Mortgage Refinancing - Avoid The Traps, Get Expert Advice » Mortgage Loan Tutorial

Avoid These Refinance Traps

Robert — Thu, 21 May 2009 17:39:51 +0000

If you are in the process of refinancing your home mortgage loan there are a number of pitfalls that can result in overpaying thousands of dollars per year.

These pitfalls range from the markup of your mortgage rate to junk fees that raise your monthly payment. Avoid these refinance traps and you can save thousands of dollars every year that you keep your mortgage. Here’s what you need to know.

Avoid These Refinance Traps

What are mortgage refinance junk fees? Anything that serves no purpose other than boosting the mortgage broker’s commission at your expense is a junk fee. Mortgage brokers receive compensation for their work from a number of sources and if you’re not careful these fees can result in overpaying thousands of dollars every year that you keep the loan.

The first mortgage broker fee you’re likely to encounter when refinancing your home mortgage is the loan origination fee. This is a fee paid to the mortgage broker specifically for their part in arranging your loan. A reasonable amount to pay the mortgage broker for loan origination is one percent of your loan amount; however, many brokers will try and pad this fee. This origination fee, while frequently overcharged, is fairly straightforward and will appear on your Good Faith Estimate and HUD-1 statement.

Don’t Put Much Faith in Your Good Faith Estimate

The law requires mortgage brokers to provide you a copy of the Good Faith Estimate as part of their disclosures; however, there are no standards as to what fees have to be disclosed to you and many are conveniently left off to make expensive loan offers seem more attractive. Your Good Faith Estimate is little more than a marketing tool used to lure homeowners into overpriced home loans… don’t trust this mortgage document.

If you can’t rely on the Good Faith Estimate when shopping for a mortgage loan what can you trust? There are two reliable documents you will receive when refinancing your home loan. The first is the original written rate lock confirmation from the mortgage lender and the second is the HUD-1 Settlement Statement; however, neither one of these documents help you shop for a mortgage loan. Make sure that the rate lock confirmation you receive comes from the mortgage lender and not the mortgage broker and never accept verbal confirmation of your rate lock. As for the written confirmation, make sure it comes from the mortgage lender and is not typed up on your broker’s letterhead. Many mortgage brokers pass off bogus rate lock confirmation in an attempt to hide their markup of your mortgage interest rate.

How to Shop for a Mortgage Loan

A common refinance trap to avoid is shopping for a mortgage loan like you would a kitchen appliance. While it’s true that mortgage loans are retail products and are subject to the same type of markup that results in overpaying, you don’t want to try making apples to apples comparisons of your mortgage loan offers. There is simply no reliable way to screen mortgage loans when refinancing due to these limitations of your disclosure documents.

The best way to shop for a new mortgage when refinancing is not to compare loan offers, but shop for the right mortgage broker instead. When you find the right person to arrange your next mortgage you’ll avoid all of the refinance traps that I’ve mentioned here today. How can you find the right mortgage broker to arrange your home loan? It’s not as hard as you might think; however, there is one other junk fee we need to discuss known as Yield Spread Premium.

Unnecessary Mortgage Broker Fees

Ask most mortgage brokers about Yield Spread Premium and they get defensive, even angry. Many think that as a mortgage broker Yield Spread Premium is their birthright. The simple fact of the matter is that charging an origination fee and Yield Spread Premium is advantageous and wrong. What is Yield Spread Premium? Simply put, it is the number one refinance trap to avoid and according to the HUD Secretary will cost homeowners in the United States sixteen billion dollars this year.

Yield Spread Premium is a Trap

Not only is Yield Spread Premium a trap that drives up your mortgage payment unnecessarily, like the jelly of the month club it’s keeps doing it all year long…every year you keep the mortgage loan. Yield Spread Premium is a fee paid to your mortgage broker for locking and closing your home loan with a higher than necessary mortgage rate. Mortgage lenders reward your mortgage brokers for overcharging you with this commission. Because you’re closing with a higher mortgage rate than you deserve your monthly payment will also be higher than it needs to be, meaning you’re overpaying as long as you keep this mortgage loan.

Yield Spread Premium works as an incentive from the lender for overcharging you. For every .25% you overpay on your mortgage the broker receives a bonus of 1.0% of your loan amount in addition to the origination fee you’re already paying. The good news is that like any other refinance trap, Yield Spread Premium and other junk fees can be avoided.

