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Best-Refinance-Mortgage-Rates

California Wholesale Lender

January 18, 2008

California Mortgage RatesIf you’re refinancing your home loan in the State of California and are looking for a wholesale mortgage lender, there are several things you need to know about wholesale interest rates. Most homeowners do not understand how mortgage rates are quoted and overpay thousands of dollars every time they take out a home loan. Here are several tips to help you find a California wholesale lender without paying markup and unnecessary junk fees.

How Are Mortgage Rates Quoted?

In order to accurately quote a mortgage rate the lender needs to have sixteen factors of financial information from you. If you receive rate quotes without providing detailed financial information I can tell you whoever gave you the quote has no intention of honoring it. This is a common tactic of shady mortgage brokers practicing bait-and-switch scams. They’ll promise you the moon and when the deal falls through they switch you to a more expensive mortgage loan that brings them the largest commission.

Once you provide your financial details and get a quote you should know that you have a “retail” mortgage rate quote. Mortgage companies and brokers that deal with the public quote rates that include commission based markup. You might think that going directly to a wholesale lender will cut out the middleman and get you wholesale interest rates; however, these wholesale lenders all have retail divisions that deal with the public and only offer their best rates to mortgage companies and brokers.

What is Commission Based Markup?

When you take out a home loan from a mortgage broker you will pay an origination fee for the broker’s services. This fee ranges from less than one percent to as much as three or four percent. (One percent is a reasonable amount to pay the broker…any more and you’re being taken advantage of) The problem with commission based markup is that you’re already paying for the broker’s work. What your mortgage broker isn’t going to tell you (and frequently becomes angry or defensive if you question him or her about it) is that they are marking up your interest rate to get a kickback from the lender.

See wholesale lenders know that mortgages that have above market interest rates bring them huge profits when they sell your home loan to investors, so they reward mortgage companies and brokers for closing loans with above market rates. The higher your mortgage rate the higher the reward for the person closing your home loan. What does this mean for you? A higher mortgage rate means higher monthly payments and money that you’re throwing away on unnecessary finance charges. You’re already paying the broker for their services; on top of your fee they’re helping themselves to your money in the form of a higher mortgage rate.

This commission based markup of your mortgage rate is called Yield Spread Premium and will easily double, often triple the compensation your mortgage broker receives for your loan. Sounds sleazy right? Here’s an example to show you just how sleazy Yield Spread Premium is. Suppose you are refinancing a $300,000 home loan at 6.5% and the mortgage broker charges you 1.5% for loan origination. That means you have to come up with $4,500 at closing to pay the mortgage broker. What you’re broker isn’t telling you is that you actually qualified for 6.0% from the lender and that they’ve marked it up because the lender pays them 1% of your loan amount for every .25% you overpay.

In this example the broker receives an additional 2% or $6,000 on top of the $4,500 you’re already paying for their services. That’s $10,500 for a few hours work and you get stuck paying an above market interest rate.

Finding California Wholesale Lenders

The good news for you today if you’re refinancing in California or any other State for that matter, is that there are ways to refinance your home without paying Yield Spread Premium. (Or lender junk fees) You can find honest mortgage brokers willing to work for reasonable origination fees if you know how to shop for a mortgage loan.

You can learn more about comparison shopping for California Wholesale Lenders when refinancing and avoiding unnecessary garbage fees by registering for a free mortgage video tutorial. Register today; the videos are free and can save you thousands of dollars on your next mortgage loan.

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Mortgage Refinancing Common Sense

October 14, 2007

What’s a good reason for refinancing your mortgage loan? Is it always to get the lowest payment or are there other reasons for taking out a new home loan? Many people will tell you that you should “Never” refinance your mortgage unless the new mortgage rate is at least two percent lower than what you’re paying now. This is probably the worst mortgage advice in the history of bad advice.

Refinancing Common SenseRefinancing your mortgage could be a good idea for you if there is some financial benefit over the long term. Contrary to popular belief a lower mortgage payment may not have long term benefits, especially if you end up paying more to your lender for your financing. There are a number of perfectly good reasons for refinancing without qualifying for a lower mortgage rate. Many homeowners refinance with a higher monthly payment using a 15 year mortgage to build equity in their homes at a faster rate. Other reasons for a higher payment include borrowing against your equity to make home improvements or consolidate your high interest debts. If your current mortgage is with one of the predatory banks or mortgage lenders you’ve been hearing about in the news there’s no better reason than for refinancing than finding a reputable mortgage company.

