Refinancing Home Mortgage, Avoid the Traps, Get Expert Advice » Mortgage Loan Tutorial

Lowest Rates Mortgage Lenders

Robert — Sat, 30 Jan 2010 22:36:04 +0000

If you are in the process of taking out a new mortgage loan to refinance you existing mortgage or purchase a new home, there are several things you’ll want to know about mortgage rate quotes to avoid paying too much. You may have arrived here searching for the lowest rates mortgage lenders; however, getting the lowest mortgage rates can be tricky due to hidden markup and junk fees. Here are several of my best mortgage tips to help you find the lowest rates mortgage lenders for your next home loan without paying junk fees.

Lowest Rates Mortgage Lenders

The first thing you need to know about mortgage lenders is that not all lenders are the same. Choosing one type of lender over another can result in paying higher mortgage rates. There are three types of mortgage lenders that I’ll discuss today, as well as the pros and cons of each. The first type is your bank or credit union. The main advantage of taking out a mortgage with your bank is convenience…what could be easier than transferring funds from your checking account every month to pay your mortgage bill? Bank mortgage rates aren’t the greatest, especially when you compare them to wholesale mortgage rates. This is because the bank makes the majority of their profit from your home loan by selling your mortgage to investors on the secondary market. Home loans with higher than market mortgage rates make them a premium profit known as Service Release Premium. Another problem with bank originated mortgage loans is that thanks to a little known loophole in the Real Estate Settlement Procedures Act (RESPA) your bank is not required to disclose their markup or profit margin on your home loan.

The second type of lender we’re going to discuss today is known as a broker bank. In the 90s the Banking Lobby in the United States successfully lobbied Congress to have the RESPA laws changed to exclude banks. This means banks have an unfair advantage over mortgage brokers that are required to disclose any markup of your mortgage rate for a profit. When the law changed a number of mortgage companies and brokers changed their business models to operate like a bank. This means they formed companies that fund home loans with their own cash rather than reselling loans from wholesale lenders. This change in their business model allows these mortgage broker banks to exploit the same loopholes enjoyed by banks. If you take out a mortgage loan from your bank or a broker bank you’ll never get the lowest mortgage rates when refinancing or purchasing your home. How do you recognize a broker bank? Simply ask what name they close your mortgage under. If they close in the name of their company rather than a wholesale lender you know you’re dealing with a mortgage broker bank.

Wholesale Mortgage Loans

Most people, including many mortgage brokers, will tell you that you can’t get wholesale mortgage rates. While many mortgage brokers markup mortgage rates offered by wholesale lenders for a commission known as Yield Spread Premium, it is possible to find a mortgage broker willing to work for a flat origination fee of one percent without marking up your mortgage rate. By paying the origination fee up front, (one percent is perfectly reasonable for the mortgage broker fee) you avoid unnecessary inflation of your mortgage payment. So how do you find a wholesale mortgage loan? You might think by contacting a wholesale mortgage lender directly you’ll be able to cut out the middleman and refinance or purchase with a wholesale mortgage rate. Unfortunately, this isn’t the case. Wholesale mortgage lenders have retail lending divisions so if you want a wholesale mortgage rate you have to find the right mortgage broker to arrange your home loan.

How to Find the Right Mortgage Broker

Getting a wholesale mortgage rate isn’t as hard as it sounds. You don’t have to be a financial guru to pull it off; you’ll just need to find the right mortgage broker for the job. The problem is that many shady mortgage brokers rely on Yield Spread Premium to boost their bottom line at your expense. You’re already paying a perfectly reasonable origination fee for this person’s work arranging your home loan so any commission paid by the mortgage lender for marking up your mortgage rate only drives up your monthly payment unnecessarily.

How do you find the right mortgage broker when refinancing or purchasing your home? Start by telling prospective mortgage brokers that you understand how Yield Spread Premium works and that you will not accept any home loan that includes this markup. Offer to pay a reasonable origination fee for the mortgage broker’s services. One percent is a perfectly reasonable origination fee and there are many honest mortgage brokers willing to arrange your home loan without taking Yield Spread Premium.

2010 RESPA Changes

In a lackluster attempt to protect homeowners from mortgage broker abuse of Yield Spread Premium, the Department of Housing and Urban Development (HUD) enacted several changes effective January 1st, 2010. Mortgage brokers now have to include Yield Spread Premium as part of the origination fee in your loan documents. This doesn’t really help homeowners because mortgage brokers will go on telling you that since the lender is paying that portion of the origination fee and it’s not coming out of your pocket that you shouldn’t worry about it. No big change there. HUD has also revamped the Good Faith Estimate and you will now receive three pages of low-balled fees instead of the two page GFE you’re used to. These changes are pretty much cosmetic and do very little to protect homeowners from abusive mortgage practices. Of course, banks and broker banks are still exempt from RESPA legislation and can charge their borrowers pretty much whatever they like.

You can learn more about getting a wholesale mortgage rate for your next home loan by checking out my Underground Mortgage Refinancing Videos.

Here’s a sample of what you’ll get when you sign up…this video shows you more about how Yield Spread Premium drives up your mortgage payment unnecessarily and what you can do to avoid it.

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Mortgage Rate Watch

Robert — Sun, 17 Jan 2010 19:44:48 +0000

If you’ve been keeping an eye on recent mortgage rate trends or are searching the web for mortgage rates before refinancing your home there are several things you need to know about mortgage quotes you find online. Internet mortgage giants and even your local mom and pop mortgage broker quote mortgage rates that have been marked up to create the commission known as Yield Spread Premium. Never heard of Yield Spread Premium? Don’t sweat it, neither have 98% of your neighbors. According to the Secretary of Housing and Urban Development your neighbors, in fact most Americans, will overpay sixteen billion dollars for their home loans this year alone. Here’s how you can avoid being part of this statistic and get the best mortgage refinancing rates for your next home loan without paying unnecessary closing costs.

Yield Spread Premium Definition

So what is this Yield Spread Premium? Simply put it is a commission paid by the lender to the person arranging your mortgage for locking and closing with a higher than necessary mortgage rate. Yield Spread Premium is paid in addition to loan origination fees you’re already paying this person for the work they do arranging your home loan. Think of Yield Spread Premium as a form of “double dipping” at your expense.

You might think “Why do I care about Yield Spread Premium if the fee is being paid by the lender and not coming out of my pocket?” This is in fact an argument put forth by many mortgage brokers. They tell you not worry about the paid outside of closing (POC charges) found on your Good Faith Estimate and HUD-1 Settlement Statement because the fees are paid by the lender. Think for a moment why would the lender pay this fee for you? I mean really, what’s in it for them? We’ve all learned how evil and greedy banks and credit card companies are after the recent financial bailouts so why would they do anything that cost them a buck?

The reason mortgage lenders pay your mortgage broker Yield Spread Premium is because there IS something in it for them. In fact, Yield Spread Premium is the reason lenders realize the majority of their profits on your home mortgage loan. You see lenders don’t just sit around collecting interest from your home loan to make a buck. Mortgage lenders sell their home loans to investors on the secondary market. Home loans with higher than market mortgage rates bring them the most profit. This is why mortgage lenders reward mortgage brokers for closing loans with higher than necessary mortgage rates…the higher the mortgage rate, the higher the reward. Unfortunately for you, the higher your mortgage rate, the higher your monthly payment will be; however, an unnecessarily high mortgage payment can be avoided.

Avoiding Yield Spread Premium

Feeling overwhelmed with the prospect of refinancing your mortgage? Don’t sweat it…you don’t have to be a financial guru to get a wholesale mortgage rate that doesn’t include Yield Spread Premium. All you need to do to avoid this unnecessary markup is find the right person to arrange your next home loan. Start by approaching local mortgage brokers and tell them you understand how Yield Spread Premium works. Offer to pay a flat origination fee for their services of one percent and be sure to tell them that you won’t accept any mortgage loan that includes Yield Spread Premium.

You can learn more about getting a wholesale mortgage rate for your next home loan while avoiding unnecessary closing costs by registering for my free Underground Mortgage Videos.

Here’s a sample of what you get for free you sign up…this video shows why your neighbors pay too much for their home loans and how you can avoid unnecessary markup and junk fees.

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Wholesale Mortgage Loans

Robert — Sun, 08 Nov 2009 21:11:11 +0000

If you’re considering refinancing your home loan you want the lowest mortgage rate and closing costs for your next mortgage. Refinancing with wholesale mortgage loans can not only get you the lowest possible mortgage rates but will help you avoid unnecessary fees… if you know how to do it. Getting wholesale mortgage loans can be tricky for the uninitiated; however, you don’t have to be financial gurus to get wholesale mortgage loans… you just need to know where to go. Here are several tips to help you get a wholesale mortgage loan when refinancing your home without paying unnecessary fees or markup.

Shopping for Wholesale Mortgage Loans

The first thing you need to know about wholesale mortgage loans is that they are not available to members of the public. If you contact a wholesale lender yourself you’ll be dealing with that lender’s retail division, not the wholesale lender itself. Before we can discuss how to go about getting wholesale mortgage loans it’s important to understand what makes a home loan wholesale and how wholesale lenders operate.

Before you can find a wholesale mortgage loan you need to know a little about the different types of mortgage lenders. The three types of mortgage lenders I’ll discuss today are banks, mortgage broker banks, and wholesale mortgage lenders. Bank mortgage loans can seem like a convenient way of refinancing your home loan right? What could be easier than having your mortgage payment automatically transferred from your checking account every month? The problem with bank originated mortgage loans comes from a little known loophole in the Real Estate Settlement Procedures Act that allows your bank to hide their profit margin and markup of your home loan.

Banks fund their mortgage loans with the bank’s money and therefore set their own mortgage rates. Your bank knows what wholesale mortgage rates are but marks up their mortgage rates up to collect a profit when your home loan is sold on the secondary market. Because of the loophole in RESPA legislation the bank is not required to tell you how much they’ve marked up your mortgage loan. The bottom line you need to know about bank home loans is that you’ll never get wholesale mortgage loans from your bank.

What about mortgage broker banks? When the RESPA laws were changed to exclude banks many mortgage brokers restructured their businesses to take advantage of the same loopholes enjoyed by your bank. These mortgage brokers formed lenders that fund their home loans with their own money and were therefore exempt from RESPA laws just like your bank. How can you recognize a mortgage broker bank? Simply ask if your home loan closes in their company’s name…if the mortgage closes in the broker’s name and not the wholesale lender you know you’re dealing with a mortgage broker bank.

Wholesale Mortgage Lenders

Wholesale mortgage lenders offer their products through mortgage brokers and other retail mortgage companies. They don’t offer wholesale mortgage rates to the public, but that doesn’t mean you can’t get wholesale mortgage loans. What makes a mortgage loan wholesale? Aside from the fact that it comes directly from a wholesale lender and not a bank or broker bank wholesale mortgage loans have mortgage rates that have not been marked up to create a commission for the person arranging your loan and do not require discount points be paid at closing. This type of wholesale mortgage rate is also known as a par mortgage rate. Your goal for refinancing your home should be to get as close to par as possible for your mortgage rate. How do you take advantage of par mortgage rates since wholesale lenders do not offer them to members of the public you ask? Simply find the right mortgage broker to arrange your wholesale mortgage loan without marking up your mortgage rate or charge you unnecessary fees.

Mortgage Broker Fees

Before you can find the right mortgage broker to arrange your home loan you’ll need to understand mortgage broker fees and compensation. Your mortgage broker gets paid for their work from a number of sources. The first, most obvious fee is the loan origination fee that appears on your Good Faith Estimate. Your loan origination fee is a flat fee you pay for the mortgage broker’s part in arranging your home loan. This fee is usually a percentage of your loan amount and a reasonable amount to pay the mortgage broker for loan origination is one percent of your home loan amount. Many brokers try and charge more than one percent; however, one percent is more than ample compensation for the mortgage broker’s work on your home loan.

The second way your mortgage broker get’s paid that we’re going to discuss today is the lender paid fee known as Yield Spread Premium. Mortgage lenders reward brokers that lock and close home loans with higher than necessary mortgage rates with a fee known as Yield Spread Premium. For every .25 percent that your mortgage broker overcharges you the lender pays them an additional one percent of your loan amount as a commission, this fee is paid in addition to the origination fee you’re already paying the broker. It goes without saying if you want wholesale mortgage loans you’ll need to find a mortgage broker that doesn’t take Yield Spread Premium in addition to your loan origination fee. Get yourself a mortgage rate that doesn’t include Yield Spread Premium and you’ll have a par mortgage rate, the wholesale mortgage loan you’ve been looking for.

How do you find the right mortgage broker to arrange wholesale mortgage loans? Start by telling potential mortgage brokers that you understand Yield Spread Premium and will not take a mortgage that includes this markup. Tell them you will pay a reasonable origination fee for their services but want a par mortgage rate for your next home loan. Once you’ve found the right mortgage broker for the job you’ll be on the path to refinancing your home with a wholesale mortgage loan.

You can learn more about wholesale mortgage loans and avoiding unnecessary fees when refinancing your home by checking out my free Underground Mortgage Refinancing Videos.

Here’s a sample you need to know about this unnecessary markup of your mortgage rate for kickback from the lender known as Yield Spread Premium. Register for these mortgage videos today while this is still a free offer.

