Know what it will cost you to refinance

If you're dreaming about refinancing your home because mortgage rates are low, first learn the costs and fees so that you don't get gouged.

Paula Sherman, lending protection coordinator for Housing Op portunities Made Equal in Richmond, said that if you have excellent credit and a pristine payment history, you definitely should be able to negotiate lower fees.

You may even get offered a no-fee refinancing because lenders want good quality loans on their books.

Bankrate.com senior financial analyst Greg McBride cautioned, though, that a no-fee refi may include hidden fees, perhaps in the form of a higher interest rate.

Be sure to shop around.

"Three lenders should give you a feel for what's fair and not fair," said Doug Robinson, spokesman for the national housing agency NeighborWorks America. He also advised checking with a credit union.

McBride warned that if you're seeking a cash-out loan, perhaps to pay off credit-card debt, or an interest-only loan, or you have a high loan-to-value ratio or a "middling" credit score, you will pay a new fee as of April 1 that the federal government requires lenders to charge. A loan-to-value ratio is how much you're borrowing, compared with the current value of your home.

"This fee is paid out of pocket at closing," McBride said.

It's called a Loan-Level Price Adjustment. "It could be a good chunk of change," he said. It may negate the benefits of refinancing.

When you get an estimate of costs from a lender, or several lenders, be sure the fees fall within these ranges:

• Loan origination fee: It should be no more than 1 percent to 2 percent of the loan amount. That's the amount of money the lender is allowed to charge just for providing the loan, Sherman said.

• Title exam and search: The fee should be $200 to $250. The lender wants the search to make sure you're the legal owner of the property.

• Broker fee: It is 1 percent to 2 percent of the loan amount. You don't need a broker, Sherman said. Go out and find your own loan. Some brokers charge so much that refinancing no longer makes sense, she said.

• Appraisal: The lender needs an appraisal, usually costing $400 to $500, to verify the true value of the property, Sherman said.

• Application fee: This fee -- $75 to $300 -- covers the initial costs of processing your loan request and checking your credit report, according to the Federal Reserve Board.

• Points: It could be zero percent to 3 percent of the loan amount. Points are charged by the lender, usually to reduce the interest rate of your loan, the Fed said.

• Home inspection fees: The fee could be $175 to $350. A lender may require a termite inspection, an analysis of the structural condition of your house, a well or septic tank test.

• Flood certification fee: It is $15 to $50. The lender wants to be sure your home is not in a flood hazard area.

You definitely will see more costs and fees.

. . .

Before signing anything, let an expert evaluate it:

• Call Housing Opportunities Made Equal at (804) 354-0641.

• Call the Bureau of Financial Institutions, part of the State Corporation Commission, at (804) 371-9657.

• Call the Federal Reserve at (202) 452-3245 and ask for "A Consumer's Guide to Mortgage Settlement Costs."

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  Contact Iris Taylor at (804) 649-6349 or .