So what should you look for when refinancing? Many homeowners obsess over mortgage rates and overlook the unnecessary fees in their Good Faith Estimate. Other homeowners don’t understand the retail nature of their mortgage interest rates and overpay hundreds of dollars every month because their mortgage interest rate has been marked up to give the broker a bonus. The mortgage industry is every bit as bad as a shady used car salesman; homeowners who take the time to do their homework before refinancing can save themselves thousands of dollars and many headaches.

Where to get started doing your homework when refinancing? The first thing you need to familiarize yourself with is Yield Spread Premium. It’s okay if you’ve never heard of this before; it’s not as scary as it sounds. Yield Spread Premium is simply the markup your broker adds to your mortgage rate to get a bonus from your lender. The problem with this markup is that you’re already paying an origination fee for the broker’s work; Yield Spread Premium really just double-dipping in your pocket…a sleazy way to make a buck.

Yield Spread Premium (YSP)

How does this mortgage scam work? Your mortgage broker qualifies you for a specific interest rate when the wholesale lender approves your loan. Most brokers will not tell you the interest rate you qualified or show you a wholesale rate sheet from the lender. Instead they mark up this interest rate based on how much they think you’ll overpay. (Sounds like a used car salesman right?) For every quarter percent you overpay for your new mortgage rate the broker gets a commission from the lender of one percent of your mortgage.

Considering that you’re already paying one percent or more for loan origination, YSP can actually double, even triple your broker’s compensation for originating your loan. Sounds like a good deal for the broker; they’ll even tell you not to worry about this fee on your HUD-1 statement because it’s being paid by the lender. The question you need to be asking is why the lender would pay this fee in the first place. Wholesale lenders make a bundle selling loans with above market interest rates to investors. Yield Spread Premium is an incentive for overcharging you, plain and simple.

Don’t be fooled by a fast-talking mortgage broker…do you really want to be making his boat payment for the next thirty years? You can learn more about refinancing your home loan without being ripped off by registering for this free mortgage refinancing tutorial.

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Best Refinance Mortgage Rates

July 5, 2007

If you’re a homeowner shopping for the best refinance mortgage rates and not familiar with Yield Spread Premium you’ll want to read every word of this article. Learning about Yield Spread Premium and how to avoid this unnecessary markup of your mortgage interest rate will put you ahead of 97% of homeowners and save you thousands of dollars. Here’s everything you need to know about the markup that will cost homeowners nearly sixteen billion dollars this year according to the US Department of Housing and Urban Development.

How do you get the best refinance mortgage rates? Most homeowners take the approach of comparison shopping with mortgage offers until they find one with the lowest interest rate. The problem with this approach is that every mortgage offer they consider includes Yield Spread Premium which means they’re overpaying for the new loan. So what is Yield Spread Premium?

Simply put, Yield Spread Premium is the retail markup of your mortgage interest rate for a commission. Your loan representative inflates your interest rate because the wholesale lender pays them a bonus of one percent of your loan for every quarter percent they overcharge you. 97% of homeowners out there have never heard of Yield Spread Premium and don’t question the markup buried in their Good Faith Estimate or HUD-1 Statement.

Here’s an example of mortgage refinancing with Yield Spread Premium. Suppose you plan on refinancing your mortgage for $300,000. Your mortgage broker tells you that you qualify for a 6.75% fixed mortgage rate on a 30 year loan. You agree to pay the broker an origination fee of one percent, or $3,000. One percent is a reasonable amount to pay for the mortgage broker’s services; however, what your mortgage broker isn’t telling you is that you actually qualified for a 6.0% interest rate. Your mortgage broker marked your rate up to 6.75% and the wholesale lender pays them a commission of $9,000 for charging you an above market interest rate.

In this example your mortgage broker walks away with $12,000 for a few hours work and you’re stuck paying above market mortgage rates. Think I’m exaggerating in this example? Every brokered mortgage loan in the United States works this way. In fact, there’s been a debate raging in Congress for years on this fleecing of American homeowners; however, nothing’s been done and this ridiculous markup is still legal.

Best Refinance Mortgage Rates without Yield Spread Premium

Fortunately for you, homeowners who learn about Yield Spread Premium can negotiate with potential mortgage brokers to avoid paying it. You can start by telling your mortgage broker that you know how Yield Spread Premium works and will not tolerate this markup with your loan. If the broker agrees to accept a reasonable origination fee for their services you’ll be ahead of 97% of homeowners that blindly agree to pay Yield Spread Premium with refinancing. You can learn more about finding the best refinance mortgage rates without overpaying with our free mortgage toolkit. You can get immediate access to the video tuorial using the link at the top of this page.

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