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Beware Free Credit Report Dot Scam

Robert — Wed, 29 Jul 2009 02:26:02 +0000

If you’re thinking about mortgage refinancing the first thing you should do before all else is check your credit reports. Don’t waste money buying credit reports or signing up for one of those credit monitoring services just to get a “free credit report.” Here are several tips to help you check out your credit prior to refinancing without wasting any of your hard earned cash.

Credit Reports Are Free…Period

Legislation in the United States known as the Fair and Accurate Credit Transactions Act passed in 2003 was intended to help you protect your credit and help prevent identity theft. This law requires the three credit reporting agencies that maintain your credit reports to provide you one free copy of your credit report every year. There are no fees or services to try…this is not to say the credit agencies won’t try and up sell you with a credit score ; however, you really don’t to pay for that either.

Free Credit Report dot what? It seems the Federal Trade Commission has grown a sense of humor. Remember those annoying “Free Credit Report” commercials on TV? Check out the FTC’s spoof of one misleading website’s commercials:

All you need to get a truly free credit report from Equifax, Experian, and TransUnion is to visit the website AnnualCreditReport.com The website is secure and sports the latest encryption; however, if you don’t feel comfortable entering all of your personally identifiable information including your social security number into a website you can get the same reports sent to you by calling 1-877-322-8228 or mailing a written request to:

Annual Credit Request Service
P. O. Box 105281
Atlanta, GA 30348-5281

It’s important to review your credit reports (make sure you check all three) every year in order to catch mistakes or identity theft should you become a victim. Mistakes in your credit report can result in higher interest rates or fees such as security deposits unnecessarily. Millions of Americans in the United States become the victim of identity theft every year. In fact, your chances of becoming a victim are statistically one in twenty.

Before you think about applying for a home loan or refinancing your existing mortgage go over all three credit reports with a fine-tooth comb. If you find mistakes in your credit reports each credit agency has a procedure for disputing errors. Correcting errors in your credit reports is free by the way…don’t let someone con you into purchasing their magical credit repair “kit.” More information about identity theft and protecting yourself is available free of charge on the FTC website at ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357).

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Yield Spread Premium (YSP)

Robert — Sat, 27 Jun 2009 21:56:06 +0000

If you are considering purchasing your home or refinancing an existing home loan, Yield Spread Premium is something you’ll unknowingly encounter that could cost you thousands of dollars per year in unnecessary mortgage interest. You can avoid hidden markup of your mortgage rate once you learn how to recognize and negotiate Yield Spread Premium. Pay attention, the following discussion will literally save you thousands of dollars every year and help you find the best mortgage deals on your next home loan.

Yield Spread Premium Definition

Yield Spread Premium (YSP) is a fee paid by mortgage lenders for home loans that are closed with higher than necessary mortgage rates. The amount of the fee depends on how much you overpay. Mortgage companies and brokers typically get one percent of your mortgage amount for every .25% you agree to overpay for your home loan. Most of the time the mortgage broker will not tell what they’ve done and brokers go to great lengths to hide their markup of your mortgage rate in your loan documents.

How Does YSP Result in Overpaying?

The example I’ll use to illustrate Yield Spread Premium has to do with Refinancing Home Mortgage loans but applies also to purchase loans. Suppose you are in the market to refinance your home loan for $305,000 and your mortgage broker quotes you an interest rate of 6.75%. What your broker isn’t telling and doesn’t want you to find out is that you actually qualified for a mortgage rate of 6.0%; however, they’ve marked up your rate for Yield Spread Premium (YSP) from the lender.

Not only is the lender paying your mortgage broker this fee for overcharging you, adding insult to injury your broker is charging you a fee for the privilege of being ripped off. This loan origination fee is all you should be paying for the mortgage broker’s services and you should only agree to pay one percent of your home loan amount, and not a penny more.

In this example your monthly payment on a $305,000 thirty year, fixed rate mortgage at 6.75% will be $1,980 per month. If you had the interest rate you could have refinanced with at 6.0% your mortgage payment would only be $1,820 per month. That’s $1,920 you’re throwing away every year because your mortgage broker overcharged you! The good news is that this unnecessary markup of your mortgage rate can be avoided.

How to Avoid Yield Spread Premium (YSP)

You can save yourself a lot of money by refinancing your home loan paying just a flat one percent origination fee without Yield Spread Premium. Instead of shopping for your next home like everyone else, think of finding the right person to arrange your next mortgage rather than shopping for the “perfect” rate quote. If you’re thinking the right person to arrange your next mortgage is actually your bank, think again. Banks don’t offer the kind of deal I’m describing here due to a loophole in the Real Estate Settlement Procedures Act. They’re simply not required to tell you about their markup or profit margin on your loan. They don’t have to play by the same rules as other mortgage lenders so why would you expect them to give you competitive rates? Banks prey on homeowners that just don’t know better.

How to Find the Right Mortgage Broker

Finding the right mortgage broker to arrange your next mortgage isn’t difficult. Start by telling mortgage brokers you approach that you’re willing to pay a reasonable fee for loan origination but will not accept any mortgage that includes Yield Spread Premium. Your best bet for finding the right person to arrange your next mortgage is to find a self-employed mortgage broker. Large firms employ sales staff with expensive overhead and will simply be unwilling or unable to negotiate the kind of deal that doesn’t include Yield Spread Premium (YSP).

You can learn more about saving money when mortgage refinancing by avoiding junk fees and Yield Spread Premium by registering for my Underground Mortgage Videos. Here’s a sample of what you’ll get when you sign up:

Sign up today for free online access without downloading anything to your home computer.

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Mortgage Rates Are Rising…Did You Miss Out?

Robert — Sat, 30 May 2009 19:59:37 +0000

If you’ve been sitting on the fence about refinancing your home mortgage and are discouraged by reports of rising interest rates, it’s not too late to lower your monthly payment and put some cash in your pocket in the process.

There are several refinancing pitfalls you need to be aware of that drive up your mortgage rate and monthly payment; however, once you find the right person to arrange your new home loan you’ll be able to refinance without paying too much.

Here are several tips to help you get the lowest possible mortgage rate and monthly payment when refinancing your home loan.

Understanding Mortgage Rates

Notice that I said “find the right person to arrange your home loan.” You’re not going to get the best possible deal refinancing your home with a bank or one of the so called “Direct Lenders” you see advertising home loans. The reason for this is that almost every mortgage quote you’ll receive when refinancing has markup built into it to create a commission for the person arranging it, or a premium when your loan is sold. This markup of your mortgage rate is rarely talked about and cryptically disclosed only part of the time. What is this mortgage markup I’m talking about?

There are two basic ways of refinancing your home mortgage loan. The first is by contacting your bank or credit union. Banks are direct lenders and cut out the middleman when refinancing right? Yes…somewhat; however, you’ll still face the same markup of your mortgage rate by a different name, driving up your monthly payment unnecessarily. Of course your banker will never admit this thanks to a loophole in the Real Estate Settlement Procedures Act… banks are exempt from disclosing any of their markup or profit margin on your loan. Your banker will probably show you the bank’s mortgage rate sheets for the day, swearing they’re not marked up; however, unless you know how to recognize this markup you’ll never know how low your mortgage rate could have been.

The second way people refinance their mortgages is with a mortgage broker. I know what you’re thinking; mortgage brokers have earned themselves a reputation for being sleaze buckets lower than a used car salesman… and in many cases rightly so. Mortgage brokers do have one redeeming quality in that they have access to wholesale mortgage rates. Most mortgage brokers aren’t going to let you have a wholesale rate, unless you know how to get it. That is the purpose of this article and the mortgage videos on this website.

How to Get The Lowest Possible Mortgage Rate

It’s true that mortgage rates are rising; however, would you know to recognize mortgage rate markup if you saw it? Don’t worry if you wouldn’t, most homeowners don’t know what the markup is let alone know how to recognize and avoid it. So what is this nefarious mortgage rate markup that drives up your monthly payment for no good reason? Before we discuss that I need to give you the framework for your ideal mortgage rate. What is ideal? In the industry the ideal rate is called a “par mortgage rate.” Simply put, a par mortgage rate is one that doesn’t cost you anything to get out of pocket in the form of discount points and does not create an “extra” commission for the person arranging your loan.

Remember that discount points are a fee you pay in exchange for a lower interest rate and that one point is one percent of your loan amount. On a $200,000 mortgage loan one discount point would be $2,000 due at closing. Mortgage rates are low enough that you’ll want to avoid paying discount points whenever possible. Get yourself a par mortgage rate and you won’t have to pay any discount points at all. The other type of points you’ll encounter are origination points. This is the mortgage broker’s fee for arranging your home loan. One percent is reasonable, it is not necessary to pay more.

What about this extra commission? Mortgage rates that have been marked up by the person arranging the loan create a commission or a “kickback” from the lender. This kickback is called Yield Spread Premium and costs the average homeowner in excess of $1,000 per year. Most people have a mortgage that includes this form of markup; in fact, the Secretary of Housing and Urban Development recently said homeowners overpay nearly sixteen billion dollars every year because of it. That includes your smug neighbor down the street…that guy’s overpaying too. Just think… you’re going to have a better mortgage loan that that guy once I’m finished with you.

Mortgage Yield Spread Premium

This markup of your mortgage interest rate for a commission known as Yield Spread Premium results when your mortgage broker locks and closes your home loan with a higher than necessary mortgage rate. There are several documents you receive in the process of refinancing your home that disclose Yield Spread Premium, if you know what you’re looking for. Your first opportunity to spot this unnecessary markup of your loan is when you lock your mortgage rate.

We all know locking is supposed to “guarantee” your mortgage rate for a period of time so that you can close on the loan. Some dishonest mortgage brokers charge a fee for locking your mortgage rate, but you should know there isn’t a single mortgage lender in the country that charges this for locking and it is pure garbage. Once you’ve you locked in your mortgage rate you should receive written confirmation of the lock from the mortgage lender. Never accept a verbal mortgage rate lock or any written confirmation that comes from the broker or mortgage company. If you don’t have written confirmation from the lender you either haven’t locked or the broker is trying to hide their markup of your mortgage rate. Any Yield Spread Premium on your mortgage loan will be clearly disclosed on your lender’s rate lock confirmation.

Your second opportunity to spot Yield Spread Premium on your mortgage loan when refinancing is just prior to closing when you receive the HUD-1 Settlement Statement. You’ll find Yield Spread Premium disclosed in section 800 of this document; although the lender might have a cryptic name for the fee. Often the markup is disclosed as “Paid Outside of Closing” or POC charges.

You can learn more about refinancing your home without unnecessary markup of your mortgage rate to get the lowest payment possible while avoiding junk fees by registering for my Underground Mortgage Videos. Here’s a sample with more you need to know about when to refinance and the unnecessary markup of your mortgage rate.

Register today and you’ll get instant online access to everything you need to get a par mortgage rate for yourself when refinancing without downloading anything to your PC or Mac.

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Should I Refinance

Robert — Wed, 27 May 2009 00:28:02 +0000

If you’re asking yourself the question “Should I Refinance” there are a number of things you’ll want to consider before taking out a new mortgage loan.

There is a lot of bad advice out there when it comes to this question and ultimately the answer for you is going to depend on your individual situation.

Here are several tips to help you answer the question “Should I Refinance” for yourself and avoid paying too much when you do.

Forget the Two Percent Rule

Whoever came up with the two percent rule of mortgage refinancing deserves to be tied to an anthill and doused with honey. Really. The two percent rule is a wives tale that makes no sense whatsoever if you approach the question “Should I Refinance” logically. First of all, the two percent rule of mortgage refinancing states you should not refinance your mortgage unless your new mortgage rate is two percent lower than your old mortgage rate.

There are many reasons for refinancing your home loan. Some people refinance to get a lower mortgage rate; however, others refinance to consolidate first and second mortgage loans or borrow cash from the equity in their homes. No matter what your reason for refinancing if you are comfortable with the consequences of taking out a new mortgage then mortgage refinancing is probably the right choice for you. So what exactly do I mean by the consequences of mortgage refinancing?

Should I Refinance… How Long To Recoup My Expenses?

If the inventors of the two percent rule had actually thought about what they were doing they would have said it makes more sense to base your decision to refinance on how long it will take you to recoup your expenses from refinancing, if at all. There are some situations where you will never recoup your expenses from taking out a new mortgage loan but if you can justify the expense and are comfortable with the consequences, mortgage refinancing still makes sense. If you are refinancing to get a lower mortgage rate and payment amount you’ll want to consider how long it will take you to recoup your origination fees and closing costs with your new lower monthly payment.

Calculating how long it will take to recoup your expenses from refinancing is easy: simply divide your total expenses by the amount you’re saving each month. This figure will give you the number of months it will take you to make up your expenses from refinancing. If you’re happy with the lower payment and the amount of time it’s going to take you to pay back your closing costs then the answer to the question “Should I Refinance” is yes. How ridiculous does the two percent rule of mortgage refinancing seem now?

How to Pay Less for Your Next Mortgage

Most people overpay for their home loans because they pay too much for the mortgage broker. Your mortgage broker deserves to be paid for their work; however, many brokers take advantage of their customers with hidden markup and junk fees. And you thought answering the question “should I refinance” was hard enough right? Fortunately you don’t have to be a financial guru to avoid being taken advantage of when refinancing your home loan. The information and mortgage videos found on this website saves the average homeowner $1,000 per year from this markup and mortgage junk fees.

