From the monthly archives:

July 2008

Refinance Mortgage Rates

July 30, 2008

home-equity Refinance Mortgage Rates

If you are in the process of refinancing your home mortgage loan, getting a good deal from a reputable lender is probably at the top of your to-do list. The mortgage industry has suffered a major setback in the United States recently with lenders tightening their standards and cutting corners on loan offerings.

In the midst of the so-called “credit crisis” how can you be sure that you’re getting a good deal on your mortgage rate and aren’t paying garbage fees to the broker or lender? Here are several tips to help you find the lowest refinance mortgage rates for your home loan when refinancing.

Understanding Mortgage Rates

Mortgage shopping for most people involves collecting rate quotes from a few online lenders or calling a broker out of the phone book. Some people ask for a Good Faith Estimate and compare fees; however, very few people actually understand how mortgage rates are quoted and nearly everyone pays too much for their home loans. What most people don’t understand is the “retail” nature of mortgage interest rates.

Mortgage lenders operate their businesses on a wholesale basis. They do not lend directly to the public but rely on mortgage brokers to resell their loans. There is one exception; nearly every wholesale lender operates a retail division. You might think that you can avoid retail markup on your loan by contacting the lender directly and skipping the mortgage broker…if you try this you’ll be dealing with their retail operation and paying the same markup of your mortgage rate.

Mortgage Refinance Rates

Why are mortgage rates marked up? Like any other retail mortgage refinance rates have been marked up to give a commission to the broker arranging the loan. This markup is called Yield Spread Premium. Understand how Yield Spread Premium works and you can save yourself as much as several thousand dollars every year that you keep the loan.

How does Yield Spread Premium work? When your mortgage broker submitted your loan application they “mark up” your mortgage rate higher than the lender is willing to approve you to get a commission. Your mortgage broker might be telling you that you qualified for a 6.75% mortgage rate; however, what there not telling you is that you could have been approved at 6.25%. The broker marked up your mortgage rate by .50% because the lender pays them a bonus of 1% for every .25% they overcharge you. On a $250,000 loan that bonus is $5,000 on top of whatever origination fee you agree to pay for their services.

What does this .5% markup mean for your monthly payment amount? If you had refinanced with the mortgage rate you deserve at 6.25% your monthly payment would be approximately $1500 on a 30 year fixed rate mortgage. Dial that up to 6.5% and you’re paying an extra $960 every year just to give your mortgage broker a bonus.

There is good news for homeowners that do their homework before refinancing. You can avoid paying this unnecessary markup of your mortgage interest rate without paying junk fees to the lender and broker with my free mortgage refinancing system. Register today and you’ll get immediate online access to the videos, a list of recommended brokers in your area and everything you need to secure the lowest possible rate when refinancing your home loan.

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30 Year Mortgage Rates

July 21, 2008

refinance-mortgage-bad-credit 30 Year Mortgage RatesIf you’re in the market to refinance your home mortgage loan and search for 30 year mortgage rate information on the internet, you’re bound to find a lot of confusing and conflicting information. How do you sort through the obvious crap and find honest rate information that does not include needles sales markup like the bogus mortgage rates you find on bankrate.com? Here are several tips to help you separate the wheat from the chaff when it comes to hunting for the lowest 30 year mortgage rates when refinancing your home loan.

Where Do Mortgage Rates Come From?

The first thing you should know about mortgage rates is that they come in two flavors. There are the retail mortgage rates quoted to 98% of homeowners that don’t know any better and the wholesale rates offered to brokers by big mortgage companies like Countrywide. You might think you can bypass the broker and their markup by going to a wholesale lender directly; however, every lender out there has a wholesale division and a retail division. Contact lenders directly and you’ll always be dealing with their retail division and the same unnecessary markup of your mortgage rate that you’re trying to avoid.

