Mortgage Refinancing - Avoid The Traps, Get Expert Advice » Mortgage Glossary

Wholesale Mortgage Loans

Robert — Sun, 08 Nov 2009 21:11:11 +0000

If you’re considering refinancing your home loan you want the lowest mortgage rate and closing costs for your next mortgage. Refinancing with wholesale mortgage loans can not only get you the lowest possible mortgage rates but will help you avoid unnecessary fees… if you know how to do it. Getting wholesale mortgage loans can be tricky for the uninitiated; however, you don’t have to be financial gurus to get wholesale mortgage loans… you just need to know where to go. Here are several tips to help you get a wholesale mortgage loan when refinancing your home without paying unnecessary fees or markup.

Shopping for Wholesale Mortgage Loans

The first thing you need to know about wholesale mortgage loans is that they are not available to members of the public. If you contact a wholesale lender yourself you’ll be dealing with that lender’s retail division, not the wholesale lender itself. Before we can discuss how to go about getting wholesale mortgage loans it’s important to understand what makes a home loan wholesale and how wholesale lenders operate.

Before you can find a wholesale mortgage loan you need to know a little about the different types of mortgage lenders. The three types of mortgage lenders I’ll discuss today are banks, mortgage broker banks, and wholesale mortgage lenders. Bank mortgage loans can seem like a convenient way of refinancing your home loan right? What could be easier than having your mortgage payment automatically transferred from your checking account every month? The problem with bank originated mortgage loans comes from a little known loophole in the Real Estate Settlement Procedures Act that allows your bank to hide their profit margin and markup of your home loan.

Banks fund their mortgage loans with the bank’s money and therefore set their own mortgage rates. Your bank knows what wholesale mortgage rates are but marks up their mortgage rates up to collect a profit when your home loan is sold on the secondary market. Because of the loophole in RESPA legislation the bank is not required to tell you how much they’ve marked up your mortgage loan. The bottom line you need to know about bank home loans is that you’ll never get wholesale mortgage loans from your bank.

What about mortgage broker banks? When the RESPA laws were changed to exclude banks many mortgage brokers restructured their businesses to take advantage of the same loopholes enjoyed by your bank. These mortgage brokers formed lenders that fund their home loans with their own money and were therefore exempt from RESPA laws just like your bank. How can you recognize a mortgage broker bank? Simply ask if your home loan closes in their company’s name…if the mortgage closes in the broker’s name and not the wholesale lender you know you’re dealing with a mortgage broker bank.

Wholesale Mortgage Lenders

Wholesale mortgage lenders offer their products through mortgage brokers and other retail mortgage companies. They don’t offer wholesale mortgage rates to the public, but that doesn’t mean you can’t get wholesale mortgage loans. What makes a mortgage loan wholesale? Aside from the fact that it comes directly from a wholesale lender and not a bank or broker bank wholesale mortgage loans have mortgage rates that have not been marked up to create a commission for the person arranging your loan and do not require discount points be paid at closing. This type of wholesale mortgage rate is also known as a par mortgage rate. Your goal for refinancing your home should be to get as close to par as possible for your mortgage rate. How do you take advantage of par mortgage rates since wholesale lenders do not offer them to members of the public you ask? Simply find the right mortgage broker to arrange your wholesale mortgage loan without marking up your mortgage rate or charge you unnecessary fees.

Mortgage Broker Fees

Before you can find the right mortgage broker to arrange your home loan you’ll need to understand mortgage broker fees and compensation. Your mortgage broker gets paid for their work from a number of sources. The first, most obvious fee is the loan origination fee that appears on your Good Faith Estimate. Your loan origination fee is a flat fee you pay for the mortgage broker’s part in arranging your home loan. This fee is usually a percentage of your loan amount and a reasonable amount to pay the mortgage broker for loan origination is one percent of your home loan amount. Many brokers try and charge more than one percent; however, one percent is more than ample compensation for the mortgage broker’s work on your home loan.

