Mortgage Refinance Guide

When it comes to getting your home loan, nearly everyone wants to get the lowest mortgage rate possible. The question is how to do this…the answer doesn’t have to be as confusing as it might seem.

The first step to getting the best mortgage rates possible is for you to understand how mortgage rates are determined and where you stand based on your credit history and credit score.

If you currently have a mortgage loan, have you been hearing rates other people qualified for or have looked in the newspaper and seen low rates that make yours look terrible? Are you wondering how some people can secure a lower rate? Perhaps you are looking to get a mortgage and you want to have the lowest rate possible but you don’t know how to do it.

Your first step is to learn all that you can about mortgage rates and how the rate is determined. One of the most important factors in your mortgage rate is your credit rating. Most loan companies and banks will use your FICO score (FICO is short for the Fair Isaac Corporation) to determine what rates you will be charged and if you will even be approved for the loan.

However, this doesn’t mean that you have to have perfect credit to get a good mortgage rate. The truth of the matter is the better your FICO score, the better your chance of a good mortgage rate but there are other ways you can try to lower your rates even if you have less than perfect credit.

First, it is essential you pay any and all of your existing bills on time and as soon as possible. Avoiding delayed payments will help add points to your credit score. It can also be helpful to pay more than the minimum amount on long term balances. Paying over the amount due shows that you want to pay off your debts and also helps improve your score over time. You should also avoid applying for new credit which can lower your score with each new credit check. These simple strategies combined can help you get the lowest mortgage rates possible for you.

Locking in your mortgage rate can be a source of confusion and frustration for many homeowners. When and how do you lock in your mortgage rate? How do you know that your mortgage broker really locked in your rate? Mortgage rates change on a daily even hourly basis; if you miss the opportunity to lock you could lose that low mortgage rate your broker promised you. Here are several tips to help you understand mortgage rate locks and what they mean for your home loan and your bottom line when refinancing.

What Does Locking Your Rate Mean?

When you choose to lock your rate, a process you must initiate yourself, your broker “locks” your mortgage rate with the wholesale lender. The idea is to hold that rate long enough for you to close on the loan. Your broker sets the lock on your behalf with the wholesale lender…more importantly the lock determines the amount of Yield Spread Premium on your new home loan.

What is Yield Spread Premium?

Yield Spread Premium is a percentage of your loan amount created when the broker locks you with an above market mortgage rate. Your broker knows the wholesale mortgage rate that your lender approved you; however, they mark up this interest rate to get a commission from the lender. This commission is called Yield Spread Premium and if you want the best possible mortgage for the long term you need to avoid this commission based markup.

If you plan on living in your home for the long term does it make sense to be constantly refinancing your mortgage loan? Mortgage rates are currently and historically low levels…You’ll probably never see rates below four percent that aren’t teasers. With this in mind doesn’t it make sense to lock in a great rate now and keep it for the long haul? If this is what you’re trying to accomplish you’ll want to lock in a wholesale mortgage rate. Before you can get a wholesale rate you’ll need to understand how mortgage brokers are compensated for originating you loan.

How Are Mortgage Brokers Paid?

There are several ways your mortgage broker gets paid (often overpaid) for their work on your home loan.

Many brokers tell you that they’re not charging you origination fees because of Yield Spread Premium. Does it make sense to take a higher mortgage rate instead of paying a one percent origination fee when you plan on keeping your home for the long term? Absolutely not…If you plan on living in your home for the long term you want a wholesale rate and you only want to pay a once percent origination fee.

How Do You Lock Your Mortgage Rate?

Before you decide to lock in your mortgage rate you need to be sure that you’re working with the right mortgage broker. Talk to your broker about the rate you qualify based on your financial details. Did you know it takes sixteen pieces of your financial details to accurately quote a mortgage rate? If your broker has not asked for detailed financial information before quoting you a rate you can be certain that they have no intention of honoring that rate.

Talk to your broker about their compensation. This includes the origination fee, broker’s fee, and any Yield Spread Premium they get from marking up your mortgage rate.

Remember that a reasonable amount to pay for loan origination including origination points and fees should not be more than one percent of your loan amount. Ask your broker for an updated Good Faith Estimate on a daily bases; remember that mortgage rates are always changing.

Before you make the decision to lock your mortgage rate make sure you have an updated Good Faith Estimate from the same day.