You can learn more about answering the question Should I Refinance for yourself while avoiding markup and mortgage junk fees by registering for my Underground Mortgage Videos. Here’s a sample showing you how this hidden markup of your interest rate drives up your mortgage payment unnecessarily.

Register today and you’ll get instant online access to my mortgage videos without downloading anything on your computer.

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Bad Credit Mortgage Interest Rate

Robert — Sun, 17 May 2009 01:42:26 +0000

If you’ve been thinking about refinancing your home mortgage loan but don’t think you’ll be able to take advantage of today’s low rates because of your credit, you might be surprised to learn how accessible low mortgage rates are.

While your credit score plays a factor in qualifying for a mortgage loan, getting the lowest mortgage rate and payment depends not on your credit history but how much about mortgage loans you know.

It’s true… learn the ropes and you’ll find that you qualify for a better mortgage rate than that snobbish neighbor on your block with their perfect credit rating. Here’s what you need to know in order to refinance your mortgage getting the lowest possible payment with less than ideal credit.

Just How Bad is Bad Credit?

There are limitations of course to how bad your credit can be in order to qualify for a traditional mortgage loan; assuming your credit score is not a barrier to loan approval your actual credit score is a non-issue. It doesn’t matter if your credit score is 650 or 750, once you’re approved your credit score has nothing to do with the mortgage rate you receive. What should you do if you cannot qualify for a traditional mortgage loan because of your credit? There are lenders that specialize in this type of home loan; even if you are unable to qualify for a traditional mortgage loan the strategies taught on this website can still save you thousands of dollars. What you need to know is that responsibility for setting your mortgage rate does not lie with the lender. So, if the mortgage lender doesn’t set your interest rate upon loan approval, who does?

Mortgage Interest Rates 101

It might surprise you to learn that the person responsible for determining your mortgage interest rate and ultimately whether or not you get a good deal or overpay is none other than your old friend the mortgage broker. You see, mortgage brokers work from daily lender rate sheets. These mortgage rate sheets quote interest rates for the same loans, with and without points. Keep in mind that a point is a fee you’ll pay to qualify for a specific mortgage rate and not all mortgage rates require paying points. In fact, some mortgage rate quotes actually create points for the broker, which is something you’ll want to avoid when refinancing. Remember that one point is 1.0% of your loan amount and the sweet spot that you’re looking for with your new mortgage is an interest rate that does not require cash out of your pocket or creates an “extra” commission for the person arranging your home loan.

The mortgage rate you’ll receive when refinancing your home loan depends on how well you can negotiate when shopping for the right person to arrange the mortgage. Negotiation not your thing? Don’t worry… it’s a lot easier than you think as long as you’re upfront with the mortgage brokers you contact. I’ve put together a very simple screening process you’ll learn about shortly to weed out mortgage brokers that take lender kickbacks and charge you junk fees.

If you take one thing away from this article in needs to be that the mortgage rate you qualify for has little to do with your credit score and is determined by the person you choose to arrange your home loan…

Because the person you choose to arrange your mortgage is paid by commission you can bet the home loan that gets them the biggest commission is not going to be the right home loan for your situation. So how does this commission I’m talking about affect your mortgage rate? Remember that I told you that lender rate sheets quote mortgage rates that either require or create points? The sweet spot in the middle is the mortgage rate that neither costs nor creates points for the broker. When you pay points in exchange for a lower mortgage rate the fee you’re paying is called a “discount point.” Conversely, when you unknowingly accept a higher than necessary mortgage rate when refinancing, points are created for the broker in the form of an unnecessary commission known as Yield Spread Premium.

Notice that I said “higher than necessary” mortgage rate creating an “unnecessary” commission for the broker. This isn’t to say that the mortgage broker should not be paid for their work; on the contrary, this is what the loan origination fee is for. The problem is that many mortgage brokers feel they are entitled not only to your origination fee, but also to Yield Spread Premium on the loan driving up your mortgage payment unnecessarily. (By the way you shouldn’t pay more than one percent for the loan origination fee.)

Shouldn’t You Just Avoid Refinancing With a Mortgage Broker?

At this point you might be saying to yourself “I already knew that mortgage brokers are shady… I’ll just avoid all this crap and refinance with my bank.” It makes sense right? Banks are direct lenders… refinance with a direct lender and you not only cut out the middleman but their commission also. The problem is that not only does your bank and every other “direct lender” under the sun take the same markup of your mortgage rate but thanks to a convenient loophole in disclosure laws your bank is not required to disclose their markup or profit margin on your loan. Banks simply do not give their customers par mortgage rates… ever. You cannot avoid working with a mortgage broker if you want the lowest possible rate and payment, bad credit or not.

It is possible to refinance your home with a par mortgage rate without a stellar credit rating and you don’t have to be a financial guru to pull it off. You can refinance your home without paying points or Yield Spread Premium on the loan, get the lowest payment and look like a hero to your family. All you need to do is find the right mortgage broker for the job.

You can learn more about a bad credit mortgage interest rate and refinancing your home loan without paying points or mortgage junk fees by registering for my Underground Mortgage Videos. Register today and you’ll get immediate access to the mortgage videos online without downloading anything to your computer. Here’s a sample of what you’ll get when you register… The refinancing techniques in these free mortgage videos save the average homeowner $1000 per year.

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Compare Mortgage Refinance Rates

Robert — Sat, 09 May 2009 19:49:02 +0000

Are you shopping for a new home loan and want to know the best way to compare mortgage refinance rates?

It might surprise you to know that the Good Faith Estimates you receive when shopping for a new mortgage are little more than marketing tools used to lure homeowners into high priced loans. How can you best compare mortgage refinance rates while avoiding costly junk fees?

Here are tips to help you avoid paying too much when refinancing your home mortgage loan.

How Not to Compare Mortgage Refinance Rates

Most homeowners rely on two things when shopping for a new home loan: the loan’s Annual Percentage Rate and Good Faith Estimate. I’ve mentioned that the Good Faith Estimate is unreliable when used as a tool to compare mortgage refinance rates; this is due to a shortcoming in disclosure laws that require mortgage lenders to provide you that Good Faith Estimate, but have no standards for what should be included. Your mortgage lender is free to disclose whatever they like on the Good Faith Estimate because it is simply an “estimate give in good faith.”

What about the mortgage Annual Percentage Rate or APR? This figure is supposed to give you the total cost of taking out a mortgage expressed as a yearly percentage of your loan amount. Again, much like the Good Faith Estimate your lender is required to publish Annual Percentage Rate for all of their home loan offers; however, there are no standards for what fees they are required to include in their calculations. Annual Percentage Rate is just another tool in your mortgage lender’s marketing arsenal.

How to Best Compare Mortgage Refinance Rates

There is a better way to shop for a home loan when refinancing your mortgage. Instead of shopping for a mortgage loan like you’re buying a bottle of ketchup, focus your energy on finding the right person to arrange your next home loan. You don’t need to bog yourself down comparing mortgage rates and fees, you just need to focus on two key elements of the mortgage broker’s compensation and the rest will fall into place.

People might tell you that mortgage brokers are crooks and you should avoid them all together when refinancing your home. Why not just refinance with your bank and not have to worry about broker fees all together? While it’s true that bank mortgage loans are convenient, I mean what could be easier than automatically transferring your mortgage payment from your checking account every month? There is one glaring problem with bank originated mortgage loans that you should know about.

The Real Estimate Settlement Procedures Act

Before we get into the best way to compare mortgage refinance rates there are a few things you need to know about disclosure laws in the United States that protect homeowners from predatory lending practices. The laws I’m referring to are known as the Real Estate Settlement Procedures Act (RESPA) and require mortgage brokers to disclose their markup and profit on your home loan. Sounds good right? The problem is that your bank and credit union are exempt from RESPA thanks to the Banking Lobby. These lobbyists spent millions of dollars getting Congress to change the laws that protect you from abusive mortgage loans so that your bank and credit union don’t have to play by the rules. That is the reason you should never take out a mortgage from your bank or credit union… you’ll never get anything close to a par mortgage rate.

What Are Par Mortgage Rates?

I talk about par mortgage rates on this website a lot because this should be your goal when you compare mortgage refinance rates. Simply put, a “par mortgage rate” is one that does not cost you any money to get and a mortgage rate that does not create an extra commission for the person arranging your home loan. When I say this is a mortgage rate that doesn’t cost you anything that means you don’t have to pay points up front to qualify for that rate. Remember a “discount point” is one percent of your loan amount that you have to pay at closing to get a certain mortgage rate. As for this “extra commission” I am of course talking about Yield Spread Premium. Don’t sweat it if you don’t know what Yield Spread Premium is, I’ll cover this in great detail later. In a nutshell it’s an extra commission paid to your mortgage broker for locking and closing your home loan with a higher than necessary mortgage rate. Think of it as a bonus paid to the mortgage broker for overcharging you.

This isn’t to say that your mortgage broker shouldn’t be paid for the work they do arranging your home loan. On the contrary, this is what the mortgage origination fee you’ll find on your Good Faith Estimate covers. Your mortgage broker deserves to be paid for the work they do like anyone else and a reasonable fee to pay for their services is one percent of your loan amount. What your mortgage broker should not be doing is padding their commission at your expense and this is exactly what Yield Spread Premium does to your home loan.

How to Find the Right Mortgage Broker

So how do you find the right person to arrange your home loan when you compare mortgage refinance rates? Does the right mortgage broker work for a large firm with an expensive sales staff and advertising budget? What about those mortgage brokers you see driving company hummers around town with their company logos splashed all over them? I can tell you from experience that because of their overhead, these mortgage brokers will be unable or unwilling to negotiate the kind of deal when refinancing that will give you a par mortgage rate, just like your bank.

Who is the right mortgage broker for the job? Look for a small time, self-employed mortgage broker working from home. These mortgage brokers have little overhead and for the most part will be honest, hard working professionals you can count on to get you a good deal when refinancing. This doesn’t mean you should blindly trust what your mortgage broker is telling you about their loan offers. There are several key points you’ll need to focus on when you compare mortgage refinance rates to make sure you’re not overpaying.

You can learn more about the best way to compare mortgage refinance rates while avoiding Yield Spread Premium and other junk fees by registering for my Underground Mortgage Videos. Register today and you’ll get instant online access without downloading anything to your personal computer. Here’s a sample of what you’ll learn, this module is called “Your Mortgage Lender Has a Dirty Little Secret.”

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How to Avoid Junk Fees When Refinancing

Robert — Sat, 02 May 2009 19:43:40 +0000

If you’re in the process of refinancing your home mortgage loan you may be concerned about paying junk fees at closing.

It’s true that there are a number of fees you cannot avoid when refinancing your home loan; however, there are also a number of fees from the broker and lender alike that are pure garbage.

Here are several tips to help you avoid overpaying at closing when refinancing your home mortgage loan.

What Are Mortgage Junk Fees?

Simply put a mortgage junk fee is one charged by your lender or mortgage broker that serves no purpose other than boosting their commission or profit margin on your home loan. In order to avoid paying junk fees at closing you’ll first need an accurate assessment of what fees you’re being charged on your new mortgage loan. Nailing down an exact list of mortgage fees isn’t as easy as you might think mainly due to the deceptive practices used by many lenders and mortgage brokers today.

Should You Trust Your Good Faith Estimate?

The short answer is no, absolutely not. The Good Faith Estimate or GFE for short is just what its name implies… an estimate. Lenders are required by law to provide you with a copy of the Good Faith Estimate within 24 hours of receiving your application; however, there is little required beyond that. After all, the Good Faith Estimate is just an estimate of your closing costs and fees given in “Good Faith.” Truth be told, the Good Faith Estimate, like its shifty cousin the Annual Percentage Rate is little more than a marketing tool used to dupe homeowners into high priced mortgage loans. Ouch! (Well…it’s true!)

What About the Annual Percentage Rate?

Should you rely on the Annual Percentage Rate (APR) when comparing loan offers? After all, the APR is required to be disclosed under our current Truth in Lending Laws; however, like the Good Faith Estimate there is no standard for how your lender is required to calculate APR or even what fees they are required to include in whatever calculation de jour they are using for your home loan. Make no mistake… APR is completely worthless when comparing loan offers. Don’t be duped by your mortgage broker or lender into choosing a home loan based on the Annual Percentage Rate… it’s a sure way to overpay for your mortgage.

How Do You Evaluate Mortgage Loan Offers?

If the Good Faith Estimate and Annual Percentage Rate are worthless when it comes to rooting out mortgage junk fees, what should you rely on before closing on a mortgage loan? Most people go about choosing a mortgage like they would a bottle of ketchup in the grocery store. While it’s true that mortgages are retail products, printing out a list of loan offers and comparing them line-by-line to choose the “best” home loan isn’t necessarily going to work. The reason for this is simply that everything you’re offered prior to closing is slanted from a marketing perspective (GFE and APR). You won’t know what your actual charges and fees are going to be until you get your hands on the HUD-1 Settlement Statement which doesn’t help you in the comparison shopping department one bit.

How to Shop for a Mortgage Loan

The best way to refinance your home isn’t to focus on finding the best loan offer or lender like you might think, but to focus your efforts on finding the right person to arrange your new home loan. This might seem counterintuitive to most; however, let me explain my reasoning. With the exception of bank originated mortgage loans which are a whole other ball of wax that you’ll want to avoid for very good reasons that I can get into later, home loans are retail products resold by mortgage companies and brokers from wholesale lenders. Many of the fees you’ll encounter at closing come from the Mortgage Company or broker and are not required by the lender behind your loan.