You can learn more about this article Avoid These Refinance Traps, including which mortgage fees are junk like Yield Spread Premium by registering for my Underground Mortgage Videos. Register today and you’ll get immediate online access to all the videos without downloading anything to your personal computer.

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How to Get the Lowest Mortgage Payment When Refinancing Your Home Loan

Robert — Thu, 07 May 2009 01:08:33 +0000

Are you looking for a mortgage with the lowest possible monthly payment? Do you know which fees drive up your mortgage payment unnecessarily and how to avoid them? There is one hidden fee you should know about that according to the Secretary of Housing and Urban Development will cost homeowners in the United States sixteen billion dollars this year alone. Here are several tips to help you get the lowest possible monthly payment while avoiding unnecessary fees on your next home loan.

What Determines Your Monthly Mortgage Payment?

Assuming that you don’t have a derogatory credit rating there are two main factors that determine your payment amount. The first of course is the mortgage rate you qualify for, and the second is the term length you choose for your home loan. Term length is the amount of time you have to repay the loan and determines your amortization schedule. Amortization is a term that describes the repayment of your mortgage loan over time as well as how much of your monthly payment is applied to finance charges. The most common term length lengths are 15 and 30 years; however, there are 40 year terms available. As a rule of thumb the longer your term length the lower your monthly payment will be. Conversely, choosing a shorter term length will raise your payment amount as more of that payment will go towards repaying the loan, than paying the lender interest.

Fees That Affect Your Mortgage Payment

There is a fee you will find on your Good Faith Estimate known as a “Discount Point.” This is a fee your lender may require you to pay to qualify for a specific mortgage rate. One point is equal to one percent of your mortgage rate due at closing. Mortgage rates are very low in today’s market so it’s best to avoid paying discount points whenever you can as the return on your investment for paying this fee will be very low. As a rule of thumb one discount point should lower your mortgage rate by .25 percent; however, if your credit rating is poor you may be required to pay points just to get approved for the loan.

Hidden Fees That Raise Your Mortgage Payment

There is a hidden fee you will not find on your Good Faith Estimate that drives up your mortgage rate and monthly payment unnecessarily. Most people think that using the Good Faith Estimate is a way to compare mortgage fees when shopping for a home loan; however, while disclosure laws in the United States require lenders to provide you with a Good Faith Estimate, there are no requirements as to which fees need be listed. Most mortgage brokers find it convenient to leave off any fees related to their commission that drive up your mortgage payment.

The fee you won’t find on your Good Faith Estimate is known as “Paid Outside of Closing” or POC fees. This is a commission paid by the lender to the mortgage broker for locking and closing your home loan with a higher than necessary mortgage rate. This fee is also known as Yield Spread Premium, and while you won’t see it on your Good Faith Estimate it will appear in one form or another on your HUD-1 statement. The problem is by the time you get the HUD-1 it’s often too late to do any good for comparison shopping. So how can you recognize Yield Spread Premium earlier in the mortgage process?

How to Recognize Paid Outside of Closing (POC) Fees

The first opportunity you’ll have to spot the POC fees also known as Yield Spread Premium on your loan, assuming that your broker is honest about not taking this fee on your loan, is when you lock in your mortgage rate. The rate lock confirmation from the lender will show you the mortgage rate, any discount points you will be required to pay, as well as any fees paid outside of closing to your mortgage broker. Be careful that the rate lock confirmation you get is in writing and comes directly from the lender, not your mortgage broker. Some dishonest brokers type up a bogus mortgage rate lock confirmation on their company letter head and try and pass it off as the lender’s mortgage rate lock. Also, if you have a “verbal” rate lock with your mortgage broker or a bogus written lock there is no way to be sure that you have actually locked in your mortgage rate. If you’re in this situation walk away and find another mortgage broker to arrange your loan.

Yield Spread Premium Drives up Your Mortgage Payment Unnecessarily

We’ve already discussed how your mortgage broker can receive a hidden commission for marking up your mortgage rate, but how does this drive up your monthly payment? Have a look at the following example to illustrate how this unnecessary markup can cost you thousands of dollars. Note that I’m saying “unnecessary” and “hidden” commission on your loan. Don’t get me wrong… I’m not saying your mortgage broker shouldn’t get paid for their work, that’s what the origination fee you pay is for. As for origination fees, one percent is a perfectly reasonable fee to pay for your mortgage broker’s services that won’t drive up your monthly payment.