The second way your mortgage broker get’s paid that we’re going to discuss today is the lender paid fee known as Yield Spread Premium. Mortgage lenders reward brokers that lock and close home loans with higher than necessary mortgage rates with a fee known as Yield Spread Premium. For every .25 percent that your mortgage broker overcharges you the lender pays them an additional one percent of your loan amount as a commission, this fee is paid in addition to the origination fee you’re already paying the broker. It goes without saying if you want wholesale mortgage loans you’ll need to find a mortgage broker that doesn’t take Yield Spread Premium in addition to your loan origination fee. Get yourself a mortgage rate that doesn’t include Yield Spread Premium and you’ll have a par mortgage rate, the wholesale mortgage loan you’ve been looking for.

How do you find the right mortgage broker to arrange wholesale mortgage loans? Start by telling potential mortgage brokers that you understand Yield Spread Premium and will not take a mortgage that includes this markup. Tell them you will pay a reasonable origination fee for their services but want a par mortgage rate for your next home loan. Once you’ve found the right mortgage broker for the job you’ll be on the path to refinancing your home with a wholesale mortgage loan.

You can learn more about wholesale mortgage loans and avoiding unnecessary fees when refinancing your home by checking out my free Underground Mortgage Refinancing Videos.

Here’s a sample you need to know about this unnecessary markup of your mortgage rate for kickback from the lender known as Yield Spread Premium. Register for these mortgage videos today while this is still a free offer.

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Mortgage Closing Costs Explained

Robert — Sun, 13 Sep 2009 21:54:27 +0000

If you’re in the process of refinancing your home mortgage loan you might be concerned about the closing costs your lender is quoting you… and rightly so. Mortgage lender junk fees and unnecessary markup will be responsible for American homeowners overpaying nearly sixteen billion dollars this year alone according to the Secretary of Housing and Urban Development. So how can you minimize your closing costs while avoiding unnecessary fees and make sure you’re not part of this statistic? Read on… this article has my best mortgage refinancing tips to help you avoid paying too much for your next home loan.

Mortgage Closing Costs Explained

Closing costs on your home mortgage loan are the fees you’ll pay up-front like home appraisal fees, loan origination fees, title fees, discount points, recording, underwriting, and loan processing fees. These fees are first presented to you on your Good Faith Estimate; however, mortgage lenders and brokers are notorious for low-balling closing costs on the Good Faith Estimate. The only reliable document for scrutinizing your closing costs is the Hud-1 Settlement Statement. This is unfortunate that bait and switch has become common practice in mortgage lending in the United States and ultimately why most of your neighbors overpay for their home loans.

The first closing costs I’m going to explain today technically aren’t a closing cost; however, you still have to pay it at closing and are prepaid interest, taxes and insurance. (You’ll have to pay interest from the day you close until the end of the month at closing making it advantageous to close on the last day of the month.) Your actual closing costs are called “hard costs” and are the fees paid to the mortgage lender or any third party company involved with your closing. These hard fees associated with your mortgage are the origination fee, underwriting fee, and loan processing fee. Anything you pay for title charges are escrow costs and fees paid for title insurance. Any reserves you might be required to pay go to the escrow account to pay your taxes and homeowners insurance premiums. Escrow accounts are how lenders protect themselves by ensuring your property taxes and homeowner insurance is paid on time; a service you’ll have to pay for if escrow is required on your loan.

Mortgage Refinancing Closing Costs

It can be common practice to roll your closing costs into the loan balance when refinancing your home; however, if you do this you’ll be paying these costs over and over again for the duration of your loan…especially if you opt for a no cost mortgage loan. It’s always better to pay closing costs and origination fees up front rather than accepting a higher mortgage rate and loan amount to cover the difference. If you have an escrow account on your original mortgage you cannot transfer it to your new mortgage; you’ll have to create a new escrow account and pay any fees associated with this new account.

Average Mortgage Closing Costs

Closing costs vary from one state to the next and from one lender to the next. Also, if there is an attorney involved your closing costs will be higher. Not including the attorney and mortgage broker fees you could estimate your closing costs anywhere from 1.5% to 2.0% of your loan amount. The origination fee needs to be considered separately because this is charged by your mortgage broker and is frequently overcharged. If your mortgage broker is charging you an origination fee they should not be marking up your mortgage rate for a commission from the lender, which is another topic I’ll get to shortly.