Finally, after you’ve instructed your mortgage broker to lock make sure they email you the rate lock confirmation from the wholesale lender. This confirmation will show you the rate, points, and any Yield Spread Premium associated with your loan. You should have this confirmation within one hour of locking…if you don’t get it contact your broker immediately. Make sure that you get the rate lock from the wholesale lender. Don’t accept anything typed up by your mortgage broker on their own letter head as this is not a guarantee of anything and you want to see if there is any Yield Spread Premium included in your lock.

You can learn more about refinancing your mortgage with a wholesale rate while only paying a one percent origination fee by registering for my free mortgage refinancing videos.

Mortgage Rates fell again today, down to 5.0% from yesterday’s 5.25%

…this is the lowest that mortgages rates have been since 2004.

Can you find a rate like this shopping online or from your bank? The short answer is no, never. Rate quotes you receive online all have retail markup and banks never quote wholesale rates. The only way to take advantage of this 5.0% mortgage rate is to find a broker willing to quote you a rate that does not include commission based markup. Here are several tips to help you find the right mortgage broker for the job.

What is Yield Spread Premium?

Mortgage lenders reward brokers for closing loans with above market interest rates. This broker rebate is paid because the lenders make a premium profit when the loans are sold to investors on the secondary mortgage market. Your mortgage broker receives one percent of your loan amount as a bonus for every quarter percent that you unknowingly agree to overpay.

Suppose you are in the process of refinancing your home for $250,000. The broker quotes you a mortgage rate of 5.75% and charges you an origination fee of one percent. What you mortgage broker isn’t telling you is that you actually qualified for a mortgage rate of 5% but they’ve marked it up to 5.75% for a commission. Your broker pockets $2,500 that you’re paying them for loan origination plus $7,500 from the lender for overcharging you. You get stuck paying thousands of dollars in unnecessary mortgage interest.

If you’re planning on refinancing and want that great 5% mortgage rate you’ll need to find a mortgage broker willing to work for the origination fee alone without charging you Yield Spread Premium. A reasonable amount to pay for loan origination is one percent of your loan amount and not a penny more. There are honest mortgage brokers out there willing to work for this much.

You can learn more about your mortgage refinancing options with a wholesale mortgage rate without paying lender garbage fees by registering for a free mortgage video tutorial. Register today for the videos while this is still a free offer.

If you are a homeowner struggling with the payments for your second mortgage loan, low mortgage rates could help you take back your budget by combining your first and second mortgage into one payment. When your home is secured by only one loan you will qualify for a lower mortgage rate which could result in a lower, more manageable payment. Here are several tips to help you decide if now is the right time to refinance and combine your higher interest mortgage loans.

Why Consider Mortgage Refinancing?

The obvious benefit of mortgage refinancing is that you will have only one monthly payment to manage, a lower mortgage rate, and a payment that could be much lower than what you’re currently paying. If you’re interested in paying down your mortgage more quickly you have the option of shortening the term length of your new mortgage, allowing you to pay more towards the principle balance of your loan. Paying more towards your loan balance will save you money in the long run by paying less in finance charges over the lifetime of your mortgage.

Consider the Cost of Refinancing a Second Mortgage

Whenever you take out a new mortgage loan you will be required to pay fees for securing the loan. These fees can include an appraisal, title search, application fees, processing fees, and various third party closing costs. If you are consolidating your second mortgage you should have no problem recouping theses expenses based on your potential savings; however, it is still important to shop around compare loan offers. You can also save yourself a lot of money by dong your homework and learning how to negotiate for a wholesale mortgage rate.

What are Wholesale Mortgage Rates?

There are two kinds of mortgage interest rates available on the market today. There are the retail mortgage rates that include commission based markup offered to the majority of homeowners today, and wholesale rates offered to those that know how to avoid this incentive based markup. This markup of your mortgage interest rate is known as Yield Spread Premium and agreeing to a mortgage that includes it results in overpaying thousands of dollars unnecessarily.

What is Yield Spread Premium?

Simply put, Yield Spread Premium is the unnecessary markup of your mortgage interest rate to get a commission from the wholesale lender behind your loan. For every quarter percent you unknowingly agree to overpay, your broker receives a bonus of one percent of your loan amount. This kickback to the broker is paid in addition the origination fees you are already paying for the mortgage broker’s work.

