Mortgage Refinance Guide

If you’re in the market to refinance your home mortgage loan and search for 30 year mortgage rate information on the internet, you’re bound to find a lot of confusing and conflicting information. How do you sort through the obvious crap and find honest rate information that does not include needles sales markup like the bogus mortgage rates you find on bankrate.com? Here are several tips to help you separate the wheat from the chaff when it comes to hunting for the lowest 30 year mortgage rates when refinancing your home loan.

Where Do Mortgage Rates Come From?

The first thing you should know about mortgage rates is that they come in two flavors. There are the retail mortgage rates quoted to 98% of homeowners that don’t know any better and the wholesale rates offered to brokers by big mortgage companies like Countrywide. You might think you can bypass the broker and their markup by going to a wholesale lender directly; however, every lender out there has a wholesale division and a retail division. Contact lenders directly and you’ll always be dealing with their retail division and the same unnecessary markup of your mortgage rate that you’re trying to avoid.

How to Make Sense of 30 Year Mortgage Rates

Before diving into 30 year mortgage rate quotes there is some terminology you need to be familiar with. The first term I’ll cover is the discount point. Most people know about discount points…a fee you’ll pay to buy down your mortgage rate. What you might not know is that genuine discount points go directly to the wholesale lender…unlike the origination points people frequently overpay to the person arranging their loans. If you ever come across a “discount point” that is paid to the broker and not the lender this is a bogus charge that you should never agree to pay. Your broker quoted you a much higher rate then you qualified and pocketed your discount points.

Banks do the same thing…you might think your bank or credit union is getting you a good deal. What you probably don’t know is that banks are exempt from the Real Estate Settlement Procedures Act and never have to disclose how much of your rate is marked up to boost their profit margins.
The next term I need to cover is the so called “par mortgage rate.” What is a par mortgage rate? This is simply the 30 year rate that doesn’t require you to pay any discount points to get it and does not create any money for the broker. By not creating any money for the broker this means it has not been marked up for Yield Spread Premium. You can’t always get par rates when refinancing your home loan but you can come pretty close if you know where to look.

Mortgage brokers are the only way to get genuine par rates because they alone have access to the rates offered by wholesale lenders. The trick is to find a mortgage broker willing to give you access to wholesale rates without marking them up for a commission. Remember that bank mortgage rates always have markup built into them and will typically be half a point (or more) higher than rates offered by wholesale lenders. This is why you should never take out a mortgage loan from your bank or credit union.

The last term I’ll cover today is Yield Spread Premium. This is the commission created for the broker when you lock and close at a higher than par mortgage rate. You may be required to pay discount points to the lender to lower your rate; however, when it comes to creating cash for your brokers “bonus” it’s paid because you’re agreeing to a higher 30 year mortgage rate than you need to. Avoiding Yield Spread Premium needs to be your priority when refinancing your home loan.

Here are several examples how 30 year mortgage rates are quoted on rate sheets from a mortgage broker and a bank so that you understand how the broker and the lender profit from your loan

When your mortgage rate is quoted higher than par a cash bonus is created for the broker. Rate sheets usually show this cash with parenthesis; however, your rate sheet might show this with a minus sign. When your 30 year mortgage rate is quoted below par, discount points are required to secure this rate for your loan.

One thing to note here is that Yield Spread Premium only applies to mortgage brokers. When the markup is done by your bank this is pure profit and goes by the name Service Release Premium. As you can see in the previous example the so called “par rate” for the bank is .5% higher than the one offered by a broker. This is why you’ll never get a wholesale rate from your bank or credit union.

How do you find a mortgage broker willing to refinance your mortgage with a par 30 year mortgage rate without charging you garbage fees? Check out my free video tutorial series on this site and you’ll discover how to do this with an easy to follow step-by-step video guide.