That’s right, the junk fees you encounter have nothing to do with your home loan and ultimately end up in the mortgage broker’s pocket just to boost their commission at your expense. This is why finding the right person to arrange your loan is more important than slogging through home loan offers to find the lowest mortgage rates or fees. There are a great number of honest mortgage brokers willing to refinance your home loan for a one percent origination fee without marking up your mortgage rate for a commission or slipping in junk fees at closing.

Mortgage Broker Junk Fees

So what are some of the junk fees you’ll want to avoid when refinancing your home loan? One of the most notorious mortgage broker junk fees is the so called “rate lock fee.” There isn’t a single mortgage lender on the planet (not counting banks or credit unions of course) that charges a fee for locking in your mortgage rate. If you’re working with a mortgage company or broker that wants to charge you a fee for locking in that “really awesome” mortgage rate, you can be sure that this fee is going straight into that person’s pocket.

Never agree to pay a fee for locking in your mortgage rate AND make sure you get written confirmation of your rate lock from the lender, never on your mortgage broker’s letterhead. The reason you want written confirmation from the lender and not the mortgage broker is that your rate lock confirmation will tell you if the broker marked up your mortgage rate for a commission. Many brokers hide the fact that they’ve marked up your mortgage rate by typing up a bogus rate lock confirmation on their company letterhead.

Some other mortgage junk fees include mortgage broker courier fees which are another made up fee headed right into the broker’s pocket and to some extent loan processing fees. For a full list of mortgage broker junk fees you are likely to encounter at closing register for my Underground Mortgage Videos.

Hidden Mortgage Junk Fees

There is one commonly misunderstood “hidden junk fee” that can result in overpaying thousands of dollars for your next home loan. This fee is known as a POC or Paid Outside of Closing Fee found on your HUD-1 Statement. Paid Outside of Closing is a fancy way of saying “Paid Under the Table” and is a kickback for your broker marking up your mortgage rate. Also known as Yield Spread Premium, this is a fee paid by the lender when your mortgage broker locks and closes your home loan with a higher than necessary mortgage interest rate. This higher than necessary mortgage rate results in a higher than necessary mortgage payment… leading to overpaying thousands of dollars every year that you keep your mortgage loan.

Yield Spread Premium is such a big problem in the United States that the Secretary of Housing and Urban Development blamed it for fleecing American homeowners out of Sixteen Billion Dollars this year alone. The problem with Yield Spread Premium is that most homeowners don’t know how to recognize it or understand how it drives up their monthly mortgage payments unnecessarily. Don’t be a victim of Yield Spread Premium when refinancing your mortgage loan…

You can learn more about avoiding mortgage junk fees when refinancing your home loan, including the hidden junk fee known as Yield Spread Premium by checking out my Underground Mortgage Videos. Register today and you’ll have immediate online access to the mortgage videos without downloading anything to your personal computer.

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Mortgage Rates Information

Robert — Wed, 29 Apr 2009 18:29:50 +0000

Are you considering a new mortgage loan and are looking online for Mortgage Rates Information? There are several things you need to know about the mortgage rate quotes that you get from a mortgage broker or find on the Internet that can result in overpaying thousands of dollars for your home mortgage.

Here are several tips to help you avoid paying too much when refinancing your home mortgage loan.

Mortgage Rates Information

How do mortgage rates work anyhow? With the exception of bank originated mortgage loans, mortgage rates come from wholesale lenders. These lenders don’t deal with the public directly but offer loans through mortgage brokers and other companies that resell their mortgage loans for a commission. This commission can come from two sources, the first being you and the second being the lender.

Mortgage Origination Fees

When your mortgage company or broker charges you a fee for arranging your loan this is called a loan origination fee and should appear on your Good Faith Estimate and HUD-1 Statement. A reasonable amount to pay for this origination fee is one percent of your loan amount and will be due at closing. Many mortgage brokers overcharge this origination fee and it’s not uncommon to find Good Faith Estimates with 2.5% or more. (That doesn’t mean you should pay it though…)

The second commission you need to be aware of (and this one’s important) is a fee paid by the mortgage lender. Why should you be concerned about a fee paid by the mortgage lender? If the lender’s paying the fee it’s not coming out of your pocket right…or is it?

Why would the mortgage lender pay a fee to the broker for arranging your home loan? I mean, what’s in it for them, really? Mortgage lenders know that home loans with higher than market interest rates bring them a premium profit when the loans are sold on the secondary, or investor mortgage market. Your lender pays your mortgage broker a fee for locking and closing your home loan with a higher than necessary mortgage rate. This means your monthly payment is higher than it should be to give that broker a commission. (At your expense…)

Should the broker get a commission from the lender on top of what you’re already paying them for loan origination? Your broker probably thinks so; however, there are a number of upfront and honest mortgage brokers out there willing to refinance your home for a flat one percent origination fee without slipping in junk fees or marking up your mortgage rate. My Underground Mortgage Videos will show you exactly how to find this person.

What About Bank Mortgage Loans?

You might think that you can avoid mortgage broker markup and commission simply by refinancing with your bank. The problem is that your bank knows the same thing about making a profit from the secondary mortgage market by selling your home loan. There might not be a middleman marking up your mortgage rate to get a commission from the bank; however, the bank still marks up your mortgage rate to boost their profits when selling your loan. Another problem with your bank mortgage is thanks to the Banking Lobby in the United States, banks are exempt from the Real Estate Settlement Procedures Act and are not required to disclose any of their markup or profit margins on your loan.

Bottom line if you are considering taking out a mortgage loan from your bank: you’ll never get anything close do a par mortgage rate…

Par Mortgage Rates Definiton: Any interest rate you qualify for without having to pay points up front and does not create an “extra” commission for the person arranging your loan.

How to Get the Best Deal When Refinancing

Getting the best deal on your next home mortgage loan boils down to finding the right person to arrange it for you. There are plenty of honest mortgage brokers willing to work for a one percent origination fee without marking up your mortgage rate or throwing in junk fees. Who is the best mortgage broker to refinance your home loan? It’s probably not the broker working for a large firm with expensive office spaces or a company hummer. These brokers are simply unable or unwilling to negotiate the kind of deal described here when refinancing.

Tell your prospective mortgage brokers that you are willing to pay a one percent origination fee for their services and will not accept any loan that includes Yield Spread Premium. Remember, Yield Spread Premium is the commission paid by your lender when the mortgage broker locks and closes your home loan with a higher than necessary mortgage rate. Avoiding this unnecessary markup of your mortgage rate can save you thousands of dollars every year that you keep the loan.

You can learn more about refinancing your home for a flat one percent origination fee without paying unnecessary markup of your mortgage rate or junk fees at closing by registering for my Underground Mortgage Videos. Register today and you’ll have instant online access to the mortgage videos and materials without downloading anything to your PC.

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Mortgage Refinancing Breakdown

Robert — Thu, 23 Apr 2009 19:11:16 +0000

If you’re considering refinancing your home loan a mortgage refinancing breakdown can help you spot troublesome areas of the loan offers you are considering.

There are a number of things including mortgage broker markup and junk fees that result in overpaying thousands of dollars when refinancing your home. Here is the mortgage refinancing breakdown you’ll need and several tips to help you avoid paying too much for your next mortgage loan.

Mortgage Refinancing Breakdown Online

RefiAdisor.com provides a number of resources to breakdown the refinancing process. There is a video tutorial in the member’s area that will show you how to refinance your home without paying markup of your mortgage rate or junk fees at closing. There is no cost to join RefiAdvisor.com. Registration is required to access materials in the password protect member’s area.

What to Look for When Refinancing Your Home

Mortgage refinancing can be an intimidating process. Should you refinance with a mortgage broker, your bank, or a mortgage company out of the phone book? I never recommend that anyone refinance with a bank or credit union; because of the Banking Lobby, banks and credit unions are exempt from the Real Estate Settlement Procedures Act and are not required to disclose any of their markup or profit margin on your home loan. Plain and simple, you’ll never get anything close to a Par Mortgage Rate refinancing your home with a bank or credit union.

What is a Par Mortgage Rate?

Mortgage rates change daily and on any given day “Par” mortgage rates may not be available; however, keep an eye on wholesale mortgage rates during the course of the week and you can get a par rate. What are par mortgage rates? Simply put a par mortgage rate is one that doesn’t cost you anything to get and does not create a commission for the person arranging your loan. Cost to you comes from discount points required to qualify for a specific mortgage rate and the commission for the mortgage broker comes from Yield Spread Premium. We’ll discuss Yield Spread Premium and the broker’s commission later but your goal when refinancing should be to get a mortgage rate that doesn’t cost you anything or create cash for the broker at your expense.

How To Get Par Mortgage Rates

Mortgage rates can be tricky and most of the rate quotes you encounter have been marked up one way or another for a commission. How does this commission based markup of your mortgage rate occur? Lenders reward mortgage brokers that lock and close home loans with higher than market interest rates with a commission known as Yield Spread Premium. If your home loan includes Yield Spread Premium your mortgage payment will be higher than it needs to be for the duration of your loan. Don’t get me wrong, your mortgage broker should get paid for their work; however, you don’t want this compensation driving up your payment for years to come. How should your mortgage broker get paid? Mortgage brokers receive a fee called a loan origination fee for their work and one percent of your home loan is a reasonable amount to pay. The problem is many (greedy) mortgage brokers charge origination fees and then take Yield Spread Premium on top of this which can double even triple their compensation at your expense.

You Can Avoid Mortgage Broker Markup

Many mortgage brokers become defensive and even angry when questioned about Yield Spread Premium, so how can you avoid unnecessary markup of your mortgage rate? You can start by finding the right mortgage broker for the job. We’ve already discussed why banks are a bad choice for refinancing your home loan; however, there is also a type of mortgage broker that you’ll need to avoid for the same reasons.

When the Banking Lobby had the law changed to exclude banks a number of mortgage brokers wanted in on the action and found that if they formed a company that funded home loans with their own money they could exploit the same loophole in the Real Estate Settlement Procedures Act as banks. This allows them to charge whatever they like without disclosing their markup of profit margins to their customers. Mortgage brokers that run their businesses in this manner are known as Mortgage Broker Banks and you’ll want to avoid them for the same reasons listed above.

How can you tell if a mortgage broker or company is operating as a broker bank? Ask them if they close home loans in the name of the wholesale lender or their own company. If the answer you get is that they close mortgages in their company’s name then you know you’re dealing with a broker bank and should move on to the next mortgage broker on your list. Who then is the best mortgage broker to refinance your home loan? Look for small, self-employed mortgage brokers working from home. Those mortgage brokers you see around town with their logos plastered on company hummers probably aren’t going to be willing to negotiate the kind of deal I’m describing here. Also, mortgage brokers working out of posh office spaces with expensive sales staff are another red flag when choosing a mortgage broker.

You can learn more about refinancing your mortgage without markup of your mortgage rate or lender junk fees with the online Mortgage Refinancing Breakdown in my Underground Mortgage Videos. Register today and you’ll have immediate access to the videos without downloading anything to your computer in the password protected member’s area.

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Mortgage Help Now

Robert — Sun, 19 Apr 2009 02:38:39 +0000

Are you considering taking out a new mortgage loan and don’t want to pay too much in the process? Are you unsure what to look for when comparing loan offers or how to screen mortgage brokers for the junk fee toting scam artists?

Mortgage rates are at all time loans but choosing the wrong person to arrange your new home loan could quickly become an expensive nightmare. Here are several tips to help you avoid paying too much for your next mortgage loan.

Getting Mortgage Help Now

The key to getting the best possible deal for your home loan is not finding the best lender, but finding the right person to arrange your loan. You don’t want to rely on a bank or a faceless mortgage giant for something as critical as your home mortgage loan; you need to find the right local, self-employed mortgage broker for the job. Why should your mortgage broker be self-employed? Large companies and brokerage firms working out of posh office spaces that employ expensive sales staff are going to be much less likely to broker the type of deal you’re looking for on your new home mortgage. Most mortgage companies simply have too much overhead and are not willing to negotiate fees. Found a self-employed mortgage broker working from home? Even better still…

What is a Good Deal on a Mortgage Loan?

Would you recognize a good deal on a mortgage loan if you found one? What makes one mortgage better than another? Is it fees from the lender or from the mortgage broker that you need to worry about? While there are underwriting fees that you’ll be required to pay, most lender fees are pretty standard when taking out a mortgage loan. The same can’t be said for mortgage broker fees… in fact the blame for most people overpaying for their home loans lies squarely with their mortgage brokers.

Mortgage Broker Compensation: What You Need to Know

Don’t get me wrong, mortgage brokers are providing a valuable service and deserve to be paid for their work; however, many brokers feel they have a right to more of your hard earned money than they deserve and use downright dirty tricks to get it. What you need to know about your mortgage broker is how they get paid for arranging your home loan. Brokers get paid in two ways; they charge you, the homeowner an origination fee for their services and they can get paid a commission by the lenders. You might think that it’s better to have the lender pay the mortgage broker’s fee than to have it come out of your pocket right? One problem with this line of reasoning is that you don’t always get to choose how your mortgage broker gets paid for arranging your loan. In fact, most brokers won’t tell you about the fee being paid by your lender and go to great lengths to hide it from you in your loan documents. Why do you think that is?

