Mortgage Refinance Guide

Step One: Do Your Homework

Before you consider a new mortgage it is important that you understand how mortgage loans work and which type of loan is right for you. You’ll need to choose a loan based on the type of mortgage interest rate and term length. You have two basic mortgage rates to choose from: fixed or adjustable. Term length is the amount of time you have to repay the loan and along with your mortgage rate determines how much your payment will be. There are other factors you need to learn about including Yield Spread Premium before shopping for a lender; you can learn more about Yield Spread Premium with my free mortgage tutorial.

Step Two: Check Your Credit

Check your credit reports for mistakes and negative information prior to shopping for a mortgage. You don’t have to pay for a credit reports or score to do this; credit agencies are required by law to provide you with one free copy of your credit reports every year. It’s not necessary to pay for a credit score when applying for a mortgage because you really don’t need to know it and your lender can give you the score when you submit your application.

You can request your free credit reports by visiting the website www.annualcreditreport.com and printing out a copy from Equifax, Experian, and Trans Union. Once you have your credit reports carefully review these records for errors. If you find mistakes you’ll need to dispute the error with each individual credit agency. If you have negative information such as judgments or write-offs you’ll need to try and settle with the creditor listed on your report to have this information removed.

Step Three: Find The Right Loan Originator

Your loan originator is the person arranging your mortgage. This person could be a loan officer at your bank, your mortgage broker, a representative from an Internet mortgage site, or someone at your local mortgage company. Never consider taking out a mortgage from your bank or credit union; banks are exempt from the Real Estate Settlement Procedures Act and are not required to disclose their profit margin or markup on your loan.

Step Four: Choose the Right Mortgage Offer

The right mortgage offer is the one that meets your financial needs without costing too much. If you found an upfront mortgage broker that will not charge Yield Spread Premium you should be paying an origination fee of one percent for the broker’s services. You can keep your broker honest by carefully reviewing the HUD-1 statement at least 24 hours prior to closing. If Yield Spread Premium is included in your mortgage it will be disclosed on lines 810-811 of the HUD statement.

Step Five: Closing and Review Your Contract

After you close you’ll need to review your loan contract and make sure the loan you got is the one you were promised. You have three business days after closing to change your mind before your loan is funded on the fourth business day. This period is your three day rescission which should be explained to you by your broker. During this rescission period you can change your mind for any reason. You can learn more about your mortgage refinancing options, including expensive pitfalls to avoid with my free video toolkit.

If you are a homeowner in the State of Texas considering a new mortgage loan, there are several things you need to know to avoid paying too much. Here are several tips to find the perfect lender for your Texas refinance mortgage.

The first thing you need to know about your Texas refinance mortgage is that comparison shopping will only get you a retail mortgage rate. In order to get a wholesale mortgage rate you need to negotiate with potential mortgage brokers for a loan that does not include Yield Spread Premium. If you’ve never heard of Yield Spread Premium it’s the markup the broker adds for a commission on your loan.

Yield Spread Premium 101

When you take out your new Texas Refinance Mortgage the person arranging your new loan will charge you an origination fee; one percent of your loan amount is a reasonable amount to pay for your mortgage broker’s work. Unfortunately most mortgage brokers think the work they do is worth a lot more of your money and this is where Yield Spread Premium comes in.

So what is the markup known as Yield Spread Premium? Here’s an example of how it works. Suppose you’re taking out a Texas refinance mortgage for $350,000; your mortgage broker tells you that you qualify for a 7.0% interest rate and charges you $3,500 for the origination fee. So far this loan seems like a good deal; however, what your mortgage broker isn’t telling you is that you actually qualified for a 6.5% interest rate and they marked it up for a bonus of $7,000 from the lender.

Is Your Mortgage Broker’s Work Worth $10,500?

How much time do you think your mortgage spends working on your loan? One hour, two hours, maybe three? Is their work really worth ten grand? Probably not, however, the current system allows them to pocket this much at your expense. You get a Texas refinance mortgage with an above market interest rate and your mortgage broker gets to make their boat payments.

How Not to Overpay When Refinancing

The good news for homeowners in Texas is that you don’t have to pay this ridiculous markup when refinancing. Homeowners who learn to recognize Yield Spread Premium can negotiate when shopping for their Texas refinance mortgage to avoid paying the markup. You can learn strategies for avoiding Yield Spread Premium and other common mistakes with our free mortgage toolkit.

If you’re in the process of refinancing your home loan you might be concerned with finding the right lender and interest rate for your new loan. Finding the lowest mortgage rate will save will save you thousands of dollars over the lifetime of your loan. What many homeowners don’t know about mortgage refinancing is that it is possible to get wholesale rates if you understand how the mortgage game works.

Mortgage loans are retail products just like the appliances you purchase for your home. Appliance stores mark up their products to make a profit. Similarly banks, mortgage companies and mortgage brokers mark up their loans to boost their profits. What you might not know is that this markup is completely unnecessary because you are already paying a fee for their services. Here’s an example of retail markup of your mortgage interest rate in action.

Suppose you refinance your home for $150,000 and your mortgage broker quotes you a 6.5% interest rate. You agree to pay $1,500 for origination fees; this amount is one percent of the loan and is a reasonable amount to pay. What your mortgage broker isn’t telling you is that you qualified for a 6.0% mortgage rate and they’ve marked your rate up for a commission. For every quarter percent you agree to overpay beyond the 6.0% rate the lender approved you the broker receives one percent of your loan amount as commission. In this case you’re paying $1,500 for the origination and the lender is paying $3,000 to the broker for charging you the above market interest rate.

In this example your mortgage broker walks way with $4,500 and you get stuck paying above market rates for the entire duration of your loan. So what about “Beating the Mortgage Game?” The good news for you is that homeowners who learn to recognize this unnecessary markup of their mortgage interest rate can avoid paying it. You can learn more about refinancing your mortgage without overpaying with our free mortgage refinancing toolkit.