Suppose for example you are refinancing your home for $315,000. Your mortgage broker quotes you an interest rate of 6.0% and charges you one percent for loan origination. That one percent origination fee is perfectly reasonable; however, what about your six percent mortgage rate? What your mortgage broker isn’t telling you is that you actually qualified for a 5.25 percent interest rate but the broker marked it up to get a commission from the lender. In this case, your mortgage broker receives one percent of your loan amount for every .25 they’ve overcharged you. Your broker walked away from this transaction with your one percent in their pocket plus three percent from the lender and you get stuck with a monthly payment higher than what it should be.

How much money is going down the drain on this home loan? With the mortgage loan you got at six percent on a thirty-year fixed rate deal your payment will be $1,900 per month. If you had the mortgage payment you deserve at 5.25 percent your payment would only be $1,740 per month! That’s a difference of $160 per month and a whopping $1,920 per year! The good news is that now you know about this hidden fee that drives up your payment and you can avoid it.

You can learn more about getting the lowest mortgage payment when refinancing your home by registering for my Underground Mortgage Videos. Register today and you’ll be on your way to saving thousands of dollars in markup and junk fees on your next home loan without downloading anything to your computer.

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Mortgage Refinancing Breakdown

Robert — Thu, 23 Apr 2009 19:11:16 +0000

If you’re considering refinancing your home loan a mortgage refinancing breakdown can help you spot troublesome areas of the loan offers you are considering.

There are a number of things including mortgage broker markup and junk fees that result in overpaying thousands of dollars when refinancing your home. Here is the mortgage refinancing breakdown you’ll need and several tips to help you avoid paying too much for your next mortgage loan.

Mortgage Refinancing Breakdown Online

RefiAdisor.com provides a number of resources to breakdown the refinancing process. There is a video tutorial in the member’s area that will show you how to refinance your home without paying markup of your mortgage rate or junk fees at closing. There is no cost to join RefiAdvisor.com. Registration is required to access materials in the password protect member’s area.

What to Look for When Refinancing Your Home

Mortgage refinancing can be an intimidating process. Should you refinance with a mortgage broker, your bank, or a mortgage company out of the phone book? I never recommend that anyone refinance with a bank or credit union; because of the Banking Lobby, banks and credit unions are exempt from the Real Estate Settlement Procedures Act and are not required to disclose any of their markup or profit margin on your home loan. Plain and simple, you’ll never get anything close to a Par Mortgage Rate refinancing your home with a bank or credit union.

What is a Par Mortgage Rate?

Mortgage rates change daily and on any given day “Par” mortgage rates may not be available; however, keep an eye on wholesale mortgage rates during the course of the week and you can get a par rate. What are par mortgage rates? Simply put a par mortgage rate is one that doesn’t cost you anything to get and does not create a commission for the person arranging your loan. Cost to you comes from discount points required to qualify for a specific mortgage rate and the commission for the mortgage broker comes from Yield Spread Premium. We’ll discuss Yield Spread Premium and the broker’s commission later but your goal when refinancing should be to get a mortgage rate that doesn’t cost you anything or create cash for the broker at your expense.

How To Get Par Mortgage Rates

Mortgage rates can be tricky and most of the rate quotes you encounter have been marked up one way or another for a commission. How does this commission based markup of your mortgage rate occur? Lenders reward mortgage brokers that lock and close home loans with higher than market interest rates with a commission known as Yield Spread Premium. If your home loan includes Yield Spread Premium your mortgage payment will be higher than it needs to be for the duration of your loan. Don’t get me wrong, your mortgage broker should get paid for their work; however, you don’t want this compensation driving up your payment for years to come. How should your mortgage broker get paid? Mortgage brokers receive a fee called a loan origination fee for their work and one percent of your home loan is a reasonable amount to pay. The problem is many (greedy) mortgage brokers charge origination fees and then take Yield Spread Premium on top of this which can double even triple their compensation at your expense.