First, let’s talk about the origination fee. What is a reasonable amount to pay your mortgage broker for loan origination? Plain and simple: one percent, and not a penny more. Not one and a half percent, not two percent and for God’s sake not three percent. One of my readers commented recently that her mortgage broker charged her 1.5 percent not for the origination fee, but to lock in her mortgage rate on top of the origination fee! (Gobsmacked by the nerve of that broker) Here’s a tip… rate lock fees are pure garbage. There isn’t a single lender out there that charges a fee for locking in your mortgage rate. One percent for loan origination is more than ample compensation for the work your mortgage broker does arranging your loan.

Now what about this lender paid mortgage broker fee? Should you be concerned that the lender is paying your mortgage broker a fee for arranging your home loan? It’s not the fact that this fee is being paid by the lender that should concern you, but why the lender is paying your broker that should worry you. Why would your mortgage lender pay the broker a fee when you’re already paying a mortgage origination fee? What’s in it for them? Mortgage lenders reward brokers for locking and closing home loans with higher than market mortgage rates with a fee known as Yield Spread Premium. That’s right, for every .25 percent that your broker marks up your mortgage rate the lender pays them a commission of 1.0 percent of your loan amount. Mortgage lenders do this because home loans with above market mortgage rates bring them a premium profit when the loans are sold on the secondary market.

This one percent commission from the lender is paid in addition to the origination fee you’re already paying the mortgage broker at closing! You can see how Yield Spread Premium can effectively double, even triple your mortgage broker’s compensation for arranging your loan and why many brokers become defensive, even angry when questioned about it. You should see some of the scathing comments and emails I receive from mortgage brokers who think they are “entitled” to this fee paid by the lender at your expense. This brings me to my next point… if the mortgage broker is marking up your mortgage rate for a commission what does this do to your monthly payment amount?

Mortgage Help Is Available

Suppose for example you are refinancing your home mortgage for $315,000. Your mortgage broker quotes you an interest rate of 5.50 percent. Not bad… on a thirty year, fixed-rate mortgage your payment at 5.50 percent interest will be $1,790 per month. What you don’t know is that you actually qualified for 5.0 percent and if you had the mortgage rate that you deserve your monthly payment would have been only $1,690! That’s $1,200 per year down the drain every year just to give the mortgage broker a commission at your expense! Adding insult to injury you’re paying this mortgage broker $3,150 out of your own pocket for arranging this loan! (And that’s only if the broker agreed to a one percent origination fee…)

The good news is that you don’t have to throw your money away for an unnecessary mortgage broker commission. To learn more about avoiding Yield Spread Premium and other junk fees like mortgage rate lock fees register for my Underground Mortgage Videos. You’ll get immediate access to these online videos in the password protected member’s area without downloading anything to your home computer.

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Home Mortgage Refinancing Rates

Robert — Fri, 10 Apr 2009 18:20:09 +0000

Are you searching the Internet for Home Mortgage Refinancing Rates?

Mortgage rates are at their lowest levels in history so it’s very easy to find a good rate; however, if you want the lowest mortgage rates possible without overpaying the broker for a loan that doesn’t include junk fees there are a few things you’ll need to know.

Here are several tips to help you avoid overpaying for your next home loan while getting super low home mortgage refinancing rates.

Home Mortgage Refinancing Rates Online

The Internet is an excellent tool for researching mortgage rates; however, there are several precautions you need to take. If you’re looking at one of the big mortgage sites like Lending Tree, always check out their disclosure statement to see how they get paid for their services. Here’s a sample from Lending Tree’s disclosure statement…

Lending Tree does not charge you (the homeowner) any fee for its services. Computerized loan origination fees paid by the Lender may be included in your mortgage rate, points or loan term and will be shown on your settlement statement. (Meaning you’re paying the fee indirectly…still sounds like you’re paying Lending Tree a fee to me, what do you think?)

What’s a computerized loan origination fee anyway? Many of the websites you find on the Internet like Lending Tree do nothing but collect information and sell it to mortgage companies and brokers for a fee. The broker or lender turns around and passes the fee on to you in the form of a Computerized Loan Origination Fee which will appear on your Good Faith Estimate and HUD-1 Settlement Statement. Do you need to pay this fee to the Lending Trees of the world for selling your information? Absolutely not…

What about your mortgage rate? According to Lending Tree, the fee that they receive can also be included in your mortgage rate. The markup of your mortgage rate for a fee is known as Yield Spread Premium and you should know that the Secretary of Housing and Urban Development recently said this markup will cost American homeowners sixteen billion dollars this year alone…

Lending Tree’s claims of not charging a fee for their services simply aren’t true. The fee still comes out of your pocket; it’s just not paid to lending tree directly… When you pay this the form of a higher mortgage rate it’s the fee that keeps costing you all year long.

Lending Tree isn’t the only one out there that marks up your mortgage rate for fun and profit; in fact, most mortgage brokers routinely include Yield Spread Premium in their loans without fully explaining what they’re doing. Many mortgage brokers will tell you not to worry about this fee because it’s not coming out of your pocket; however, it’s not the fact that your lender is paying the broker a fee, but why they’re paying this fee that should concern you.

Yield Spread Premium: What You Need to Know

In the simplest definition Yield Spread Premium is a percentage of your loan amount (cash) created for the mortgage broker when they lock and close your home loan with an above market mortgage rate. This markup of your mortgage rate leads to a higher monthly payment and more cash out of your pocket. In fact, the mortgage broker is paid one percent of your loan amount for every .25 percent they markup your rate. The markup of .25 percent doesn’t sound like much but it can add a hundred dollars or more to your payment, adding up to thousand dollars or more per year.

There is good news since you’re reading this today… Yield Spread Premium can be avoided. It is possible to find a mortgage broker willing to arrange your home loan for a one percent origination fee without marking up your mortgage rate for a commission. You just need to know how to negotiate the deal. My Underground Mortgage Videos show you how to do just this while avoiding lender junk fees. You’ll also learn what you can do to give your credit a tune-up prior to applying.

Bank Mortgage Loans & Service Release Premium

Some homeowners think they can avoid mortgage broker’s fees and markup by refinancing their mortgage loan with a bank or credit union. The bad news is the bank charges the same markup on your mortgage rate as the broker; it just has a different name. Banks markup their mortgage rates to make a profit when your loan is sold to investors on the secondary market… loans with higher than market rates bring the bank premium profits.

When the bank marks up your mortgage rate to make this profit the markup is called Service Release Premium. The bank is not required to disclose this markup to you because they are exempt from the Real Estate Settlement Procedures Act which requires mortgage brokers to disclose the Yield Spread Premium the receive from the lender. Because banks don’t have to disclose their markup or profit margin on your mortgage you’ll never get as good a deal from your bank as you could refinancing your mortgage with an honest mortgage broker.

You can learn more about getting the best possible Home Mortgage Refinancing Rates without lender junk fees by registering for my Underground Mortgage Videos. Register today and you’ll have immediate access to the mortgage videos and a list of mortgage brokers in your area that do not mark up rates for a commission in my password protected member’s area, without downloading anything to your PC or Macintosh.

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Mortgage Brokers Have a Dirty Little Secret

Robert — Mon, 06 Apr 2009 16:49:47 +0000

Did you know your mortgage broker has a dirty little secret? Most professions have a few skeletons in the closet but this one could cost you thousands of dollars every year that you have a home loan unnecessarily.

In fact, this “secret” is so bad that the Secretary of Housing and Urban development said it will be responsible for fleecing American homeowners out of sixteen billion dollars this year alone. What is it? Read the following mortgage tips to help you avoid paying too much for your next home loan.

Mortgage Brokers Compensation

Mortgage brokers should be paid for their work like anyone else; however, like a used car salesman they have ways of padding their commission at your expense. You can expect any mortgage brokers you work with to charge you an origination fee for their services. This origination fee will be clearly marked on your Good Faith Estimate and HUD-1 statement; however, there is a hidden mortgage broker fee you need to be aware of before refinancing your home mortgage.

Mortgage Brokers Secrets

The second way mortgage brokers get paid for their work is a hidden commission from the lender. This commission will never appear on your Good Faith Estimate and most brokers have clever ways of disguising it on your HUD-1 settlement statement. This secret commission from the mortgage lender is called Yield Spread Premium and if you agree to a mortgage with this hidden markup it can cost you thousands of dollars every year that you keep the loan.

Yield Spread Premium is Hidden Markup

Here’s how Yield Spread Premium works. Suppose you are refinancing your home for $250,000 and the mortgage broker quotes you an interest rate of six percent while charging you a two percent origination fee. On the surface six percent sounds like a good deal, even though the origination fee is double what you should be paying, you agree to the loan. This means you have to pay $5000 to the broker for loan origination, your home gets refinanced and everything went smoothly, right? Wrong… What your mortgage broker isn’t telling you is that you were approved for a mortgage rate of 5.25 percent, but they marked it up to get Yield Spread Premium from the lender.

Yield Spread Premium is a percentage of your loan amount created when mortgage brokers lock and close loans with higher than necessary interest rates. You get stuck with a payment based on an interest rate higher than you deserve just to create a commission for the broker. A commission paid in addition to the loan origination fees your mortgage broker is already probably overcharging you…

Hidden Mortgage Markup

How does this hidden markup of your mortgage rate affect your monthly payment amount? In the previous example Yield Spread Premium adds a hundred dollars a month to the payment for a thirty year fixed rate mortgage. That’s $1200 a year you’re throwing down the drain due to your mortgage broker’s deception! Most mortgage brokers don’t talk about Yield Spread Premium and many become angry and defensive when questioned about the markup. Can you blame them? Yield Spread Premium effectively doubles even triples their compensation on the loan… at your expense of course.

You Can Avoid Overpaying for Your Next Mortgage

You don’t have to be a financial guru to get a good deal on your next home mortgage loan. Tell potential mortgage brokers that you will not accept any loan that includes Yield Spread Premium and that you’re willing to pay a one percent origination fee for their services. There are honest mortgage brokers out there willing to work for a one percent origination fee without marking up your mortgage rate and I can send you a list of them in your area.

There are other mortgage junk fees that you need to keep an eye out for: mortgage broker courier fees and rate lock fees are examples of junk fees you should never agree to pay when refinancing your home loan. Before closing on the new loan make sure you get a copy of the HUD-1 settlement statement and go through it with a fine-toothed comb; don’t rely on the Good Faith Estimate to look for these junk fees as this document is little more than a marketing tool used to lure homeowners into overpriced loans.

What About Bank Mortgage Loans?

Can’t you avoid all of this markup and trickery by mortgage brokers simply by refinancing with a bank mortgage loan? While it’s true that your bank doesn’t charge Yield Spread Premium on their loans because your loan is funded with the bank’s money; however, banks have another kind of markup called Service Release Premium that accomplishes the same thing. Also, your bank doesn’t have to disclose Service Release Premium to you because of a loophole in the Real Estate Settlement Procedures Act. You’ll never get as a good a deal from your bank as you could from an honest mortgage broker that hasn’t included Yield Spread Premium on your loan.

What is a Good Mortgage Rate Anyway?

Refinancing your home loan and dealing with mortgage brokers and lenders can be overwhelming. How do you know a good deal when you spot one? The ideal mortgage rate when refinancing your home is what’s known as a par mortgage rate. “Par Mortgage Rates” are ones that don’t cost you discount points to get or create any commission for the Mortgage Company or broker. You’ll never get a par mortgage rate from any bank or credit union and can only get this from the right mortgage broker.

To learn more about refinancing your home loan with the lowest mortgage rate without junk fees or mortgage broker markup register for my Underground Mortgage Videos. You’ll have immediate online access to the mortgage videos as well as a list of mortgage brokers in your area that do not mark up mortgage rates for a commission without downloading anything to your PC or Mac.

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Cash Out Mortgage Refinancing

Robert — Sat, 28 Mar 2009 23:24:03 +0000

Are you considering cashing out equity in your home when refinancing your mortgage?

Your home can be an excellent source of cash if you’re willing to give up some of your hard-earned equity in exchange for liquidity.

Cash out mortgage refinancing is one way to get your hands on cash for everything from consolidating bills, home improvement, even paying for college. Here are several tips to help you get the most for your hard-earned equity when cash out mortgage refinancing.

Cash Out Refinancing: What You Need to Know

Taking cash back when refinancing your mortgage is simply borrowing more than you owe on your existing home loan and pocketing the cash. Take the money and run right? If you’ve had your existing mortgage for a while the principle balance is probably much lower than it was when you purchased your home. Provided your home’s value hasn’t dropped significantly due to the faltering economy your build up of equity allows you to refinance and take cash back at closing.

Suppose for example you owe $110,000 on a $300,000 home and want to take back $25,000 in cash to build an addition to your home. You could refinance your existing home loan for $135,000 and walk away from closing with $25,000 cash in your pocket.

Since it’s your money you can use the cash for anything: home improvement, purchasing a second home, paying college tuition, consolidating higher interest debt like credit cards, anything really. Mortgage interest rates are at historically low levels right now and because of the market lenders are desperate to deal. Keep in mind that refinancing with cash back is different from taking out a Home Equity Line of Credit (HELOC). Home equity lines tend to be more expensive and often carry higher interest rates than if you had refinanced with cash back.

How Much Cash Can You Take Out Refinancing?