No Closing Costs Mortgage Loans Are a Lie

What about these lenders that advertise no closing costs or a flat $395 fee for their mortgage loans? There’s no such thing as a “No Closing Cost” mortgage loan. Your closing costs, especially the ones paid to third party companies have to be paid no matter what the mortgage lender’s pitching. Carefully read the fine print and you’ll find out that these loan originators are using a fee known as Yield Spread Premium to pay your closing costs.

Yield Spread Premium is a fee paid by the wholesale lender when you accept a mortgage with a higher than necessary mortgage rate. It is a cash percentage of your loan amount, one percent for every .25% you agree to overpay, and results in a higher than necessary mortgage payment. (Several hundred dollars a month or more…) If you want the lowest possible mortgage rate and payment amount you must avoid any form of Yield Spread Premium. It’s not just “No Cost” mortgages that use Yield Spread Premium…at least with these loans the money is going towards your losing costs. There are a whole lot of mortgage brokers out there that pocket this kickback from the lender as part of their commission. Avoiding sleazy mortgage brokers is the one of the topics from my free Underground Mortgage Videos.

What About Mortgage Junk Fees

So how do you know which fees on your Good Faith Estimate and Hud-1 Statement are junk? Most of the third party charges on your Good Faith Estimate that don’t come from the broker are on the level and can’t be avoided. Attorneys, surveyors, and appraisers all need to be paid as part of getting a home loan. Underwriting fees are fairly standard and if you don’t like a particular lender’s underwriting fees you can always go to another lender. As for the junk fees you’re likely to encounter when refinancing your home, they typically come from the loan originator. Your mortgage company or broker is responsible for nearly all of the junk fees out there.

What are mortgage junk fees? We already talked about Yield Spread Premium. Anything resembling a rate lock fee is pure garbage. There isn’t a lender out there that charges a fee for locking in your mortgage rate… if your broker claims there is a fee for rate lock you can be certain you’re dealing with a dishonest mortgage broke. Mortgage broker courier fees are also pure junk. Origination fees and processing fees aren’t junk but are frequently abused. Don’t agree to pay more than one percent for loan origination and any loan processing fee greater than $400 is also garbage.

You can learn more about refinancing your home mortgage and closing costs by checking out my free Underground Mortgage Videos. These videos walk you through every aspect of refinancing your home including how to recognize and avoid junk fees like Yield Spread Premium in easy-to-understand terms without jargon.

Here’s a taste of what you’ll get when you sign up, this video is about your mortgage originator’s (the person arranging your loan) dirty little secret…

Register today before this offer is gone and you’ll get immediate access to these Underground Mortgage Videos without downloading anything to your personal computer.

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Mortgage Discount Point Fee

Robert — Tue, 21 Jul 2009 01:18:48 +0000

If you’re in the process of taking out a new mortgage to purchase your home or refinance an existing home loan you’re likely to encounter points before it’s done. Is it necessary or even beneficial to pay discount points on your next mortgage loan? Are mortgage points a bait and switch scam used to trick homeowners into overpriced mortgage loans? Here are several tips to help you avoid paying too much for your next home mortgage loan.

Discount Points Definition

Mortgage points come in two flavors. There are the discount points you can pay in order to buy down your mortgage rate and the origination points you pay the person arranging your home loan. They are very different fees and it’s important to understand how they work. One point, whether it discount or origination, is a fee that you’ll pay at closing and equals one percent of your mortgage loan amount. In the case of discount points you’re paying this fee in exchange for a lower mortgage rate. This is a legitimate fee that is often abused by dishonest advertisers trying to make their rates appear much lower than they really are. Points don’t always come in full percentages; you could pay less than one percent or more a point.

Suppose for instance you were going to pay one discount point to lower your mortgage rate from 6.0% to 5.75%. On a $250,000 mortgage one discount point would be $2,500 that you would pay at closing in exchange for this lower mortgage rate. The only situation where paying discount points make sense is if you plan on keeping your home for the long term. Even then, as low as mortgage rates are in today’s market the amount of time it will take you to recoup the expense of paying points may outweigh the benefit a slightly lower mortgage rate.