You Can Avoid Mortgage Broker Markup

Many mortgage brokers become defensive and even angry when questioned about Yield Spread Premium, so how can you avoid unnecessary markup of your mortgage rate? You can start by finding the right mortgage broker for the job. We’ve already discussed why banks are a bad choice for refinancing your home loan; however, there is also a type of mortgage broker that you’ll need to avoid for the same reasons.

When the Banking Lobby had the law changed to exclude banks a number of mortgage brokers wanted in on the action and found that if they formed a company that funded home loans with their own money they could exploit the same loophole in the Real Estate Settlement Procedures Act as banks. This allows them to charge whatever they like without disclosing their markup of profit margins to their customers. Mortgage brokers that run their businesses in this manner are known as Mortgage Broker Banks and you’ll want to avoid them for the same reasons listed above.

How can you tell if a mortgage broker or company is operating as a broker bank? Ask them if they close home loans in the name of the wholesale lender or their own company. If the answer you get is that they close mortgages in their company’s name then you know you’re dealing with a broker bank and should move on to the next mortgage broker on your list. Who then is the best mortgage broker to refinance your home loan? Look for small, self-employed mortgage brokers working from home. Those mortgage brokers you see around town with their logos plastered on company hummers probably aren’t going to be willing to negotiate the kind of deal I’m describing here. Also, mortgage brokers working out of posh office spaces with expensive sales staff are another red flag when choosing a mortgage broker.

You can learn more about refinancing your mortgage without markup of your mortgage rate or lender junk fees with the online Mortgage Refinancing Breakdown in my Underground Mortgage Videos. Register today and you’ll have immediate access to the videos without downloading anything to your computer in the password protected member’s area.

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Origination Fee and Points

Robert — Sat, 21 Feb 2009 21:38:40 +0000

Many homeowners absolutely dread refinancing their mortgage loans because they don’t fully understand how the Origination Fee and Points work.

In fact, the Origination Fee and Points are one of the reasons homeowners in the United States will overpay well over sixteen billion dollars this year alone when refinancing their mortgage loans according to the HUD Secretary. Here are several tips to help you avoid being a part of this statistic when refinancing your home loan AND save you thousands of dollars in the process.

Origination Fee and Points

Let’s get started with the origination fee. Sometimes called “origination points” this a fee you will pay to the person arranging your new loan. This person could be a discount mortgage company or a broker. A reasonable amount to pay for loan origination is one percent of your loan amount; however, it is not uncommon for mortgage brokers to charge as much as five percent. If you follow the system outlined in the free underground mortgage videos on this website you can find a loan broker willing to work for one percent without padding your best mortgage rate for a commission…but more on that later.

What About Discount Points

There is another flavor of mortgage points you need to be aware of and that is the so called “discount points.” This is a form of pre-paid interest paid by you at closing in exchange for the lowest mortgage rate. One “discount” point is the equivalent of one percent of your mortgage amount and should lower your mortgage rate by .25%. Some lenders will require you to pay points to get a specific low mortgage rate; however, in today’s market you can get rock bottom rates without paying discount points.

If you have less than desirable credit you might not be able to get around paying points…whether or not it makes sense to refinance in your case depends on how long it will take to recoup your points and closing costs from your savings on the new loan. You can easily calculate the break-even point when refinancing by determining how much lower your new monthly payment will be each month and dividing your total closing costs including points by the amount of your savings. This will tell you how many months it will take to recoup your expenses from refinancing; if you can live with the length of time it takes to get your money back then refinancing your home loan probably makes sense in your situation.

This is a much more intelligent method of determining if refinancing is a good idea in your situation than relying on that old wife’s tale known as the two percent rule. (The two percent rule states you should only refinance if the best mortgage rate is two percent lower than you existing rate. A real bonehead came up with this rule…you’d never want to be seen with him and he’d embarrass you at parties.) Getting back to points in most cases you will want to avoid paying discount points whenever possible because mortgage rates are so low right now.

What About Mortgage Broker Markup?

That’s the million dollar question…what about all these sneaky mortgage brokers that mark your interest rate up to get a commission from the lender? I’ll bet you didn’t know they did that? In fact, many brokers become defensive and angry if you ask them about this markup, insisting that the fee they receive from the lender is “none of your business…it’s between me and the lender.”