Usually, you’re allowed to refinance up to 80% of your home’s value. Some lenders may allow you to borrow more; however, you may be required to purchase Private Mortgage Insurance (PMI), or settle for a higher mortgage rate. You can avoid Private Mortgage Insurance by opting for a Home Equity Line of Credit; however, this is usually a more expensive option than cash out mortgage refinancing.

Refinancing your mortgage is generally a good idea when current mortgage rates are lower than your existing home loan. Cash back refinancing is one reason for taking a higher mortgage rate…if you need the cash you may be able to justify the higher monthly payment. Keep in mind that cash out mortgage refinancing is not without risks; you are giving up a portion of your equity and with declining property values there is a chance you could end up underwater in the new mortgage loan.

Cash Out Refinancing Pitfalls

There are a number of problems with cash out refinancing that can result in overpaying thousands of dollars every year that you’re in your mortgage loan. Because you’ll likely end up with a higher monthly payment than you’re used to when taking cash back you have to be careful to avoid anything that could potentially raise your payment on top of this. What raises your mortgage payment unnecessarily? Yield Spread Premium…the commission paid by the lender for locking and closing your loan with a higher than necessary mortgage rate.

Mortgage brokers earn their commission from two sources. They can charge you an origination fee for their part in arranging your home loan and they can take a commission from the lender in the form of Yield Spread Premium. It is possible to cash out refinance your home paying only a flat one percent origination fee without Yield Spread Premium if you follow the guidelines in my Underground Mortgage Videos; however, most homeowners pay much more than this.

How does the commission from Yield Spread Premium drive up your mortgage payment unnecessarily? First of all, for every .25 percent that the mortgage broker overcharges you the lender pays a commission of 1.0 percent. It’s not uncommon to find mortgages done with .75 percent or higher markup on the mortgage rate. In fact, you’re probably paying this much on your existing home loan now.

Here’s an example to illustrate why you need to avoid Yield Spread Premium when cash out mortgage refinancing. Suppose you owe $200,000 on your existing mortgage and your home is worth $350,000. You’ve decided to cash out refinance $50,000, making the balance of your new loan $250,000. Your mortgage broker tells you that you qualify for an interest rate of 6.5 percent and charges you an origination fee of 2.0 percent.

First of all, had you watched my Underground Mortgage Videos you could have paid a flat 1.0 percent origination fee and saved yourself $2,500 right off the bat…but what about that mortgage rate? What your broker isn’t telling you is that you actually qualified for 5.75 percent mortgage loan; however, they’ve marked your rate up to get a 3.0 percent commission from the lender. This three percent is in addition to the 2.0 percent origination fee that you’re already overpaying. In this transaction your mortgage broker walks away with $12,500 for their part in arranging your lemon of home loan…now let’s take a look at what you got stuck with shall we?

You already know that you paid $2,500 too much for the origination fee but what about that 3.0 percent Yield Spread Premium? At 6.5 percent your monthly payment on a thirty year fixed rate mortgage will be $1,580. If you had gotten the mortgage rate you deserve at 5.75 percent your payment would only be $1,450! In addition to the $2,500 you overpaid for loan origination you’re throwing away $1,560 every year that you keep this loan!

Can you now see how people get screwed over on their mortgage loans and why the Secretary of Housing and Urban Development said homeowners in the United States will overpay sixteen billion dollars for their home loans this year alone?

Now that you know how people get ripped off refinancing their mortgage loans what can you do to make sure you’re not a victim of this unnecessary mortgage rate markup? Register today for my Underground Mortgage Videos and you’ll discover how to get the best deal for your next mortgage loan without markup or junk fees.

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Negotiating Refinancing With Mortgage Brokers

Robert — Wed, 25 Mar 2009 19:45:45 +0000

Are you in the process of taking out a new home loan and want advice on negotiating refinancing?

Negotiating with your mortgage broker can help you avoid unnecessary markup of your mortgage rate and lender junk fees that result in overpaying thousands of dollars when refinancing your home.

Here are several tips to help you when negotiating refinancing to avoid overpaying for your next mortgage loan.

Negotiating Refinancing with a Mortgage Broker

The first thing you need know is that it’s important to use a mortgage broker when refinancing and to avoid your Bank or Credit Union. Banks are exempt from disclosure laws that protect you from predatory lending practices; while your bank might not be out to rip you off, because of this legislation you’ll never get anything close to “par” mortgage rates from a bank or credit union. This is because the Banking Lobby spent millions of dollars getting banks excluded from the Real Estate Settlement Procedures Act.

What are “Par Mortgage Rates?” Par mortgage rates are simply those that don’t cost you anything to get and do not create a commission for the person or bank arranging your loan. Banks don’t hand out par mortgage rates to anyone, (including you) so the only way to get them is by negotiating refinancing with the right mortgage broker. Notice that I said “the right mortgage broker.” Who is the right mortgage broker for your next home loan?

How to Find the Right Mortgage Broker for the Job

Self employed mortgage brokers are your best bet for negotiating the deal you’re looking for when refinancing your mortgage. The self employed broker is much more likely to agree to refinance your loan with a par mortgage rate than the mortgage broker that employs an expensive sales staff or works in a posh office space. Can you find a self employed mortgage broker working from their home? Even better…Also, the ideal mortgage broker for the job has at least ten years experience. Find this person and you’ll be able to refinance for a flat one percent origination fee without paying commission based markup of your mortgage rate.

How to Negotiate with Your Mortgage Broker

Before you can negotiate with your mortgage broker you need to understand how this person is compensated for arranging your loan. Mortgage brokers receive compensation from two sources: you and your lender. First, you’ll be charged an origination fee for the broker’s part in arranging your home loan. This fee can be as high as three percent or more; however, a reasonable fee to pay for this mortgage broker fee is only one percent of your loan amount.

The second way mortgage brokers get paid is from a commission paid by the lender. Mortgage lenders pay a commission to brokers that lock and close home loans with higher than market mortgage interest rates. This markup of your mortgage rate by the broker creates a commission known as Yield Spread Premium. The mortgage broker gets a commission and you get a higher than necessary mortgage rate which drives up your monthly mortgage payment. The only way to avoid Yield Spread Premium is by finding and negotiating with the right mortgage broker.

Tell your mortgage broker that you’re willing to pay a flat one percent origination fee and that you will not accept a home loan that includes Yield Spread Premium. If your mortgage broker agrees to your terms then you’ve found the right person for the job. If the broker becomes defensive or angry when discussing Yield Spread Premium, move on to the next person.

Beware Mortgage Broker Junk Fees

Before closing on your new mortgage loan you’ll need to take a hard look at the fees found on your HUD-1 statement. Don’t use the Good Faith Estimate for this; the GFE is practically worthless for rooting out junk fees since it’s just an estimate given “in good faith.” Pay close attention to all mortgage broker and processing fees listed on your HUD-1. Anything listed as a “mortgage broker courier fee” or a “rate lock fee” is pure garbage and headed for your mortgage broker’s pocket.

Check your HUD-1 section 800 for anything that resembles Yield Spread paid to broker or POC fees. POC stands for “Paid Outside of Closing” and is just a way of disguising Yield Spread Premium on your mortgage loan. Be careful when reviewing your HUD-1; mortgage brokers have clever ways of hiding their junk fees. If you don’t understand a fee listed in your loan documents don’t be afraid to question your mortgage broker.

You can learn more about negotiating refinancing with your mortgage broker for the lowest Mortgage Rates while avoiding junk fees by checking out my Underground Mortgage Videos. Register today and you’ll have immediate access to the video guide and a list of mortgage brokers in your area without downloading anything to your PC or Mac.

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Home Mortgage Refinance

Robert — Sat, 14 Mar 2009 21:12:25 +0000

Considering refinancing your home mortgage loan this year?

A home mortgage refinance can save you a lot of money if you go about it the right way. Did you know the mortgage rate you have on your home now was marked up by the person arranging your loan for a commission?

You’ve been paying too much ever since purchasing your home just to give that mortgage broker a commission from the lender. Don’t worry; you’re not alone… in fact, according to the Secretary of Housing and Urban Development this hidden mortgage commission will cost homeowners in the United States sixteen billion dollars this year alone. Want to save a few thousand bucks on your next mortgage loan? Read on… I’ve got the low down on refinancing your home loan for you without paying too much for your next mortgage loan.

Home Mortgage Refinance Tips

You don’t have to be a financial guru to get a good deal on your next mortgage loan. Mortgage loans are retail products like anything else you buy today; you just need to know how to recognize and avoid the crap people are shoveling to make a buck at your expense. Mortgage brokers have earned themselves a reputation for being sleazy used car salesman in recent years… and rightly so. This doesn’t mean you should avoid using a mortgage broker when refinancing your home. Mortgage brokers have access to wholesale mortgage rates which is something you’ll never get from a bank or credit union.

Wholesale Mortgage Rates

You’re familiar with wholesale prices when it comes to retail products but what about mortgage loans? Mortgage rates are no different; in fact, home loans are retail products being resold by mortgage companies and brokers for a commission. How to mortgage companies and brokers make their money? They make money from two places: you and your mortgage lender.

Your mortgage company or broker can charge you an origination fee, often called “origination points” for their part in arranging your home loan. This fee is often overcharged. A reasonable fee for loan origination is one percent of your mortgage amount but it’s not uncommon to see this fee as high as three to five percent. Never pay this much for a mortgage broker origination fee.

The second source of compensation for your Mortgage Company or broker is a little known kickback called Yield Spread Premium. Simply put this is a fee paid by the lender when your loan originator locks and closes your home loan with a higher than market mortgage rate. You’ll see market or the so called wholesale mortgage rates referred to as par mortgage rates.

Par Mortgage Rates

A par mortgage rate is simply one that does not cost you anything to get or create any money for the Mortgage Company or broker arranging your home loan. Mortgage rates that cost you money require discount points be paid at closing. Remember that one point is one percent of your mortgage amount and a discount point is a fee paid to lower your mortgage rate. If you have to pay cash at closing to qualify for a specific mortgage rate this is not a par rate; likewise if your mortgage rate creates a commission for the broker it is not a par rate either. If you want the best possible deal when refinancing your home loan you want to get as close to a par mortgage rate as possible.

Avoiding the unnecessary markup of your mortgage rate to generate a commission for the mortgage broker is easier than it sounds. You just need to find the right broker for the job and forget about refinancing with your bank or credit union. Banks fund their loans with the banks money and are not required under the current disclosure laws to tell you how they’ve marked up your interest rate. Compare a par rate to your banks “great deal” and you’ll see how much they overcharge their customers.

You can learn more about a Home Mortgage Refinance with par mortgage rates without paying lender junk fees in the process by registering for my free Underground Mortgage Videos. Register Today and you’ll have immediate access to the membership area without downloading anything to your PC.

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Home Mortgage Refinancing

Robert — Wed, 11 Mar 2009 19:34:02 +0000

If you are considering mortgage refinancing for any reason this year, there are several things you need to know in order to avoid overpaying for your next home loan.

Lender junk fees and mortgage broker markup of your mortgage rate can quickly turn a sweet deal into a costly lemon of a home loan.

Mortgage refinancing with your bank or credit union won’t save you from mortgage broker markup like you might think. Here are several tips to help you avoid paying too much and getting burned with your next mortgage loan.

Banks vs. Mortgage Brokers

Many people think they can avoid paying mortgage broker fees by refinancing their home loan with a bank. After all, your bank is a direct lender right? Unfortunately banks are just as guilty, if not more so of taking advantage of and overcharging their customers as mortgage brokers. In fact, the Banking Lobby in the United States spent millions of dollars having the disclosure laws changed to exclude banks. That’s right; your bank is exempt from the Real Estate Settlement Procedures Act and is not obligated to disclose their profit margin or markup on your home loan.

Mortgage brokers on the other hand have access to wholesale rates and if you find the right broker willing to work for a flat origination fee, you can save yourself thousands of dollars per year. Much like your bank, mortgage brokers can mark up your mortgage rate for a commission from the lender. This commission is known as Yield Spread Premium and if you want the best deal when refinancing your home you’ll need to avoid this unnecessary markup.

What You Need to Know About Mortgage Rates

Most of the mortgage rate quotes you find online include some amount of Yield Spread Premium. Never heard of this markup? Don’t worry, most homeowners haven’t and according to the Secretary of Housing and Urban Development will overpay nearly sixteen billion dollars this year alone because of it. So what is Yield Spread Premium? It is simply a percentage of your loan amount created for the mortgage broker for locking and closing your home loan with a higher than necessary mortgage rate. Lenders reward mortgage brokers for closing loans with higher than market rates because these loans bring them a premium profit when your loan is sold on the secondary market.

For every .25% that your mortgage broker marks up your mortgage rate the lender pays them a commission of one percent of your loan amount. This is paid in addition to any loan origination fees that you’re already paying, and probably paying too much more. It is possible to refinance your mortgage paying a flat origination fee of one percent without markup of your mortgage rate. This is a deal that you’ll never get from your bank or credit union and will save you thousands of dollars every year you keep the loan.

How to Refinance Your Mortgage

The first thing you’ll need to do is find the right mortgage broker for the job. Your friend’s cousin probably isn’t going to be the right broker nor will the ones with full page ads in the phone book, company hummers, and posh office spaces. These mortgage brokers employ expensive sales staff and offices spaces and are going to be much less likely or unable to negotiate the kind of deal you’re looking for when mortgage refinancing. Someone has to make the hummer payment for them right? Just make sure it’s not you.