You can figure this out for yourself by spending a few minutes with a simple mortgage calculator. In the previous example your mortgage payment at 6.0% on a $250,000, 30 year fixed rate mortgage would be $1,498 per month. The same loan with a mortgage rate of 5.75% has a monthly payment of $1,458 per month. That’s a savings of $40 per month meaning it will take you 63 months, that’s just over five years to recoup your expenses before you realize any savings. Is it worth it? What happens if you refinance or sell your home before the five years are up? Your $2,500 is down the drain…

Are Mortgage Points Tax Deductable?

Because mortgage discount points are a form of prepaid interest, the points you pay at closing could be a tax deduction. Be careful when shopping for mortgage that your mortgage broker isn’t staring out with an inflated mortgage rate. If you’re a victim of this type of scam, you’re not paying discount points. Real discount points are paid to the lender, not the originator.

Other mortgage scams involving discount points come from companies advertising mortgage rates that seem too good to be true. If you come across one of these offers check the fine print and you’ll find that “x amount” of discount points are required at closing to qualify. Always ask if paying discount points are required to qualify for the mortgage rate advertised.

What About Mortgage Origination Points?

Origination points are a fee paid to the person arranging your home loan. This “loan originator” could be a mortgage broker, company, or banker. Like discount points this is a fee you’ll pay at closing and one point equals one percent of your loan amount. How much is a reasonable fee to pay for mortgage origination? One percent is reasonable, provided the person arranging your home loan has not also marked up your mortgage rate to get a commission from the lender.

Many originators use a hidden commission known as Yield Spread Premium to boost their profits at your expense, often without telling or fully explaining what they’re doing. It’s not uncommon for shady mortgage brokers to charge you as much as two or three percent for loan origination in addition to inflating your mortgage rate for a bonus from the lender. Keep in mind that any markup of your mortgage rate by the broker drives up your monthly payment unnecessarily. Want to avoid overpaying for your next mortgage loan? Learn how to recognize and avoid the markup of your interest rate for Yield Spread Premium.

You can learn more about mortgage fees and avoiding unnecessary junk fees by checking out my free Underground Mortgage Videos. Here’s a sample of what you’ll get when you register… This module is called Mortgage Refinancing Secrets:

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Mortgage Processing Fee Definition

Robert — Sat, 18 Jul 2009 23:09:35 +0000

The mortgage processing fee is not typically a junk fee found on your Good Faith Estimate (GFE) or HUD-1 Settlement Statement.

This is a fee paid to the mortgage company or loan processor for services related to preparing your loan application. Just because loan processing fees can be legitimate doesn’t mean that some mortgage brokers won’t abuse this fee.

Here is what you’ll need to know to avoid paying too much for your mortgage processing fees while avoiding other junk fees on your next mortgage loan.

Mortgage Processing Fee Defined

The mortgage processing fee should cost you no more than $500; however, $300 is more reasonable amount to pay. This fee should be clearly disclosed on your GFE and HUD-1 Statement. If you see that the fee is being paid to a third party on your loan documents this simply means that your mortgage company outsources preparing their loan documents.

What is the mortgage processing fee for? “Mortgage Processing” covers preparing all of the information for your application, verifying information, creating documents to the lender’s specification and facilitating closing between the loan under writer and title when necessary. Should you pay this fee? There is a lot of work that goes on behind the scenes in preparing your loan application and mortgage processors deserve to be paid for the work they do in putting your loan together. Some people call the processing fee a mortgage junk fee; however, there is some merit to this fee and the ability to close your new mortgage without a hitch.

If your mortgage broker is quoting you $900 or more for mortgage processing fees it’s probably not worth your time to try and talk this fee down; you’ll be better off finding another mortgage broker.

Mortgage Junk Fees

What are other mortgage junk fees and how do you avoid them? Mortgage junk fees are any fee you encounter that serves no purpose but to increase the profit margin of the person arranging your home loan. Mortgage brokers get paid for their services in two ways: fees paid by you and fees paid by your mortgage lender. Brokers get paid a fee by the mortgage lender for increasing your mortgage rate, often without telling you and from the origination fees disclosed on your Good Faith Estimate and HUD-1 Statement.