Well, I’m here to tell you that this “fee” known as Yield Spread Premium is your business and you should be very concerned as to why the lender pays the broker for marking up your mortgage rate. Mortgage lenders love loans that close with higher than market mortgage rates. Your online mortgage lender actually makes the majority of their profits selling loans to investors on the secondary mortgage market and home loans with higher than necessary mortgage rates make them the most profit. This is why mortgage lenders reward brokers that overcharge their customers with a commission known as Yield Spread Premium.

Most homeowners have never heard of this markup and don’t know how to spot it in their loan documents. You’ll probably never see it on your Good Faith Estimate because many brokers leave it off completely. The lender is required by law to disclose it in the HUD-1 statement; however, if you don’t know what you’re looking for at this point it’s probably too late and you’ve already paid too much.

Better luck next time around right? Well, fortunately for you, you’re probably not that far along in the closing process and have time to learn how to avoid this unnecessary markup of your discount mortgage rate that results in overpaying thousands of dollars every year that you keep the mortgage loan. Another little known fact when refinancing your home mortgage loan is that you actually have three days to change your mind and put the brakes on before your lender funds the loan. This is known as your three day rescission rights…you can bail on a shady lender at any time until your loan is funded three business days after closing.

How to Avoid Overpaying the Origination Fee and Points

You might be thinking to yourself I know how to avoid all this on line mortgage broker trickery…I’ll just refinance my home loan with my bank or credit union. Guess again, banks have their own tricks due to a little known loophole in the Real Estate Settlement Procedures Act. Refinance your home loan with a bank and I guarantee you’ll pay more than you have to AND will never know how the bank overcharged you. The best deals when refinancing your mortgage without overpaying come from finding the right mortgage broker for the job.

Your Mortgage broker works for a commission, you’ll never get around this and they do have kids to feed like everyone else; however, they should not be taking advantage of people just to make a hummer payment. There are honest mortgage brokers out there who are willing to work for a one percent loan origination fee without taking Yield Spread Premium on the loan; you just need to know how to find them.

You can learn more about refinancing your home with a wholesale mortgage rate with my free Underground Mortgage Videos. Check out these mortgage videos today and you’ll be able to refinance your home without paying markup or lender junk fees.

Here’s a sample of what you’ll get when you register today without downloading anything to your computer’s hard drive.

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Refi Problems You Need to Avoid

Robert — Wed, 28 Jan 2009 19:56:23 +0000

If you are considering refinancing your home mortgage loan you might be concerned about refi problems that can arise during the closing process. There are a number of junk fees and markup that can turn that new mortgage loan you’re applying for into an expensive mistake. Here are several tips to help you avoid Refi Problems that result in overpaying for your next mortgage loan.

Refi Problems

Most homeowners have no idea how the person arranging their mortgage is compensated for their work. Assuming you will not be refinancing your mortgage with a bank due to loopholes in the Real Estate Settlement Procedures Act which allows the bank to overcharge without telling you, the next mortgage you have will be arranged by a mortgage broker.

Mortgage brokers are paid for their work by two sources. Brokers can charge you a loan origination fee, often as much as five percent, which you will pay at closing for their part in arranging the loan. One percent is a reasonable amount to pay for loan origination, so don’t be afraid to bring this up when shopping for a loan. The second way mortgage brokers are compensated is with a fee paid by the lenders in the form of Yield Spread Premium.

Mortgage Yield Spread Premium

Mortgage lenders pay a fee to the broker for locking and closing your loan with an above market mortgage rate. You might think this isn’t a problem because the fee is not coming out of your pocket but you need to consider why lenders pay this fee. Lenders reward mortgage brokers for closing loans with above market mortgage rates because these loans bring them a premium profit when the loans are sold to investors on the secondary market. What you need to know about higher than market mortgage rates is that they result in a higher than necessary mortgage payment, a payment you’ll be making every month that you keep your loan.

Here’s an example to illustrate how Yield Spread Premium drives up your mortgage payment unnecessarily. Suppose for example you are refinancing your California mortgage for $350,000. The broker quotes you a mortgage rate of 5.75% and charges you an origination fee of 2%. This means you’ll have to fork over seven thousand dollars at closing for the mortgage broker’s fee. What your broker isn’t telling you is that you actually qualified for a 5.0% mortgage rate and they’ve marked it up to get a commission from the lender.

