Home mortgage rates are at near all time lows and many of you might be wondering how to predict when they will bottom out. Mortgage interest rates are extremely difficult to predict; sometimes when the Federal Reserve lowers short term interest rates mortgage interest rates actually go up. Sometimes when the stock market takes a hit and bond yields are up mortgage rates go down. The truth is no one can actually predict when mortgage rates are going to bottom out…anyone that tells you can is selling you a loan.
How can you get the lowest mortgage rates?
Instead of trying to predict when mortgage rates will bottom out you can save yourself thousands of dollars by concentrating on what aspects of your mortgage rate you can control. There is one factor affecting your mortgage rate that 90 percent of homeowners have never heard about…namely the commission based markup of your interest rate. You might thing that when you apply for a home loan the lender runs your credit, looks at your qualifying ratios, and will approve your loan with the interest rate you deserve. This simply is not the case.
Beware Your Loan Originator
Your mortgage company or broker you choose when taking out a mortgage actually determines whether or not you’ll pay too much for your next home loan. Pick the wrong person for the job and you’ll overpay thousands of dollars every year you keep this mortgage. All because of a little known fact called Yield Spread Premium. Simply put…this is the commission based markup of your interest rate. The broker arranging your mortgage gets paid in two ways. They get paid by charging you an origination fee for their work and they get paid by marking your mortgage rate up for a kickback for lender.
How Yield Spread Premium Works
Yield Spread Premium is a percentage of your home loan amount created when the broker or mortgage company locks and closes your loan with a higher than market interest rate. When you get approved for your home loan the lender approves you for a certain mortgage rate, say 5.5%. The broker turns around and marks this up telling you that you qualified for 6.25% because the lender pays them 1% of your loan amount for every .25% they markup up your loan.
Suppose you’re refinancing your home for $200,000 taking out a fixed rate loan for thirty years will get you a payment of $1,231 at 6.25%. If you had gotten the mortgage rate you deserve at 5.5% your monthly payment would be $1,135 per month. That’s $1,152 that you’re throwing away every year because your mortgage broker took advantage of you!
Mortgage Rates Predictions
As you can see it’s much more important to make sure your loan does not include Yield Spread Premium than it is to try and make mortgage rates predictions. When you avoid Yield Spread Premium you’ll be taking advantage of wholesale mortgage rates and can negotiate with your broker to pay only a one percent mortgage origination fee. There are honest mortgage brokers out there that do not abuse Yield Spread Premium; you just have to find the right person for your loan. You can learn more about finding the right person to arrange your next mortgage without taking advantage of you by registering for my free home mortgage video tutorial…and don’t let anyone pull the wool over your eyes making meaningless mortgage rates predictions.
re you refinancing
your home and want the best lender with the lowest mortgage rates?