You may have found this site searching for information on current FHA rates. Finding out about government programs to refinance your home can be confusing, especially if you don’t know where to start. FHA programs are government insured loans; there are no set FHA mortgage rates…finding an accurate source for rate information becomes more difficult because mortgage rates are almost never what they seem. Here are several tips to help you refinance your home loan without being taken advantage of by the lender.

FHA Mortgage Rates

If you qualify for an FHA loan to refinance your mortgage the rate you qualify for is set by the lender behind your loan. Because FHA loans are backed by the government you’ll be required to purchase Private Mortgage Insurance to protect the lender and government from loss if you default on the loan. What you might not know is that the mortgage rate you’re approved includes markup by the person arranging your loan for a commission. This commission is called Yield Spread Premium and could raise your monthly payment by several hundred dollars unless you know how to avoid it.

Yield Spread Premium & FHA Mortgage Rates

To get an FHA mortgage you’ll need to find someone to arrange the loan for you. This person could be a mortgage company or broker and with the exception of FHA streamline refinancing you’ll be required to pay closing costs and other fees for the loan. What you shouldn’t get stuck paying are the hidden costs created by Yield Spread Premium. FHA loans are no different from conventional loans in the way that they arranged…understanding how the person arranging your loan is paid will help you avoid paying too much when refinancing.

Yield Spread Premium is the commission the person arranging your loan receives for marking up your mortgage rate. When your FHA loan was approved the lender approved you for a certain mortgage rate. The broker marks this rate up because the lender pays them a bonus of 1% of your loan amount for every .25% they markup your rate. This markup is paid in addition to any fees you’re already paying for loan origination.

It is possible to refinance your home with an FHA backed mortgage without paying for Yield Spread Premium. There are brokers willing to work for a 1% origination fee without marking up your rate. You can learn more about finding the right mortgage broker without paying junk fees or unnecessary markup by registering for my free video tutorial. Register today; the videos are yours with no obligation.

If you are in the market to refinance your home loan and came to this site looking for information about mortgage lenders, there are several things you need to know to avoid paying too much for your next mortgage loan. The first thing you need to know is that with the exception of bank originated mortgage loans, home loans in the United States are retail products and therefore you will pay retail markup by the person arranging your loan.

You might think “I’ll just go to a bank to avoid this markup…” However, because banks fund their loans with their own money they are exempt from legislation in the United States that required mortgage lenders to disclose their markup making it impossible for you to get the best deal possible from your bank. Here are several tips to help you find the best information about mortgage lenders and save thousands of dollars on your next mortgage loan.

Mortgage Rate Markup

It’s a little known fact in the United States that mortgage loans are marked up by the person arranging the loan for a commission. In the Industry the commission on this markup is called Yield Spread Premium and many brokers conveniently leave the markup off their Good Faith Estimates when quoting you a loan. Mortgage Brokers are required by the Real Estate Settlement Procedures Act to disclose their markup on the HUD-1 Settlement Statement; however, many brokers have clever ways of hiding this markup and the commission the lender pays them.

Yield Spread Premium 101

Suppose you are refinancing your home for $275,000. The broker quotes you a mortgage rate of 6.75% and charges you an origination fee of 2.5% for the loan. The origination fee is what the broker discloses as their fee for arranging your loan and in this case you’ll be charged $6,875 at closing. It’s not uncommon for mortgage brokers to charge as much as 3-4% for the origination fee which if you follow the system found in the free videos on this site you can refinance your home for a flat 1% origination fee. What the mortgage broke isn’t telling you is that your lender actually approved you for a 6.25% interest rate and they’ve marked it up to 6.75% for their commission.

Mortgage lenders pay brokers one percent of your loan amount for every .25% they overcharge you on the mortgage rate. That’s right; in this example the broker pockets an additional 2% of your loan amount for overcharging you. You’re already paying the broker $6,875 for arranging your loan, but the broker pockets another $5,500 at your expense. You get stuck paying $173 more every month in this example just to pay for the mortgage broker’s “extra commission.”