You might be asking “What’s a measly .75% between friends?” Here’s what that .75% on your mortgage rate does to your monthly payment. Your monthly payment with a mortgage rate of 5.75% on a 30 year fixed rate loan will be $2050. If you had gotten the mortgage rate you qualified for at 5.0% your monthly mortgage payment would be only $1,875 per month! That’s a difference of $2,100 every year that you keep this loan! Still think Yield Spread Premium isn’t a Refi Problem you need to be worried about?

Yield Spread Premium Can Be Avoided

It is possible to refinance your home loan without Yield Spread Premium paying the mortgage broker a flat one percent origination fee for their work. Homeowners who know how to do this are able to take advantage of the wholesale nature of mortgage rates and save thousands of dollars in unnecessary mortgage interest every year. According to the HUD Secretary Yield Spread Premium will be responsible for American homeowners overpaying nearly sixteen billion dollars this year alone! Don’t be a part of this statistic…register for the mortgage refinancing tutorial on this website and you’ll learn how to refinance you home with a wholesale mortgage rate without paying junk fees to the lender or the broker.

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Mortgage Refinancing During the Holidays

Robert — Wed, 24 Dec 2008 18:16:56 +0000

If you are refinancing your home mortgage this holiday season there are several things you need to know in order to avoid paying too much in fees and finance charges.

While mortgage rates are at their lowest levels in 50 years there are a number of junk fees and mortgage broker tricks that can quickly turn a good deal into a horrible mistake. Here are several tips to help you keep more of your money this holiday season when refinancing your home mortgage loan.

Beware Yield Spread Premium

Yield Spread Premium isn’t as scary as it sounds and is a fairly simple concept to wrap your head around even though most homeowners have never heard of it. Simply put this is the markup of your mortgage interest rate by the mortgage company or broker for a commission. Don’t think you’ll be getting away from mortgage rate markup by refinancing with your bank; you’ll pay the same markup or more refinancing with a bank or credit union, the markup just goes by another name. See Service Release Premium for more about this type of markup by a bank or credit union.

How does Yield Spread Premium work? Lenders pay mortgage companies and brokers a commission for locking and closing mortgage loans with above market rates. For every .25 percent you agree to overpay when locking and closing your new home loan the mortgage company or broker arranging your loan is paid one percent of your loan amount as a commission. This commission is paid in addition to any fees you pay for loan origination, including junk fees the mortgage company slips past you.

Don’t Pay Too Much for Your Next Mortgage Loan

Avoiding Yield Spread Premium and junk fees is easier than you think. It’s all about negotiation with your mortgage broker to pay a flat origination fee without commission based markup of your mortgage rate. There are brokers out there willing to work for a flat origination fee of one percent without marking up your mortgage rate for a commission. If you can find a broker like this you’ll be able to take advantage of wholesale mortgage rates when refinancing, saving yourself thousands of dollars every year you keep the loan.

How to Find The Right Mortgage Broker

Finding the right mortgage broker for the job isn’t as hard as it sounds. The ideal mortgage broker does not work for a large firm or Internet website. They are self-employed, have five to ten years of experience, and if you can find one that works out of the home, even better. Why would you want a self-employed, homebound mortgage broker? These brokers do not employ expensive sales staff and do not pay for posh office spaces…therefore their overhead is much lower or non-existent. This mortgage broker is much more likely to negotiate with you over their commission than the fast talking salesperson sitting in a posh office.

You can learn more about refinancing your mortgage this holiday season without paying too much by registering for the free mortgage videos found on this website. Register today and you’ll receive a list of mortgage brokers in your area that do not markup mortgage rates for a commission and you’ll be on the road to saving thousands of dollars on your next mortgage loan.

Happy Holidays!
Robert

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How to Refinance Your Home Mortgage Loan and Save

Robert — Fri, 07 Nov 2008 02:05:15 +0000

If you are considering refinancing your home mortgage the interest rate you receive is probably your number one concern for the new loan. What you might not know about that mortgage rate is that the quotes you receive are often padded to give your mortgage company a commission. Here are refinancing tips to help you avoid this padding of your mortgage rate and save you thousands of dollars in the process.