A reasonable amount to pay for the loan origination fee is one percent of your mortgage amount, provided the person arranging your loan is not marking up your mortgage rate on top of the origination fee. Other junk fees that serve no purpose whatsoever include broker courier fees and mortgage rate lock fees. There simply isn’t a single mortgage lender out there that charges a fee for locking in a mortgage rate. If your mortgage company or broker is charging you a mortgage rate lock fee you can be certain that you’re dealing with a dishonest person or company and should find someone else to arrange your next home loan.

You can learn more about which mortgage fees and closing costs are legitimate and how to spot which ones are junk by checking out my free Underground Mortgage Videos. Spend an hour with my mortgage refinancing videos and you’ll know more about home loans than the so called mortgage “experts.” Here’s a sample of what you’ll learn today when you sign up:

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Typical Loan Origination Fee

Robert — Wed, 08 Jul 2009 20:48:35 +0000

If you’re in the process of taking out a new home mortgage loan you might have questions pertaining to loan origination fees. What is a typical loan origination fee and what about mortgage brokers that claim the lender is paying this fee for you? There are no free lunches when it comes to mortgages and loans with “no origination fees” always come with a catch. Here is what you need to know about the typical loan origination fee in order to avoid paying too much for your next home mortgage loan.

Your Typical Loan Origination Fee

What’s a fair amount to pay for mortgage loan origination? First of all, you should understand what the loan origination fees are for. Your mortgage broker or loan company charges you a fee for their part in arranging your home loan known as a loan origination fee. Typical loan origination fees vary by broker and mortgage company; however, a one percent origination fee is a reasonable amount to pay for arranging your home loan. Many mortgage companies and brokers overcharge loan origination fees so you’ll want to comparison shop until you find someone willing to work for a flat one percent.

What About Hidden Origination Fees?

There is a hidden fee you need to know about before taking out a mortgage loan. Many mortgage companies charge you an origination fee, (often overcharging you) and then take a hidden fee paid by the lender on top of it. This hidden fee drives up your mortgage payment unnecessarily and often doubles even triples the compensation your broker receives for their work. You get stuck paying as much as a hundred dollars or more per month more than you need to and the broker doubles their take at your expense.

What is this hidden fee the Secretary of Housing and Urban Development blames for overcharging homeowners in the United States to the tune of sixteen billion dollars this year alone? I am of course talking about Yield Spread Premium. Don’t worry if you’ve never heard of Yield Spread Premium (YSP) as most homeowners have not.

The simplest definition of Yield Spread Premium is a fee paid by mortgage lenders for home loans that are locked and closed with higher than necessary mortgage rates. Your mortgage lender approves you for a specific mortgage rate based on your credit and financial details; however, the mortgage company or broker almost always quotes you a much higher rate to get this extra commission from the lender. As a result your mortgage payment is much higher than it need be and the reason most people overpay for their mortgage loans.

If you want the lowest possible mortgage rate for your home you’ll need to avoid this unnecessary markup for a hidden origination fee. You don’t have to be a financial guru to find someone willing to work for a one percent loan origination fee without including Yield Spread Premium on your mortgage; you simply need to find the right person for the job.

You can learn more about Loan Origination Fees and other mortgage junk fees that result in overpaying thousands of dollars for your next mortgage by checking out my free Underground Mortgage Refinancing Videos. Here’s a sample of what you’ll get when you register:

Sign up today, these mortgage videos are yours free with no obligation.

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Yield Spread Premium (YSP)

Robert — Sat, 27 Jun 2009 21:56:06 +0000

If you are considering purchasing your home or refinancing an existing home loan, Yield Spread Premium is something you’ll unknowingly encounter that could cost you thousands of dollars per year in unnecessary mortgage interest. You can avoid hidden markup of your mortgage rate once you learn how to recognize and negotiate Yield Spread Premium. Pay attention, the following discussion will literally save you thousands of dollars every year and help you find the best mortgage deals on your next home loan.

Yield Spread Premium Definition

Yield Spread Premium (YSP) is a fee paid by mortgage lenders for home loans that are closed with higher than necessary mortgage rates. The amount of the fee depends on how much you overpay. Mortgage companies and brokers typically get one percent of your mortgage amount for every .25% you agree to overpay for your home loan. Most of the time the mortgage broker will not tell what they’ve done and brokers go to great lengths to hide their markup of your mortgage rate in your loan documents.

