Home Mortgage Refinancing Guide

Locking in your mortgage rate is when the lender backing your mortgage secures the money for your loan at a specific interest rate, term length, and dollar amount. A typical rate lock period is for thirty days but it is possible to lock your interest rate for more or even less time. Keep in mind that the longer you lock your rate, the more it will cost you when all is said and done with your loan.

The process of mortgage rate locking starts between you and your mortgage broker or loan officer. When you choose to lock in your mortgage rate the broker or loan officer contacts the wholesale lender to lock the rate. If you are dealing with a loan officer from Wells Fargo bank for example, they will lock the rate with Wells Fargo Mortgage. If you are working with a mortgage broker they will lock with the wholesale lender they are arranging your loan with. That wholesale lender will then secure money for your loan from the secondary mortgage market.

Keep in mind that even though you’ve locked your mortgage rate and the lender has reserved funds for the loan you are not yet obligated to take out this loan. (See your three day rescission rights for more on this)

Once the wholesale lender confirms your loan from the secondary mortgage market, a written lock confirmation is issued by the lender and sent to your mortgage broker or loan officer. This rate lock shows everything about your loan including any Yield Spread Premium or commission being paid to the broker for marking up your mortgage rate. If you do not receive written confirmation of your rate lock then you have not locked your mortgage rate. Verbal rate locks are meaningless and could cost you a higher rate on your loan.

You can learn more about locking in your mortgage rate and other tips to avoid paying too much for your next mortgage by registering for the free video tutorial on this site.

In a single word…yes, your mortgage broker is better. There are a number of reasons that direct mortgage lenders and banks should be avoided at all costs when refinancing your home loan. Banks and other direct mortgage companies can legally hide the profit they make from marking up your mortgage rate where a mortgage broker is legally required to disclose their commission.

The Real Estate Settlement Procedures Act

The banking lobby spent millions of dollars having legislation passed requiring mortgage brokers disclose the commissions they receive on your loan. They also made sure that banks and other lenders that fund mortgage loans with their own capital were exempt from the law. This legislation known as RESPA requires your mortgage broker to disclose Yield Spread Premium on the HUD-1 statement you receive prior to closing.

Yield Spread Premium & Service Release Premium

The commission paid to your mortgage broker by a wholesale lender is called Yield Spread Premium. Brokers get paid by the lender when they lock and close your loan with an above market mortgage rate. If you learn how to recognize this markup you can avoid it when refinancing your home loan which essentially allows you access to wholesale mortgage rates. Service Release Premium on the other hand is the profit the bank makes when your loan with an above market mortgage rate is sold to investors on the secondary market.

Because banks are exempt from RESPA legislation they will never tell you how much your mortgage rate has been marked up for their profit. This type of markup is therefore impossible to avoid and reason enough never to take out a mortgage loan from your bank.

Avoiding Yield Spread Premium Is Easier Than You Think

You don’t have to be a financial guru to get a wholesale rate when refinancing your mortgage. Spend a little time learning how mortgage brokers are paid and you can easily negotiate with your broker to pay a flat origination fee without including Yield Spread Premium on your new home loan. You can learn more about refinancing with a wholesale rate by registering for the free videos found on this website.

The videos offer a step-by-step system for finding the right mortgage broker and the lowest interest rate while avoiding lender junk fees. Register today, these mortgage videos are yours free for a limited time.

With the mortgage meltdown underway in full swing you might think getting a mortgage even with good credit would be difficult. This isn’t necessarily the case.

The problem many homeowners face when refinancing their mortgages is that home values are declining. If you’re upside down in your home and struggling to refinance there are options available to get you the help you need. Here are several tips to help get you approved when refinancing your home loan.

Why Mortgage Applications Are Denied

Many mortgage brokers these days are closing as few as one out of ten loan applications. The majority of these denials are related to the home and not the borrower. This means the loan-to-value ratio for many borrowers is too high or they are upside-down in their property. Being upside down simply means you owe more than your home is worth.

You might hear that people are being denied mortgage loans because of the credit freeze and this simply isn’t the case. The credit freeze you hear about in the news is because banks have stopped lending money to each other for fear of bank failure and has nothing to do with consumer lending or mortgage loans. There are mortgage loans available and you don’t necessarily need stellar credit to find one.

What To Do If Your Application Is Denied

First of all don’t take it personally…it’s discouraging to have your mortgage denied but the first thing you need to do is look at the big picture. What is your credit score? Have you checked your credit reports for inaccuracies? Spend an hour going over your credit reports from the website AnnualCreditReport.com. It won’t cost you anything and if there are mistakes in your credit file you can bet they are dragging down your credit score.

Next, look at your qualifying ratios. These are your debt-to-income ratio and the loan-to-value ratio of your home. Are your monthly bills too much compared to your monthly income? If so what can you do to payoff or consolidate this debt to bring your debt-to-income ratio back in line? When was your home last appraised and how much do you owe compared to its value?