The Best Rates Come From Mortgage Brokers

It’s true; you’ll never get a wholesale mortgage rate from your bank or that “e” site. You have to find the right person to arrange your loan and negotiate with them to avoid paying the unnecessary markup of your mortgage rate. This is easier than you think…you just need to understand how mortgage brokers are compensated for arranging your loan and then learn which buttons to push.

Mortgage brokers are simply reselling loans from wholesale lenders for a commission. Brokers receive compensation in two ways. The first is the origination fee you pay at closing. This fee can range from anywhere from zero to as high as 4%. You might think that a zero origination fee mortgage is the way to go; however, you’ll soon see that this type of loan results in much higher mortgage rate and monthly
payment.

The second way your mortgage broker is compensated is with a commission paid by the lender. Mortgage lenders pay a fee known as Yield Spread Premium when your mortgage broker locks and closes your home loan with an above market mortgage rate. You get a higher rate than you could have and the lender doubles, often triples your brokers commission on your loan…most often without your knowledge or consent.

Here’s an example of how this unnecessary mortgage rate will cost you thousands of dollars. Suppose you’ve decided to refinance your home for $300,000. Your mortgage broker quotes you an interest of 7.0% because you’ll be taking cash back on the loan to pay off some old debts. What you don’t know is that you were approved for a mortgage rate of 6.25% but the broker marked your rate up for a commission. You got suckered into paying .75% too much for your new loan and the broker walked away with the one percent origination fee you pay plus a whopping three percent from the lender for overcharging you.

What does this mean for your monthly payment? On a $300,000 thirty year mortgage with a fixed 7% mortgage rate your monthly payment will be about $2,000 per month. The same loan with the 6.25% mortgage rate that you deserve would have a monthly payment of only $1840. That’s almost $200 per month, a whopping $1,920 per year you’re overpaying for the loan.

You Can Save Thousands of Dollars on Your Next Mortgage Loan

There is good news for any homeowner willing to invest a few minutes learning how to refinance without overpaying. It is possible to refinance your home mortgage paying only a one percent origination fee without markup of your mortgage rate for Yield Spread Premium. Learn how to do this and you and your family will have access to wholesale mortgage rates for every home you buy and every loan you refinance. You can learn more about doing this for yourself by registering for the free mortgage videos found on this website.

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Mortgage Closing Costs Defined

Robert — Sat, 09 Aug 2008 05:21:42 +0000

Mortgage closing costs are fees including loan origination fees, underwriting fees, loan processing fees, discount points, title charges and a host of others…some legitimate, others garbage. The closing costs you will be required to pay when refinancing your mortgage are any fees paid to the mortgage broker or any third party company like the title company or your appraiser.

There are other administrative fees that come out of your pocket at closing like any unpaid interest or escrows that are a part of the cash you need to close and are not actually a part of your actual closing costs.

Definition: Mortgage Closing costs are the fees you pay up front when taking out a mortgage loan.

You can pay your closing costs several different ways. Writing a check at the title company is the most common method when purchasing your home. You have the option of including these costs in your loan amount in many cases when refinancing your mortgage. The problem many homeowners are aware of but not sure what to do about is simply knowing which closing costs are necessary and which fees are destined for the mortgage broker’s pocket…

While closing costs are fairly straight forward and you cut the fat once you know what to look for, there is another “junk fee” that many homeowners overlook altogether. If you’re a regular reader of this blog you’ll know that I am referring to Yield Spread Premium.

Definition: Yield Spread Premium is a percentage of your loan created when the mortgage broker locks and closes at a rate higher than necessary for your loan.

Mortgage brokers mark up your mortgage rate because the lender pays them a bonus for overcharging you…of course this happens most frequently without your knowledge. The good news for you is that this unnecessary markup of your mortgage rate and the commission it creates known as Yield Spread Premium can be avoided, saving you as much as thousands of dollars each and every year that you keep your home loan. You can learn more about avoiding Yield Spread premium by registering for the free mortgage refinancing videos found on this website.

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Understanding The Good Faith Estimate

Robert — Mon, 30 Jun 2008 23:24:29 +0000

If you are in the process of refinancing your home mortgage loan the Good Faith Estimate can be a source of confusion. While the Good Faith Estimate (GFE) can be a useful tool for evaluating a loan offer, keep in mind that it is just an estimate and treat it accordingly. Here are several tips to help you understand Good Faith Estimates when refinancing your home mortgage loan.