How Does YSP Result in Overpaying?

The example I’ll use to illustrate Yield Spread Premium has to do with Refinancing Home Mortgage loans but applies also to purchase loans. Suppose you are in the market to refinance your home loan for $305,000 and your mortgage broker quotes you an interest rate of 6.75%. What your broker isn’t telling and doesn’t want you to find out is that you actually qualified for a mortgage rate of 6.0%; however, they’ve marked up your rate for Yield Spread Premium (YSP) from the lender.

Not only is the lender paying your mortgage broker this fee for overcharging you, adding insult to injury your broker is charging you a fee for the privilege of being ripped off. This loan origination fee is all you should be paying for the mortgage broker’s services and you should only agree to pay one percent of your home loan amount, and not a penny more.

In this example your monthly payment on a $305,000 thirty year, fixed rate mortgage at 6.75% will be $1,980 per month. If you had the interest rate you could have refinanced with at 6.0% your mortgage payment would only be $1,820 per month. That’s $1,920 you’re throwing away every year because your mortgage broker overcharged you! The good news is that this unnecessary markup of your mortgage rate can be avoided.

How to Avoid Yield Spread Premium (YSP)

You can save yourself a lot of money by refinancing your home loan paying just a flat one percent origination fee without Yield Spread Premium. Instead of shopping for your next home like everyone else, think of finding the right person to arrange your next mortgage rather than shopping for the “perfect” rate quote. If you’re thinking the right person to arrange your next mortgage is actually your bank, think again. Banks don’t offer the kind of deal I’m describing here due to a loophole in the Real Estate Settlement Procedures Act. They’re simply not required to tell you about their markup or profit margin on your loan. They don’t have to play by the same rules as other mortgage lenders so why would you expect them to give you competitive rates? Banks prey on homeowners that just don’t know better.

How to Find the Right Mortgage Broker

Finding the right mortgage broker to arrange your next mortgage isn’t difficult. Start by telling mortgage brokers you approach that you’re willing to pay a reasonable fee for loan origination but will not accept any mortgage that includes Yield Spread Premium. Your best bet for finding the right person to arrange your next mortgage is to find a self-employed mortgage broker. Large firms employ sales staff with expensive overhead and will simply be unwilling or unable to negotiate the kind of deal that doesn’t include Yield Spread Premium (YSP).

You can learn more about saving money when mortgage refinancing by avoiding junk fees and Yield Spread Premium by registering for my Underground Mortgage Videos. Here’s a sample of what you’ll get when you sign up:

Sign up today for free online access without downloading anything to your home computer.

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Mortgage Annual Percentage Rate

Robert — Wed, 18 Feb 2009 22:17:08 +0000

Are you in the market to refinance your existing mortgage loan? Do you find terms like APR, Mortgage Rate, and Points confusing and misleading?

You’re not alone…most homeowners never fully understand what the Annual Percentage Rate is or how points affect their mortgage rate and closing costs. Here are several tips to help demystify mortgage loans and save you thousands of dollars when refinancing your home loan.

Annual Percentage Rate

You’ll see it listed as APR for short…but what is Annual Percentage Rate really? The Truth in Lending Act of 1974 requires lenders to disclose the costs of a loan to allow homeowners to compare loan offers. This law was supposed to make it easy to make apples to apples comparisons of any mortgage offer you’re considering; however, the problem you’ll find when comparing one apple to another is that your lender could just as easily hand you a mango that they’ve designated an apple. Here’s why.

Annual Percentage Rate is an expression of the total costs you’ll pay every year as a percentage of the loan amount. The law requires mortgage lenders to tell you what the APR is; however, there is no standard for lenders to calculate the APR or requirements that all fees and charges be listed. This means that every lender you encounter when refinancing your mortgage will have a different way of calculating the APR and may only include the lenders fees, not your broker’s origination fees and markup.

