appraiser called to set up appointment for the house appraisal.
• Week 3: 10/14 Wed: The house appraisal was done.
• Week 4: 10/22 Thu: Appraisal report was posted online. Valuation is slightly higher than I expected.
• Week 5: 10/30 Fri: Emailed the underwriter. She said that they were swarmed with applications and were currently processing applications from the first week of September.
• Week 6: 11/02 Mon: I raised my concerns about the 60-day rate lock. The underwriter replied that the rate would be kept for me if they were unable to fund by the rate lock expiry date.
• Week 10: 12/01 Tue: No additional progress were made in the month of November. On 12/1, Underwriter informed me that they would be processing my loan the coming week.
• Week 11: 12/07 Mon: Received email from underwriter that my loan was approved.
• Week 11: 12/11 Fri: Loan processor informed me that they were requesting the list of fees from the title company.
• Week 12: 12/14 Mon: Escrow officer sent the list of fees to Star One for approval. Loan docs prepared and sent to the title company.
• Week 12: 12/15 Tue: Received closing statement, revised it and set appointment for sign-off on the next day.
• Week 12: 12/16 Wed: Sign-off the refinance in the title company’s office. I requested that the funding and closing dates not to straddle over a weekend. For the reason, read this post by TFB.
• Week 12: 12/19 Sat: End of three-day refinance rescission period.
• Week 13: 12/22 Tue: Star One funded the loan.

In total, the closing costs came up to be around $2100. The title charges (escrow +  title insurance) were about $1400, loan fees (appraisal + loan application) were around $600, and about $100 was charged by Bank of America to close out the old loan.

Overall, I am happy with the new rate but wished that the entire process could have been much shorter than the 12 weeks it took.

Unlike some who suggest to pay down the mortgage whenever possible, I plan to keep this mortgage to the full term. At the fixed rate of 4.75%, I am pretty sure I can find better opportunities elsewhere for any excess money that I have.

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• September 29, 2009 — Refinance Started (1)
• January 19, 2010 — Junk fees in AT&T landline service (0)
• November 16, 2009 — Reverting back to using checks instead of ACH (1)

According to the loan officer, they are currently processing applications submitted in the second week of September. They will reach my case some time near the end of this month. I asked about the rate lock expiry (60 days). The loan officer told me that they will honor the rate if they could not process the loan by the lock expiry date.

I sure hope she is correct.

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• January 19, 2010 — Junk fees in AT&T landline service (0)
• November 16, 2009 — Reverting back to using checks instead of ACH (1)

I had already obtained quotes directly from the big banks (Bank of America, Wells Fargo & Chase) but most of their rates included an one point fee (which I do not want). And even with that, their rates were not very competitive.

I also obtained several quotes from brokers using Zillow’s online mortgage quote system. One of the quotes actually looked promising and I got to talk to the broker who called back quite promptly. His quote (for 9/28/09) was:

• 30-yr fixed, “conforming” loan (<$625.5k) @4.875% with zero point. Fees $2800 ~ $3000 out-the-door.

By “out-the-door”, he meant that it included lender fees plus title charges and recording fees (but excludes prepaid items like home insurance or interest). This broker had a handful of reviews, most of which were good. But one negative was that the loan required impounding for property taxes and insurance. To waive this,  an additional fee of $780 was required, bringing the total closing costs to $3600 ~ $3800 (note: my LTV or loan-to-value, is below 70% so a high LTV was not the reason for the impound).

I then looked at the credit unions in my area (San Francisco bay area). The most promising rates were from Star One credit union. Their rates yesterday were:

• 30-yr fixed “conforming” loan (<$625.5k) @5.00% with zero point.
• 20-yr fixed, “conforming” loan (<$625.5k) @4.75% with zero point.
• 15-yr fixed, “conforming” loan (<$625.5k) @4.375% with zero point.

Their estimated “out-the-door” closing cost is around $2000. This closing cost number is quite accurate according to a friend who closed a mortgage with them last year.

I crunched some numbers to compare the three options. This is illustrated in the figure below:

The 20-yr mortgage requires 20% more monthly payment than the 30-yr mortgage but gets paid off 10 years earlier. The 15-yr mortgage requires 41% more monthly payment compared to the 30-yr mortgage but gets paid off in half the time. Given the relatively high discount (25 basis points) in going from 30-yr to 20-yr yesterday, I decided to apply for the 20-yr fixed mortgage.

As I already had an account with Star One, it was a relatively painless process to apply for the mortgage. Everything was done online, and I was charged $12 for the credit reports (paid by credit card). I was approved instantly by the online system and I locked in the rate on the spot.

According to the warning in the online application, mortgage applications with Star One are taking an average of four to six weeks to close. We will see how it goes.

Addendum

By the way, the rates for Star One today are

• 30-yr fixed, conforming jumbo loan (<$625.5k) @4.875% with zero point.
• 20-yr fixed, conforming jumbo loan (<$625.5k) @4.75% with zero point.
• 15-yr fixed, conforming jumbo loan (<$625.5k) @4.375% with zero point.

On hindsight, there is a 50% chance that I might have picked the 30-year fixed mortgage if I were to lock today. 

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• June 6, 2011 — Refinance Started With First Internet Bank (3)
• January 17, 2010 — Refinance Completed (2)
• November 5, 2009 — Refinance Still In Progress (0)
• January 19, 2010 — Junk fees in AT&T landline service (0)
• November 16, 2009 — Reverting back to using checks instead of ACH (1)