Mortgage Brokers Can Help

A good mortgage broker can advise you on improving aspects of your application and can place you with loan programs tailored to your individual situation. You have to be careful when working with a mortgage broker, especially in today’s climate, because brokers work for a commission. Loans that bring your broker the best commission probably aren’t the best loans for your situation.

Mortgage brokers can also markup your mortgage rate to get a commission from the lender. This commission is called Yield Spread Premium and according to the HUD Secretary is responsible for Americans overpaying nearly sixteen billion dollars every year. You don’t have to fall victim to this unnecessary markup of your mortgage rate…learn how to recognize the markup and find the right mortgage broker and you can save yourself thousands of dollars every year.

You can learn more about getting your loan approved, finding the right mortgage broker, and avoiding lender junk fees by registering for the free videos on this website. You’ll get a list of recommended mortgage brokers in your area that can get you on the right path to mortgage approval.

If you’ve been following the news you’ve undoubtedly heard that the President signed the $700 billion dollar bailout package. Shortly after this the Federal Reserve cut interest rates. What you may not know is that the when the Federal Reserve cuts rates it lowers the Federal Funds rate which actually has nothing to do with mortgage rates.

30 Year Mortgage Rates

When you hear about rate cuts in the news or see all of the bad news coming out of Wall Street you might wonder how exactly this impacts mortgage rates. The rate that the government is cutting is the Federal Funds rate and is what the government charges your bank to borrow money. This affects the rates on your credit cards, car loans, and lines of credit as the rate cuts impact the bank’s prime lending rate.

Mortgage rates actually follow the bond markets. This means that mortgage rates rise and fall based on the yields of long term bonds like the 10 year Treasury note. While this isn’t a 100% rule, it is the closest way of tracking the market’s affect on mortgage rates. Suppose for example you look at a 10 year bond and a traditional 30 year mortgage. If you are a investor with loads of cash to invest you can purchase ten year treasury bonds with their safe but low yield, or invest in mortgage securities which are now backed by the government and offer a better return on your investment.

What has all this got to do with mortgage rates? For 30 year interest rates to drop the yield on the 10 year Treasury bond needs to drop. If you’re refinancing your home and want to know which direction mortgage rates are going, pay no attention to the Federal Reserve rate cuts, but pay attention to what’s happening in the bond market. When the yield on the 10 year Treasury drops, expect to see a similar drop in mortgage rates.

What About The Credit Crisis?

It’s no secret that the financial markets in the United States are in trouble. Mortgage applications are at very low levels as people are holding their breath waiting to see what happens. Mortgage rates are currently just over 6% and there are opportunities to save money especially if you are carrying a first and second mortgage with higher rates.

Savvy shopping is a must and finding the right person to arrange your loan can save you thousands of dollars. Remember that mortgage companies and brokers are in the business to earn a commission. The loan that brings them the highest commission is probably not going to be the best one for your situation. You can learn more about refinancing with the right loan while avoiding interest rate markup and junk fees by registering for the free videos on this website.

Are you thinking about mortgage refinancing with an FHA loan? You’ve probably heard that mortgage rates are at a five year low and that the FHA refinance loans have been updated and are once again very popular. Fortunately for you, FHA loans now present an excellent opportunity for you to refinance and save some money in the process…and it is no more difficult to get an FHA loan than a traditional mortgage loan.

Qualifying For FHA Mortgage Loans

Before you jump into FHA refinancing it is important to know the basic requirements for FHA mortgage loans. In order to qualify for FHA refinance loans your monthly mortgage costs including principle, interest, taxes and insurance must be less than 31% of your gross monthly income. You also need to have enough money coming in to pay your mortgage and any other debts on a monthly basis. Your total debt-to-income ratio must be less than 43% of your monthly income unless there are other compensating factors to make up the difference.

FHA Mortgage Credit Requirements

Your credit history is another factor in qualifying for an FHA refinance loan. Qualifying is not entirely based on your credit history; however, having a FICO score greater than 580 will help your cause. The FHA guidelines help borrowers with credit challenges…if you’ve had problems in the past and can show you’ve recovered in a reasonable fashion your credit will not necessarily prevent you from refinancing with an FHA mortgage loan.

What About Bankruptcy?

If you’ve had a bankruptcy recently, you may still be able to refinance with an FHA mortgage. If your Chapter Seven bankruptcy has been discharged for at least two years you can qualify for FHA mortgage refinancing. If you are in Chapter Thirteen and are making all of your payments on time for at least one year you will also be eligible for FHA mortgage loans.

If you have equity in your home it could be possible to refinance up to 98% of your home’s appraised value, even with your closing costs. If you are considering taking cash back it is possible to refinance up to 95% of your home’s value…depending on your circumstances. If you lack equity in your home it is possible to find a lender willing to write down or write off the excess owed to refinance the loan. You can learn more about refinancing your mortgage with paying too much by registering for the free mortgage video guide found on this website.