APR is a Marketing Tool

These days the Annual Percentage Rate is largely a marketing tool designed to get you into the office or on the phone to generate a lead. Most of the numbers you see are purely fictional and should not be relied on when choosing a mortgage loan. How should you compare loan offers? Shopping for a mortgage correctly isn’t a matter of comparing loan offers like you would compare a bottle of Ketchup at the grocery store. Instead of trying to find the right lender or loan, concentrate your efforts on finding the right person to arrange you mortgage and the rest will fall into place.

How to Find the Right Mortgage Broker

Finding the right mortgage broker when refinancing your home loan is easier than you think. If you look in the phone book you’ll find a lot of fancy mortgage brokers with posh offices and company hummers decked out with their company logos. Think these folks are the right people to originate your loan? Think again. Posh offices, expensive sales staff, receptionists, cappuccino makers, and company hummers cost a lot of money. These mortgage brokers have huge overhead costs to keep their businesses afloat and have minimum targets they need to bring in on each loan.

This means because of their overhead costs these mortgage brokers will never be willing or able to negotiate their origination fees or Yield Spread Premium on your loan. It’s your money but these broker’s think they’re entitled to it…someone’s gotta make that hummer payment right?

How do you find the right mortgage broker to refinance your home loan? Look for a small, self-employed mortgage broker that has been in the business for ten years or longer. Does this broker work out of their home? Even better…less overhead means these mortgage brokers will be willing and able to negotiate for your business.

You can learn more about finding the right broker to refinance your home loan without paying commission based markup of your mortgage rate or junk fees by registering for my Underground Mortgage Videos available on this website.

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Par Mortgage Rates Definition

Robert — Thu, 01 Jan 2009 21:11:01 +0000

If you are considering refinancing your existing home mortgage loan a par mortgage rate could save you thousands of dollars every year that you have the mortgage. The problem is that all of the mortgage rate quotes you see online and from your local mortgage companies include some markup to create a commission for the loan originator.

Here are the basics you need to know about par mortgage rates to help you get the lowest rate and monthly payment when refinancing your mortgage loan.

A “Par” mortgage rate is one that does not cost money to get or creates cash for the mortgage broker as a commission.

Mortgage rate sheets used by your Mortgage Company or broker are listed on a scale. Going from one side of the rate sheet to the other, the lower the mortgage rate the more you’ll need to pay in “discount points” to get that lower rate. As you move further along the scale there is a point where no points are required. This point on the rate sheet is a “par mortgage rate.” Move further along the rate sheet and you’ll see that mortgage rates higher than “par” creates cash commission in the form of Yield Spread Premium.

Here’s an example to illustrate how mortgage rate sheets quote an interest rate:

5.75% (.5 point required) 5.875% (.25 point required)
6.0% (zero points) Par Mortgage Rate
6.125% (.25% commission created) 6.25% (.5% commission created)

As you can see, 6% is the par mortgage rate of the day. Mortgage rates above 6% create cash for the Mortgage Company or broker while rates below 6% cost you money in the form of discount points. If you want the lowest possible mortgage rate when refinancing you’ll need to get as close to par as possible without creating Yield Spread Premium for the mortgage broker.

How do you get a par mortgage rate? You can get a par mortgage rate by paying a flat 1% origination fee to the person arranging your mortgage loan. Doing this is easier than you think; you just need to find the right mortgage broker for the job.

The free mortgage refinancing videos on this website show you how to get a par mortgage rate while avoiding lender junk fees in the process. Register today and you’ll be on your way to saving thousands of dollars every year on your next mortgage loan.

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Wholesale Mortgage Lenders

Robert — Sun, 28 Dec 2008 20:56:03 +0000

If you’re considering refinancing your home mortgage loan in 2009 and are looking for a wholesale lender there are several things you need to know in order to take advantage of wholesale rates. As a member of the public you cannot simply contact a wholesale lender expecting to refinance your home mortgage with a wholesale mortgage rate.

Here are several tips to help you take advantage of wholesale mortgage rates when refinancing without hidden retail markup of your loan.

What Are Wholesale Mortgage Lenders?

Wholesale mortgage lenders offer loans exclusively through mortgage brokers. Period. You cannot get a wholesale mortgage loan from your bank or credit union no matter what the banker or your neighbor Bob tells you. The reason for this is due to a little know loophole in the Real Estate Settlement Procedures Act that allows banks to hide their markup and profit margin on your loan. Your banker will show you the Bank’s mortgage rate sheets and swear the rates have not been marked up; however, the Banks mortgage rate sheets already include the markup known as Service Release Premium to boost the banks profits when your loan is sold on the secondary market.