Consolidate Your Second Mortgage with a Wholesale Mortgage Rate

By consolidating your first and second mortgage loans with a wholesale rate and avoiding junk fees you can save yourself thousands of dollars. If you would like more information on how to refinance your second mortgage, register for a free video guide.

If you are in the process of refinancing your mortgage, a wholesale mortgage lender can save you thousands of dollars. Many homeowners refinance with their bank or local mortgage company and don’t realize they are really getting a retail mortgage rate. Even Internet lenders offer retail mortgage rates to their customers. Finding the right mortgage with a wholesale interest rate can be tricky; however, doing your homework and learning how to negotiate for a wholesale mortgage rate is easier than you think. Here are several tips to help you find a wholesale lender while avoiding junk fees.

What Are Wholesale Mortgage Lenders?

Wholesale mortgage lenders are large financial institutions that offer loans through mortgage originators. These “loan originators” are the companies you see online and those with retail storefronts including mortgage brokers. When you take out a home loan from a retail mortgage company you are not only paying a fee for the “middleman’s” services, but are paying retail markup of your mortgage interest rate. You might think that bypassing the mortgage broker and going directly to a wholesale lender will get you a wholesale mortgage rate; however, this is simply not the case. Wholesale lenders do not deal directly with the public; although, most have retail divisions. If you contact a wholesale lender yourself you will be dealing with that lender’s retail division.

How Do You Get a Wholesale Mortgage Rate?

In order to qualify for a wholesale mortgage rate when refinancing your mortgage you’ll need the help of a mortgage broker. Banks don’t offer wholesale rates; they markup up their interest rates to boost their profits when the bank sells your mortgage. If your bank is out of the question and the only way to get your hands on a wholesale mortgage rate is with a mortgage broker, how can you find the right person for the job?

Mortgage Brokers Are Used Car Salesmen

Sad, but it’s true. All you are to your mortgage broker is a mark. Your mortgage broker will try and place you with the mortgage that brings them the largest commission. You can be sure that this is the wrong loan for your situation. If you assume that your mortgage broker does not have your best interest at heart and negotiate accordingly your will be well on your way to refinancing with a wholesale mortgage rate.

Before you can negotiate with your mortgage broker it is important to understand how mortgage brokers are compensated for their work. This compensation comes from two sources; origination fees charged by the broker and Yield Spread Premium by the lender.

Origination Fees and Yield Spread Premium

The origination fee that appears on your Good Faith Estimate is charged by your mortgage broker and is intended to be compensation for their part in arranging your mortgage. Many brokers charge too much for their origination fees. How much should you agree to pay for this fee? A reasonable amount to pay your mortgage broker for loan origination should not be more than one percent of the amount you are borrowing. Any more than this and you’re simply paying too much. How about Yield Spread Premium? Most homeowners have never heard of this unnecessary markup of their mortgage interest rate.

What is Yield Spread Premium? The second form of compensation your broker receives is a kickback from the lender for marking up your mortgage interest rate. Mortgage brokers mark up your mortgage interest rate because the lender pays them one percent of your loan amount for every quarter percent they overcharge you. This kickback is paid in addition to the origination fee you are already paying for the mortgage broker’s work. In most cases Yield Spread Premium will double or even triple the compensation your mortgage receives.

You Can Get a Wholesale Mortgage Rate

What’s the secret of refinancing with a wholesale mortgage rate? The secret is actually quite simple; avoid paying Yield Spread Premium and you’ll be able to refinance your mortgage with a wholesale mortgage rate. How can you avoid paying Yield Spread Premium? Refinancing with a wholesale mortgage rate means finding a broker willing to work for an origination fee alone without charging you Yield Spread Premium. This is where your negotiating skills come into play. Don’t be intimidated by negotiating with your mortgage broker.

Mortgage Broker Negotiation

Negotiating for a wholesale mortgage rate is easier than you think. You can start by telling your prospective mortgage brokers that you know how Yield Spread Premium works and will not accept any mortgage offer that includes the markup. Try negotiating with local mortgage brokers in your area that are self employed. You may have better luck dealing with this type of mortgage broker because those working for a large firm may not have the authority to broker the deal you need when refinancing your mortgage.

You can learn more about negotiating with your mortgage broker for a wholesale mortgage rate, including expensive pitfalls to avoid by registering for a free mortgage video tutorial.