The Best Information About Mortgage Lenders Is Free

The good news for you is that you can avoid this unnecessary markup of your mortgage rate and get the monthly payment that you deserve. The free videos provided on this website show you how to refinance your home loan without paying commission based markup with a flat 1% origination fee. You’ll save thousands of dollars each and every year that you keep the loan. Register today…the videos are yours fee with no strings attached.

It is becoming increasingly more difficult to get approved for a mortgage loan even with good credit. Mortgage lenders have been tightening standards for approval due to the credit crunch of late…and the end of the crisis is not yet in sight. Here are several tips to help make sure you qualify if you’re in the market to refinance your home mortgage loan in today’s topsy-turvy mortgage market.

What Mortgage Lenders Consider

Mortgages lenders look at a number of factors to not only approve your loan but assign you a mortgage rate. The top aspects lenders look at are your past credit history and the amount of cash you have; however, the single most important factor is your credit worthiness. If your credit score is below 700 right now your only option could be one of the FHA programs. While FHA loans are great the downside for you is that you will be required to purchase Private Mortgage Insurance (PMI). If you’re not familiar with PMI, this insurance protects the lender and the government from losses if you default on the loan.

The amount you’ll pay for PMI premiums depends on your credit history and can add hundreds of dollars to your monthly payment. While this is certainly a downside of Private Mortgage Insurance, if paying the premiums allows you to keep your home it’s certainly worthwhile.

How to Improve Your Credit Rating

To build a strong credit score you can start by paying down the balances of your credit cards so that you have not used more than half of your available credit. Suppose for example that you have a $5,000 limit on your cards…it is best not to exceed $2,500 in available credit. If you have used more than 50% of your available credit shifting the balances to other cards with less than half of the available credit used could improve your credit rating.

Pay More Than The Minimum Payment

Making the minimum payment every month will not help your financial situation. Set your own payment at least 25% higher than what you are due each month. This will not only improve your credit score but help pay down your balances as paying the card minimum will never get you anywhere. Don’t pay off your balances entirely…you want to show that you can use credit responsibly.

You can learn more about qualifying for a better mortgage and improving your credit score by registering for my free video tutorial.

Don’t let bad credit stop you from refinancing your home loan. There are many options available making it possible for you to refinance and even get cash back.. Even if you have a history of foreclosure and bankruptcy on your credit report, you still have options.

You do need to realize that with bad credit you will not get the same types of loans or mortgage rates as someone with perfect credit would, but it is still possible for you to receive a fair deal. The very first thing that you will need to do is to get copies of your credit reports. Your credit score derived from these reports will be a big factor in determining the loan and the mortgage rates that you can receive.

Normally, the lower your credit score is, the higher your mortgage rate, closing cost and origination fees can be. Since this is such a big part of determining what your interest rate and the type of loan will be, you want your score to be as high as possible. There are steps you can follow that will allow you to improve your credit score fairly quickly. You will not be able to make a lot of improvements in a short amount of time; however, every little bit will help.

Review your income and debts to see how much income you would actually have left to pay on a home loan. This is an important step and it is imperative that you do not leave out anything that you pay on. You should even consider the amount of money you spend on gas, food and other necessities to have an accurate figure. This will give you an idea of how the lenders will review your loan application. If your income is not high enough to actually pay back a loan, then you could be denied. On the other hand, if you have adequate amount of income you have a very good chance of getting a home loan.

Keep in mind that the less you borrow when refinancing the lower your monthly payments will be and it can also reduce the rates you will be charged. You’ll need to factor this into your decision to take cash back at closing. Even though you can expect to pay a little more for your home loan if you have bad credit, you still shouldn’t take the first offer you receive. Shop around a little and compare lenders to make sure you are receiving the best loan available. There are some lenders that will take advantage of people with bad credit and others that will offer reasonable rates for your loan.