The best mortgage broker for the job has at least 10 years of experience, is self-employed, and if you can find one working out of their home, even better. These brokers don’t have the expensive overhead and will be more receptive to negotiate with you, especially since you’ll know how to talk to them after watching my Underground Mortgage Videos. Remember, your goal is to avoid Yield Spread Premium when refinancing and to do that you have to find the right person for the job.

Why Yield Spread Premium Is Such a Problem

Here’s an example to illustrate how this commission based markup by the mortgage broker drives up your monthly payment unnecessarily. Suppose you are refinancing your home for $275,000 and your mortgage broker quotes you an interest rate of 5.75%. You agree to pay a loan origination fee of 2.5% and think you’re getting a great deal with your now much lower mortgage payment.

What your mortgage broker didn’t tell you is that the lender approved you for a mortgage rate of 5.0%, but they’ve marked it up to get 3% cash back from the lender as commission. This is in addition to the 2.5% you’ve overpaid for the loan origination fee. In this example your mortgage broker is stuffing their pockets with $15,125 at your expense. You get stuck with a higher than necessary mortgage payment, in addition to shelling out too much cash for your home loan.

With the inflated mortgage rate at 5.75% your monthly payment of a $275,000, 30 year, fixed-rate mortgage loan will be $1600. If you had the mortgage rate you deserve at 5.0% your monthly payment would only be $1,475 per month! That’s a savings of $1500 per year! Remember, you don’t have to be a financial guru to get the kind of deal I’m describing here; you just need to know how to find and negotiate with the right mortgage broker.

You can learn more about mortgage refinancing without paying mortgage broker markup or lender junk fees by registering for my Underground Mortgage Videos. The mortgage videos are free and you can watch them today without downloading anything to your PC.

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Mortgage Refinancing in 2009

Robert — Sat, 07 Mar 2009 23:13:46 +0000

When it comes to refinancing your home loan, the more you know, the more you’ll save.

Refinancing your home mortgage without paying too much involves cutting through lender hype and carefully evaluating your mortgage needs and choices. Here are several tips to help you avoid overpaying for your next home mortgage loan.

Should You Refinance Your Mortgage?

Many people refinance to improve the terms of their mortgage loans. Getting a “better” loan can mean different things to different homeowners. For you, a better home loan could have a lower mortgage rate and payment amount, it could mean converting a risky adjustable rate mortgage to a fixed rate loan, or it could mean taking cash back for home improvements.

Whether or not you should refinance depends on your needs and when or if you’ll break even on the new loan. If you’re taking cash back you might end up with a higher mortgage rate than you have now; in this case you’ll probably not recoup your expenses from refinancing. If you’re trying to save money on your mortgage the decision to refinance can be based on how long it will take you to recoup your expenses from taking out a new loan. You can easily determine this by dividing your total closing costs and fees by how much lower your new monthly payment amount will be. This will tell you the number of months it will take you to break even on the new loan.

How Hard is Qualifying to Refinance?

Mortgage lenders tightened their requirements when Freddie Mac and Fannie Mae changed the percentage of your home value that can be financed. Lenders have much narrower criteria for judging acceptable credit and there are fewer loan options available today. If you purchased your home with a sub-prime or stated income mortgage loan you could find it difficult to refinance your mortgage without changing your financial situation.

The mortgage you choose when refinancing depends on several factors. How long do you plan on keeping your mortgage and what do you need from the new loan? If you only plan on keeping your home for a short while you’ll have more options; however, the longer you plan on keeping your home the better your opportunity to save money when refining.

Get a Lower Mortgage Rate

There are a number of ways to qualify for a lower mortgage rate when refinancing your home loan. You can do this for yourself by choosing an Adjustable Rate Mortgage, refinancing your subprime mortgage with a conforming loan, consolidating your home equity or second mortgage, or simply finding a better mortgage that doesn’t include commission based markup of the mortgage rate.

Lower Your Mortgage Payment

You can temporarily lower your mortgage payment by choosing an interest only loan or do so permanently by extending the term length of your new loan. Traditional mortgage loans have a term length of 30 years; however, there are now mortgages available with 40 year terms. If you are a senior citizen consider a reverse mortgage to generate income or free up cash for other bills.

Mortgage Refinancing Emergency

If you’re a homeowner who is underwater in your existing mortgage or can no longer afford your monthly payment due to your ARM resetting, you could benefit from FHA bailout programs. Your existing lender might need to agree to a modification or deferment to allow you time to catch up; however, help is available.

You can learn more about refinancing your home mortgage loan without overpaying or making an expensive mistake by registering for my Underground Mortgage Videos. Register today and you’ll learn how to refinance without paying commission based markup or lender junk fees and save thousands of dollars in the process.

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Mortgage Annual Percentage Rate

Robert — Wed, 18 Feb 2009 22:17:08 +0000

Are you in the market to refinance your existing mortgage loan? Do you find terms like APR, Mortgage Rate, and Points confusing and misleading?

You’re not alone…most homeowners never fully understand what the Annual Percentage Rate is or how points affect their mortgage rate and closing costs. Here are several tips to help demystify mortgage loans and save you thousands of dollars when refinancing your home loan.

Annual Percentage Rate

You’ll see it listed as APR for short…but what is Annual Percentage Rate really? The Truth in Lending Act of 1974 requires lenders to disclose the costs of a loan to allow homeowners to compare loan offers. This law was supposed to make it easy to make apples to apples comparisons of any mortgage offer you’re considering; however, the problem you’ll find when comparing one apple to another is that your lender could just as easily hand you a mango that they’ve designated an apple. Here’s why.

Annual Percentage Rate is an expression of the total costs you’ll pay every year as a percentage of the loan amount. The law requires mortgage lenders to tell you what the APR is; however, there is no standard for lenders to calculate the APR or requirements that all fees and charges be listed. This means that every lender you encounter when refinancing your mortgage will have a different way of calculating the APR and may only include the lenders fees, not your broker’s origination fees and markup.

APR is a Marketing Tool

These days the Annual Percentage Rate is largely a marketing tool designed to get you into the office or on the phone to generate a lead. Most of the numbers you see are purely fictional and should not be relied on when choosing a mortgage loan. How should you compare loan offers? Shopping for a mortgage correctly isn’t a matter of comparing loan offers like you would compare a bottle of Ketchup at the grocery store. Instead of trying to find the right lender or loan, concentrate your efforts on finding the right person to arrange you mortgage and the rest will fall into place.

How to Find the Right Mortgage Broker

Finding the right mortgage broker when refinancing your home loan is easier than you think. If you look in the phone book you’ll find a lot of fancy mortgage brokers with posh offices and company hummers decked out with their company logos. Think these folks are the right people to originate your loan? Think again. Posh offices, expensive sales staff, receptionists, cappuccino makers, and company hummers cost a lot of money. These mortgage brokers have huge overhead costs to keep their businesses afloat and have minimum targets they need to bring in on each loan.

This means because of their overhead costs these mortgage brokers will never be willing or able to negotiate their origination fees or Yield Spread Premium on your loan. It’s your money but these broker’s think they’re entitled to it…someone’s gotta make that hummer payment right?

How do you find the right mortgage broker to refinance your home loan? Look for a small, self-employed mortgage broker that has been in the business for ten years or longer. Does this broker work out of their home? Even better…less overhead means these mortgage brokers will be willing and able to negotiate for your business.

You can learn more about finding the right broker to refinance your home loan without paying commission based markup of your mortgage rate or junk fees by registering for my Underground Mortgage Videos available on this website.

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Mortgage Advice Today

Robert — Mon, 16 Feb 2009 17:23:38 +0000

Are you considering taking out a new mortgage to refinance your existing home loan?

If you’re seeking advice online to help you find the best loan with the lowest possible mortgage rate there are a number of things you need to know in order to avoid paying too much when refinancing.

Here are several mortgage tips to help you avoid a costly mistake when refinancing your home mortgage loan.

Mortgage Advice Today

Ever hear of Yield Spread Premium? Don’t feel bad if you haven’t… 90 percent of homeowners in the United States have no idea how this unnecessary markup of their mortgage rate drives their payment up costing them thousands of dollars every year. What is Yield Spread Premium? In the simplest terms it is a commission created for the person arranging your mortgage for locking and closing your loan with a higher than market mortgage rate. That’s right, mortgage lenders reward brokers that overcharge their customers with a commission.

How does Yield Spread Premium work? Suppose you are refinancing your $230,000 home and your broker quotes you a mortgage rate of 6.5%. The broker waives their origination fee stating that their fee is “being paid by the lender so it’s not costing you anything.” What a great deal right? What a load of crap. First of all, think about it… Why would the mortgage lender pay the broker’s origination fee unless there was something in it for them?

The truth is there is something in it for the lender. Mortgage lenders make the majority of their profits selling their loans to investors on the secondary mortgage market. Home loans with higher than market mortgage rates bring in premium profits for the lender, more than making up for the chump change they throw at the broker for overcharging you. Now that you know why lenders pay mortgage brokers for originating loans with higher than market rates let’s get back to our $230,000 example.

Your broker quoted you a mortgage rate of 6.5% on a $230,000 thirty-year, fixed rate mortgage. What you don’t know because most brokers will not tell you and often become angry and defensive if you ask them, is that you actually qualified for a 6.0% but they’ve marked your rate up to get Yield Spread Premium from the lender. For every .25% your broker marks up your mortgage rate they receive a commission from the lender of 1.0% of your loan amount. In this example the broker gets 2%, a commission of $4,600…which is double what they should be getting for arranging your loan.

So what’s the big deal with Yield Spread Premium? That $4,600 isn’t coming out of your pocket so why should you worry about it? Take a look at what that extra .5 percent you’re paying does to your monthly mortgage payment. If you had closed with the mortgage rate you deserve at 6.0% your payment on a $230,000 thirty-year, fixed rate mortgage would be about $1,370 per month. Since you agreed to overpay for your mortgage loan your payment for the same loan at 6.5% will be $1455. That’s $1,020 you’re throwing away every year because you paid too much when refinancing.

Mortgage Refinancing With a Bank

You might be saying to yourself “If mortgage brokers are so sleazy I’ll just avoid all this unfortunate Yield Spread Premium business by refinancing with my bank.” This sounds like a good idea; however, banks are just as guilty of ripping people off and twice as sleazy. Here’s why:

The Real Estate Settlement Procedures Act

Called RESPA for short is a bit of legislation in the United States that requires mortgage brokers to disclose their markup and profit margins on your home loan. Sounds good right? The problem with RESPA laws as they are on the books now is that banks and credit unions are exempt from these disclosure laws. Your bank is not required to tell you how much they’ve marked up your rate to make a profit selling your loan on the secondary market or how much profit they’re making for that matter. This markup of your bank or credit union for fun and profit goes by a slightly different name; it’s called Service Release Premium.

Where Do You Go From Here?

You’ve learned that your bank or credit union is a bad place to refinance your home and mortgage brokers cannot be trusted…so where does that leave you? It’s not a question of if you should use a mortgage broker when refinancing but which mortgage broker. You see brokers have access to wholesale mortgage rates and give you deals that your bank and credit unions will never allow… you just need to know how to find the right mortgage broker for the job.

Fortunately for you, finding the right mortgage broker to refinance your home loan is easier than you think. You can learn more about refinancing your home with the lowest possible mortgage rate while avoiding junk fees by registering for my underground mortgage videos. Register today for immediate online access from your PC and you’ll be on your way to saving thousands of dollars on your next mortgage loan.

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Today’s Mortgage Rates Refinance

Robert — Fri, 06 Feb 2009 20:01:58 +0000

Are you in the market to refinance your home mortgage and are searching for today’s mortgage rates? Before you do anything there are several things you need to know about the mortgage rate quotes you receive.

Things are not as bad as you have been hearing in the news; however, it is very easy to overpay when refinancing your mortgage. Almost every mortgage quote you come across has someone’s commission built into it. If you’re looking for today’s real mortgage rates for refinancing your home loan here are several tips to help you get a good deal.

Today’s Mortgage Rates Refinancing

If you’re new to this business of mortgage refinancing, the process isn’t much different from what you went through when you purchased your home. You’ll need to find someone to arrange your mortgage for you, usually a mortgage broker that will charge you a fee for their services. Many homeowners think they can skip the middleman by going to their bank for a mortgage loan; however, what the bank isn’t obligated to tell you thanks to a loophole in the Real Estate Settlement Procedures Act is that they are charging you the same markup that most mortgage brokers charge, and probably even more.

How to Find the Right Mortgage Broker

If you want the best deal for your next mortgage loan you’ll need to find a mortgage broker to arrange the loan for you, and not just any broker. Because mortgage brokers work for a commission you don’t want the mortgage broker with the posh office and company hummer. I mean really, how do you think they’re paying for all that bling? They pay for it by overcharging their customer’s mortgage rate…but more on that later.

If you want the best deal the right mortgage broker for your job is a small time self-employed professional, even one working out of their home. These mortgage brokers don’t have the overhead that comes with posh offices and expensive sales staff…not to mention the company hummer plastered with their logo and website.

Mortgage Junk to Avoid

Why do the majority of people overpay when refinancing their mortgages? Simply because they don’t understand how the broker is paid and think that if the lender is paying the fee it’s not coming out of their pocket. Many brokers brag about the fact that their compensation is coming from the lender and even waive their origination fee when refinancing…if anyone who works for a commission starts waiving fees pay very close attention to what they’re shoveling.