What is the Good Faith Estimate?

Mortgage lenders are required to give you the standardized form known as a Good Faith Estimate within 24 hours of receiving your application for a mortgage loan. Of course this isn’t the most helpful time to get your Good Faith Estimate when comparison shopping; most mortgage lenders will provide you a copy for the loan you are considering upon request.

Your Good Faith Estimate is an itemized list of fees associated with your loan. Pay close attention to your loan origination fees and Yield Spread Premium as this is where most people overpay when refinancing. If you’re not familiar with these terms don’t worry…you’ve come to the right place to learn how to save money when refinancing.

Loan Origination Fees

Non-bank originated mortgage loans are arranged by a third person, typically a mortgage company or broker. These people work for an origination fee which is paid by you at closing. A reasonable amount to pay for loan origination is one percent of your loan amount; however, it is not uncommon to find mortgage companies and brokers charging four percent or more for loan origination. Your goal when refinancing your mortgage should be to find a mortgage broker willing to work for a one percent origination fee without charging you Yield Spread Premium.

Yield Spread Premium

Most people have never heard of Yield Spread Premium. Simply put, this is a commission paid to the broker by the lender behind your loan. Yield Spread Premium is paid because the broker marks up your mortgage rate beyond what your lender approved you to earn a commission. Your mortgage broker earns a commission of 1% of your loan amount for every .25% they overcharge you. Yield Spread Premium can add hundreds of dollars to your month payment just to pay a bonus to the person arranging your loan.

The good news is that you can avoid this unnecessary markup of your mortgage interest rate and save yourself thousands of dollars in the process. You can learn more about avoiding Yield Spread Premium and other garbage fees when refinancing your mortgage by registering for my free video tutorial.

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How to Negotiate With Your Mortgage Broker

Robert — Thu, 28 Feb 2008 03:50:31 +0000

If you’re in the process of refinancing your home you can save yourself thousands of dollars by getting a wholesale mortgage rate.

The problem for many homeowners is that that they don’t know how get wholesale rates; most mortgage brokers would simply laugh at you if you told them “give me a wholesale mortgage rate.”

Here are several tips to help you negotiate with mortgage brokers and find the right person to arrange your home loan.

Not Every Mortgage Broker Will Negotiate

The problem with negotiating with a broker is that not all brokers are in a position where they can negotiate. If you’re speaking to a salesperson from a large brokerage house they will probably not have the authority to negotiate for the terms you’re looking for. The reason for this is that the owner of the brokerage will be splitting the commission with the salesperson meaning you’ll always pay more than you have to with a mortgage broker in this situation.

This is also true of mortgage brokers that employ their own salespeople. Suppose for instance, you’re charged a one percent origination fee for your home loan. Your broker pockets this fee and will most often pay the salesperson from the Yield Spread Premium on your loan. Loan offers that don’t have origination fees are making up the difference often by doubling the amount of Yield Spread Premium on your loan. If you want a wholesale mortgage rate and plan on keeping your home for a long time you’ll need to avoid Yield Spread Premium completely.

If you’re not already familiar with this retail markup of your mortgage rate for a commission here is an article about the basics of Yield Spread Premium.

Self Employed Mortgage Brokers Are Best

It’s always better to work with the owner of the company you are dealing with. A self-employed mortgage broker that has been working for ten years or longer is the perfect candidate for arranging your mortgage. Working out of their home? Even better. One reason why working with a self employed mortgage broker is better is that they simply don’t have the overhead expenses that come with posh offices and support staff. A self employed mortgage broker is more likely to negotiate with you and agree to your terms for the loan.

What To Ask For When Refinancing Your Mortgage

If you plan on keeping your home for the duration you’ll want to pay a one percent origination fee without any Yield Spread Premium on the loan. Some mortgage brokers argue that paying the origination fee will only raise your closing costs; however, agreeing to a higher mortgage rate that includes Yield Premium will result in a mortgage payment that could be as much hundreds of dollars higher per month than it has to be.

You can learn more about finding the right mortgage broker to arrange your loan by checking out my free Underground Mortgage Videos. Register today and you’ll learn how to refinance with wholesale mortgage rates without paying junk fees to your lender or broker.

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