How to Make Sense of 30 Year Mortgage Rates

Before diving into 30 year mortgage rate quotes there is some terminology you need to be familiar with. The first term I’ll cover is the discount point. Most people know about discount points…a fee you’ll pay to buy down your mortgage rate. What you might not know is that genuine discount points go directly to the wholesale lender…unlike the origination points people frequently overpay to the person arranging their loans. If you ever come across a “discount point” that is paid to the broker and not the lender this is a bogus charge that you should never agree to pay. Your broker quoted you a much higher rate then you qualified and pocketed your discount points.

Banks do the same thing…you might think your bank or credit union is getting you a good deal. What you probably don’t know is that banks are exempt from the Real Estate Settlement Procedures Act and never have to disclose how much of your rate is marked up to boost their profit margins.

The next term I need to cover is the so called “par mortgage rate.” What is a par mortgage rate? This is simply the 30 year rate that doesn’t require you to pay any discount points to get it and does not create any money for the broker. By not creating any money for the broker this means it has not been marked up for Yield Spread Premium. You can’t always get par rates when refinancing your home loan but you can come pretty close if you know where to look.

Mortgage brokers are the only way to get genuine par rates because they alone have access to the rates offered by wholesale lenders. The trick is to find a mortgage broker willing to give you access to wholesale rates without marking them up for a commission. Remember that bank mortgage rates always have markup built into them and will typically be half a point (or more) higher than rates offered by wholesale lenders. This is why you should never take out a mortgage loan from your bank or credit union.

The last term I’ll cover today is Yield Spread Premium. This is the commission created for the broker when you lock and close at a higher than par mortgage rate. You may be required to pay discount points to the lender to lower your rate; however, when it comes to creating cash for your brokers “bonus” it’s paid because you’re agreeing to a higher 30 year mortgage rate than you need to. Avoiding Yield Spread Premium needs to be your priority when refinancing your home loan.

Here are several examples how 30 year mortgage rates are quoted on rate sheets from a mortgage broker and a bank so that you understand how the broker and the lender profit from your loan

30 Year Mortgage Rates Offered By a Broker

6.25% ( Includes .25% Broker Markup) 1% Bonus to Your Broker
6.125% (Includes .125% Broker Markup) .5% Bonus to Your Broker
6.0% Par Mortgage Rate - Zero Bonus Paid or Discount Points Required
5.875% (Includes .5% Discount) Paid Directly to the Lender
5.75% (Includes 1.% Discount) Paid Directly to the Lender

When your mortgage rate is quoted higher than par a cash bonus is created for the broker. Rate sheets usually show this cash with parenthesis; however, your rate sheet might show this with a minus sign. When your 30 year mortgage rate is quoted below par, discount points are required to secure this rate for your loan.

The Same 30 Year Mortgage Rates From Your Bank

6.75% (.25% Markup) Goes to Your Bank (Service Release Premium)
6.625% (.125% Markup) Goes to Your Bank (Service Release Premium)
6.5% Par Mortgage Rate With Zero Markup
6.375% (.125% Discount) Discount Point Paid to the Bank
6.25% (.25% Discount) Discount Point Paid to the Bank

One thing to note here is that Yield Spread Premium only applies to mortgage brokers. When the markup is done by your bank this is pure profit and goes by the name Service Release Premium. As you can see in the previous example the so called “par rate” for the bank is .5% higher than the one offered by a broker. This is why you’ll never get a wholesale rate from your bank or credit union.

How do you find a mortgage broker willing to refinance your mortgage with a par 30 year mortgage rate without charging you garbage fees? Check out my free video tutorial series on this site and you’ll discover how to do this with an easy to follow step-by-step video guide.

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Current FHA Rate

July 16, 2008

FHA Rates

You may have found this site searching for information on current FHA rates. Finding out about government programs to refinance your home can be confusing, especially if you don’t know where to start. FHA programs are government insured loans; there are no set FHA mortgage rates…finding an accurate source for rate information becomes more difficult because mortgage rates are almost never what they seem. Here are several tips to help you refinance your home loan without being taken advantage of by the lender.