What Are Wholesale Mortgage Rates?

Wholesale mortgage rates, also known as par mortgage rates, are interest rates that do not include any Yield Spread Premium or discount points to get them. Yield Spread Premium is a percentage of your loan amount created when the Mortgage Company or broker locks and closes your loan with an above market mortgage rate. This is typically done to create a commission for the broker. Discount Points are a form of prepaid interest due at closing paid to the lender in exchange for a lower mortgage rate. Wholesale mortgage rates include neither Yield Spread Premium nor discount points.

Why Can’t You Just Call Up a Wholesale Lender?

You can certainly call up a wholesale mortgage lender, they all operate retail divisions; however, you will be offered a retail mortgage loan with the same markup as if you had gone through a typical mortgage broker. If banks and wholesale lenders are out of the question how does one go about refinancing with a wholesale mortgage rate? In order to take advantage of wholesale mortgage rates you’ll have to find a mortgage broker willing to work for a flat origination fee without marking up your mortgage rate for Yield Spread Premium.

Finding The Right Mortgage Broker is Easier Than You Think

First, you’ll need to do a little homework learning when and where you can recognize Yield Spread Premium in your loan documents. Second, you’ll need to know how to negotiate with mortgage brokers and where to look for a broker willing to work for a flat origination fee of one percent without marking up your mortgage rate. There are honest mortgage brokers out there willing to work for a flat origination fee of one percent without taking Yield Spread Premium on your loan…you just need to know where to look to find one.

You can learn more about refinancing your home loan with a wholesale mortgage lender by registering for the free mortgage videos on this website. When you register you’ll get a list of mortgage brokers in your area that do not work for Yield Spread Premium and learn how to recognize and avoid lender junk fees.

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Mortgage Refinancing and Your Loan to Value Ratio (LTV)

Robert — Fri, 19 Dec 2008 02:19:57 +0000

If you are considering mortgage refinancing, understating loan-to-value ratio could make the process less painful for you. Many homeowners glaze over at the “technical terminology” associated with mortgage loans like loan-to-value ratio and yield spread premium. If you are such a homeowner here are the basics you need to know about loan-to-value when refinancing your home loan.

Why Loan-to-Value Ratio is Important

When most people talk about loan-to-value ratio when it comes to a mortgage loan they are talking about avoiding Private Mortgage Insurance (PMI). While avoiding private mortgage insurance is important and can save you hundreds of dollars every month, loan-to-value ratios influence other aspects of your home loan including mortgage rate, payment amount, and loan approval.

Loan-to-Value Ratio Definition

Simply put your loan to value is the ratio between your mortgage amount and the value of your home. Suppose for instance you have a $200,000 home with a $100,000 mortgage loan. Your loan-to-value ratio or LTV in this example is 50 percent.

Different types of mortgage loans and lenders have different requirements for LTV ratios. Your primary residence for example can have an LTV as high as 96.5 percent and still qualify for an FHA mortgage loan. Conventional mortgage loan requirements range anywhere from 95 – 97 percent LTV. Thinking about a VA or Rural Housing loan? These loans can go as high as 100 percent LTV.

If avoiding Private Mortgage Insurance (PMI) is your goal you will need to have the loan-to-value ratio below 80%. Private Mortgage Insurance can add hundreds of dollars to your monthly payment amount and does nothing to protect the homeowner; this insurance simply protects the lender from certain types of losses if you default on your mortgage loan. Having a lower LTV ratio can also affect the mortgage rate you get when refinancing your home. Generally the lower your LTV the better your mortgage rate will be which in turn gives you the lowest monthly payment amount.

Having a favorable loan-to-value ratio could mean the difference between getting your loan approved or denied if you are a homeowner with less than perfect credit. Having a low loan-to-value ratio reduces the risk for the mortgage lender, making you more loan worthy. You can learn more about lowering your mortgage rate and payment amount when refinancing while avoiding lender junk fees by registering for the free mortgage videos available on this website.

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