If you are a homeowner refinancing your mortgage, doing your homework before applying for a new mortgage could save you thousands of dollars. There are a number of costly mortgage mistakes homeowners make that lead to overpaying for the new loan. Here are several tips to help you avoid making these costly mortgage refinancing mistakes.

Before you begin shopping for a mortgage loan it is important to brush up on mortgage terminology and how mortgage lenders operate. Understanding how the retail mortgage market works will help you avoid paying unnecessary markup many mortgage companies and brokers include with their loans. Here are the basics of how retail mortgage companies and brokers operate.

Excluding banks and broker-banks (never take out a mortgage from a bank) mortgage companies and brokers are the main outlets for wholesale lenders to sell their mortgage loans. When you apply for a mortgage with a mortgage company or broker, the wholesale lender they represent will qualify you for a specific interest rate. The broker receives this rate from the lender and marks it up to receive a bonus from that lender. This markup on your interest rate is called Yield Spread Premium or YSP. If you learn how to recognize YSP when refinancing your mortgage loan you can avoid paying it and save yourself a lot of money.

Before you start shopping for a new mortgage loan when refinancing, it is important to review your credit records and make sure your credit score is as high as it can be. Credit records are frequently prone to errors; having mistakes in your credit report can significantly damage your credit score and the interest rate you will qualify for. Once you have requested credit reports from each of the three credit agencies and reviewed them for errors you will need to dispute any mistakes you find and allow several months for your credit score to reflect the correction.

You can learn more about qualifying for the best mortgage when refinancing including costly mistakes to avoid by registering for a free mortgage guidebook.