FHA Mortgage Rates

If you qualify for an FHA loan to refinance your mortgage the rate you qualify for is set by the lender behind your loan. Because FHA loans are backed by the government you’ll be required to purchase Private Mortgage Insurance to protect the lender and government from loss if you default on the loan. What you might not know is that the mortgage rate you’re approved includes markup by the person arranging your loan for a commission. This commission is called Yield Spread Premium and could raise your monthly payment by several hundred dollars unless you know how to avoid it.

Yield Spread Premium & FHA Mortgage Rates

To get an FHA mortgage you’ll need to find someone to arrange the loan for you. This person could be a mortgage company or broker and with the exception of FHA streamline refinancing you’ll be required to pay closing costs and other fees for the loan. What you shouldn’t get stuck paying are the hidden costs created by Yield Spread Premium. FHA loans are no different from conventional loans in the way that they arranged…understanding how the person arranging your loan is paid will help you avoid paying too much when refinancing.

Yield Spread Premium is the commission the person arranging your loan receives for marking up your mortgage rate. When your FHA loan was approved the lender approved you for a certain mortgage rate. The broker marks this rate up because the lender pays them a bonus of 1% of your loan amount for every .25% they markup your rate. This markup is paid in addition to any fees you’re already paying for loan origination.

It is possible to refinance your home with an FHA backed mortgage without paying for Yield Spread Premium. There are brokers willing to work for a 1% origination fee without marking up your rate. You can learn more about finding the right mortgage broker without paying junk fees or unnecessary markup by registering for my free video tutorial. Register today; the videos are yours with no obligation.

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Information About Mortgage Lenders

July 5, 2008

Mortgage LendersIf you are in the market to refinance your home loan and came to this site looking for information about mortgage lenders, there are several things you need to know to avoid paying too much for your next mortgage loan. The first thing you need to know is that with the exception of bank originated mortgage loans, home loans in the United States are retail products and therefore you will pay retail markup by the person arranging your loan.

You might think “I’ll just go to a bank to avoid this markup…” However, because banks fund their loans with their own money they are exempt from legislation in the United States that required mortgage lenders to disclose their markup making it impossible for you to get the best deal possible from your bank. Here are several tips to help you find the best information about mortgage lenders and save thousands of dollars on your next mortgage loan.

Mortgage Rate Markup

It’s a little known fact in the United States that mortgage loans are marked up by the person arranging the loan for a commission. In the Industry the commission on this markup is called Yield Spread Premium and many brokers conveniently leave the markup off their Good Faith Estimates when quoting you a loan. Mortgage Brokers are required by the Real Estate Settlement Procedures Act to disclose their markup on the HUD-1 Settlement Statement; however, many brokers have clever ways of hiding this markup and the commission the lender pays them.

Yield Spread Premium 101

Suppose you are refinancing your home for $275,000. The broker quotes you a mortgage rate of 6.75% and charges you an origination fee of 2.5% for the loan. The origination fee is what the broker discloses as their fee for arranging your loan and in this case you’ll be charged $6,875 at closing. It’s not uncommon for mortgage brokers to charge as much as 3-4% for the origination fee which if you follow the system found in the free videos on this site you can refinance your home for a flat 1% origination fee. What the mortgage broke isn’t telling you is that your lender actually approved you for a 6.25% interest rate and they’ve marked it up to 6.75% for their commission.

Mortgage lenders pay brokers one percent of your loan amount for every .25% they overcharge you on the mortgage rate. That’s right; in this example the broker pockets an additional 2% of your loan amount for overcharging you. You’re already paying the broker $6,875 for arranging your loan, but the broker pockets another $5,500 at your expense. You get stuck paying $173 more every month in this example just to pay for the mortgage broker’s “extra commission.”

The Best Information About Mortgage Lenders Is Free

The good news for you is that you can avoid this unnecessary markup of your mortgage rate and get the monthly payment that you deserve. The free videos provided on this website show you how to refinance your home loan without paying commission based markup with a flat 1% origination fee. You’ll save thousands of dollars each and every year that you keep the loan. Register today…the videos are yours fee with no strings attached.

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