What you need to know is not the fact that the mortgage lender is paying this fee for you but why they are paying a fee. Lenders reward mortgage brokers that lock and close loans with above market mortgage rates. If your mortgage broker is receiving a fee from the lender when refinancing it’s because you’re paying a higher mortgage rate than you need to, not that your broker is the “best in the business.” What a load of crap…

It is possible to refinance your home mortgage with a wholesale mortgage rate paying only a one percent origination fee to the mortgage broker. You can find honest mortgage brokers licensed to work in your state that do not mark up mortgage rates for a commission.

You can learn more about refinancing your home mortgage without paying too much by checking out my Underground Mortgage Videos.

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Best Mortgage Rate 2009

Robert — Fri, 16 Jan 2009 19:58:58 +0000

If you’re considering refinancing your home mortgage loan and are looking for the best mortgage rate in 2009, there are several things you need to know in order to avoid overpaying for the new loan.

Most homeowners have heard of mortgage junk fees but very few are familiar with the evils of Yield Spread Premium or how it raises your monthly payment unnecessarily. Here are several tips to help you get the best mortgage rate in 2009 when mortgage refinancing.

What is Yield Spread Premium?

Mortgage brokers receive compensation for their work in two ways. Your broker will typically charge you an origination fee for their part in arranging your loan which will be disclosed on your Good Faith Estimate. This fee could be as much as five percent but typically runs anywhere from 2-3%. One percent is actually a reasonable fee to pay your mortgage broker for loan origination.

The second way mortgage brokers receive compensation is from Yield Spread Premium on your loan. Yield Spread Premium is a percentage of your loan amount paid by the lender when the mortgage broker locks and closes your home loan with a higher than necessary mortgage rate. I say “higher than necessary” because the mortgage broker is already being compensated for their work with the origination fee you’re paying. Any amount of Yield Spread Premium on your loan could effectively double or triple the broker’s compensation on your loan.

Best Mortgage Rate 2009

In order to get the best mortgage rate when refinancing your mortgage you’ll need to avoid Yield Spread Premium completely. This unnecessary markup of your mortgage rate can add hundreds of dollars to your monthly payment, and for what reason? Just to give your mortgage broker a bonus to make their boat payment? Not on my watch…the free videos on this website will show you not only how to avoid Yield Spread Premium and lender junk fees responsible for homeowners in the United States overpaying nearly sixteen billion dollars every year according to the government.

Check out my Underground Mortgage Videos today and you’ll get immediate online access to the mortgage tutorial in my password protected memberhip area and a list of mortgage brokers in your area that do not pad their loans with Yield Spread Premium.

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Refinance Fees You Need to Avoid

Robert — Sun, 11 Jan 2009 20:49:33 +0000

If you are in the process of shopping for a home loan there are a number of Refinance Fees you need to avoid if you don’t want to overpay. Many of these fees are charged by the lender; however, there are several refinance fees that do nothing but line your mortgage broker’s pockets. Here are several tips to help you avoid paying too much for your next mortgage loan.

Refinance Fees

When refinancing your home mortgage loan you can reasonably expect to pay many of the same fees you paid when purchasing your home. The problem is that you probably didn’t have a good idea which of those fees were necessary and which were pure garbage when you purchased your home. Refinance fees typically come from three sources: the lender, the broker, and third party companies involved with closing your mortgage.

Mortgage Broker Refinance Fees

Honest mortgage brokers explain their fees upfront and will typically only charge you a loan origination fee. This refinance fee will often appear in your loan documents as “origination points” and a reasonable amount to pay for loan origination is one percent of your mortgage amount. Many brokers charge as much as five percent or more; however, you should never agree to pay this much for a mortgage broker’s services.

There are a number of mortgage broker junk fees you’ll want to keep an eye out for when refinancing. At the top of this list is the so called “rate lock fee.” Lenders never charge a fee for locking in your mortgage rate. If your mortgage broker is charging you a fee for locking in your interest rate you’re probably dealing with a dishonest mortgage broker. Another warning flag to watch out for is if your broker verbally locks your mortgage rate or provides you a written lock on company letterhead. Rate lock confirmation should always come from the lender and be confirmed in writing. If you have verbally locked your mortgage rate you haven’t locked anything.

Dishonest mortgage brokers pass of their own rate lock confirmation and tell you the rate lock from the lender is proprietary or confidential and that you cannot see it. They tell you this because they’re hiding a fee they receive from the lender for marking up your mortgage rate…more on this fee later; however, you know you are dealing with a 100% dishonest mortgage broker if they will not show you the rate lock confirmation in writing from the lender. Other junk fees include broker courier fees and processing fees. If you find these on your Good Faith Estimate or HUD-1 statement you’ll want to have a heart-to-heart with your mortgage broker and strongly consider taking your business somewhere else.

Mortgage Lender Refinance Fees

Once your mortgage broker has completed processing your application the loan is transferred to underwriting at your mortgage lender. You can expect to pay underwriting fees at this stage of the game however, most of the lender fees are not junk fees and cannot be avoided. Your mortgage company or broker is responsible for 90% of the junk fees you’ll encounter when refinancing your mortgage loan unless you refinance with a bank or credit union.

Many homeowners think they’ll get the best deal and avoid junk refinance fees by sticking with their bank or credit union. Unfortunately this simply isn’t true…banks and credit unions are exempt from key legislation in the United States known as the Real Estate Settlement Procedures Act that requires mortgage companies and brokers to disclose their profit margins and markup on your loan. This means if you refinance your home loan with a bank or credit union you’ll never know how much they’ve marked up your mortgage loan or how much you’ve overpaid. Never refinance your home mortgage with a bank or credit union.

Hidden Refinance Fees

Now that you know banks and credit unions are a bad idea there is one hidden fee you need to know about before choosing a broker to refinance your home loan. Mortgage brokers receive their compensation for arranging your loan from two sources. We’ve already discussed loan origination fees and you now know that a reasonable fee to pay your broker is one percent of your loan amount, but what about this “hidden” compensation? Did you know that mortgage lenders reward brokers for overcharging you? This reward doesn’t come from overcharging you on refinance fees but by marking up your mortgage interest rate.

Mortgage lenders know that the majority of their profit comes from selling your home loan to investors on the secondary market. What better way to boost their profits by selling your loan with an above market mortgage rate for a premium fee. This is why mortgage lenders reward brokers for marking up your mortgage rate. This markup of your mortgage rate creates a percentage of your loan amount for the Mortgage Company or broker. Known as Yield Spread Premium this fee is a cash bonus paid when you lock and close your mortgage loan with a higher than market mortgage rate.

Yield Spread Premium is usually disguised in your loan documents and rarely talked about by your broker. In fact, many mortgage brokers become angry and defensive when questioned about Yield Spread Premium. This is another warning flag that you’re dealing with a potentially dishonest broker if they refuse to discuss Yield Spread Premium on your loan. How can you spot this unnecessary markup of your mortgage rate? I’ll tell you…

Your first opportunity to recognize and avoid Yield Spread Premium comes not on the Good Faith Estimate but on the rate lock confirmation from your lender. This is why many dishonest mortgage brokers refuse to show you the confirmation claiming that it’s confidential and proprietary. Rubbish! They just don’t want you to see how much they’ve marked up your mortgage rate and the fee your lender is paying them for overcharging you!

Why Yield Spread Premium is Bad

You’ve learned how mortgage brokers make money from arranging your loan and you’ve learned about Yield Spread Premium; however, you might be asking why should I care about a fee paid by the lender? After all it’s not coming out of my pocket right? Wrong! It’s not the fee you should be concerned about but rather the reason your mortgage lender is paying this fee. Remember your mortgage broker receives this fee for marking up your mortgage rate. Your broker is paid one percent of your loan amount for every .25 percent they markup of your interest rate. What does this markup do to your monthly payment amount?

Suppose you’re refinancing your home for $300,000 and the broker quotes you a mortgage rate of 5.5 percent, charging you a loan origination fee of one percent or in this case $3,000. Sounds like a good deal right? What you don’t know is that you actually qualified for a 5.0 percent mortgage rate and the broker marked it up by .5 percent to get a bonus from the lender of $6,000. What does this markup do to your payment? At 5.5 percent on a fixed rate 30 year mortgage your monthly payment will be $1,700 per month. If you had the mortgage rate you deserve at 5.0 percent your monthly payment would be only $1600 per month! That’s $1,200 a year you’re throwing away just to give your mortgage broker an unnecessary bonus for overcharging you!

Happily Yield Spread Premium can be avoided. If you’ve read this far you’re head and shoulders above most homeowners out there who have never heard of Yield Spread Premium. You can learn more about avoiding the unnecessary markup of your mortgage rate and other junk fees by registering for the free mortgage videos on this website.

Check out my Underground Mortgage Videos today and you’ll have instant, online access to these award winning mortgage videos and all resources in our password protected member area for free.

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Internet Mortgage Lenders

Robert — Fri, 26 Dec 2008 23:32:14 +0000

Considering Internet Mortgage Lenders to refinance your existing home loan? The Internet is an excellent tool for comparing loan offers; however, there are a number of hidden fees that could quickly turn that sweet Internet mortgage rate quote into a financial nightmare.

Here are several tips to help you find the right Internet Mortgage Lenders without paying junk fees or markup of your mortgage rate.

What Are Internet Mortgage Lenders?

Most websites you find on the Internet fall into one of two categories: lead generation and broker banks. The Internet giants like Lending Tree involved with lead generation actually have nothing to do with mortgage loans whatsoever. You might be surprised to learn that all Lending Tree does is run a glorified lead generation site with an enormous advertising budget. That’s right, all Lending Tree does is collect your contact information and financial details and sell your information to the lenders and brokers in their “network” for a premium fee.

Beware Computerized Origination Fees

Did you know that if you refinance your mortgage with one of the lenders in Lending Tree’s network you will be charged a “computerized loan origination fee” of up to $1200 on your Good Faith Estimate? This is how mortgage companies and brokers pass Lending Trees lead generation fees on to you the consumer. Should you have to pay this ridiculous junk fee just so Lending Tree can turn an enormous profit? Of course not. There are hundreds of honest and hardworking mortgage brokers in every market willing to work for a fair loan origination fee without marking up your mortgage rate for fun and profit.

What About Mortgage Broker Banks?

Mortgage broker banks are another evil most homeowners are not familiar with. The Banking Lobby in the United States spent millions of dollars lobbying congress to be exempt from the Real Estate Settlement Procedures Act which requires mortgage brokers to disclose their markup and profit margin on your home loan. Because banks are exempt from this legislation and fund their loans with the bank’s money you’ll never know the bank’s margin on your loan or how much they’ve marked the rate up over a par or wholesale mortgage rate.

Mortgage broker banks were created to take advantage of the loophole in the Real Estate Settlement Procedure Act and are simply a mortgage company or broker that closes and funds loan in its own name. eLoan is an example of an Internet Mortgage Lender that closes in its own name and is therefore not required to disclose how much they’ve marked up your mortgage rate for a profit. Take out a mortgage loan from a mortgage broker bank and you’ll never know how low your mortgage rate could have been…

How to Avoid Mortgage Broker Banks

Broker banks are easy to avoid when refinancing your mortgage. Simply ask your mortgage broker or loan representative if their company closes in the name of the wholesale lender or their own company. If they close in their own name you know you are dealing with a broker bank. There is only one reason for a mortgage company to operate as a mortgage broker bank and that is to take advantage of the loophole created by the banking lobby to exploit homeowners. This is not the type of company or mortgage broker you want to do business with.

Honest Mortgage Brokers Are Not Hard to Find

The ideal mortgage broker is self-employed with at least five to ten years experience. Find one working out of their home? Even better. The reason this makes for the perfect mortgage broker is the small time self-employed brokers do not employ expensive sales staff or pay for posh office spaces. This type of broker is much more likely to give you a good deal without marking up your mortgage rate for a commission. You can learn more about refinancing your mortgage without paying too much by registering for the free videos available on this website. Register today and you’ll receive a list of mortgage brokers in your area that do not mark up mortgage rates for a commission, allowing you to take advantage of wholesale mortgage rates.

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Mortgage Refinancing During the Holidays

Robert — Wed, 24 Dec 2008 18:16:56 +0000

If you are refinancing your home mortgage this holiday season there are several things you need to know in order to avoid paying too much in fees and finance charges.

While mortgage rates are at their lowest levels in 50 years there are a number of junk fees and mortgage broker tricks that can quickly turn a good deal into a horrible mistake. Here are several tips to help you keep more of your money this holiday season when refinancing your home mortgage loan.

Beware Yield Spread Premium

Yield Spread Premium isn’t as scary as it sounds and is a fairly simple concept to wrap your head around even though most homeowners have never heard of it. Simply put this is the markup of your mortgage interest rate by the mortgage company or broker for a commission. Don’t think you’ll be getting away from mortgage rate markup by refinancing with your bank; you’ll pay the same markup or more refinancing with a bank or credit union, the markup just goes by another name. See Service Release Premium for more about this type of markup by a bank or credit union.

How does Yield Spread Premium work? Lenders pay mortgage companies and brokers a commission for locking and closing mortgage loans with above market rates. For every .25 percent you agree to overpay when locking and closing your new home loan the mortgage company or broker arranging your loan is paid one percent of your loan amount as a commission. This commission is paid in addition to any fees you pay for loan origination, including junk fees the mortgage company slips past you.

Don’t Pay Too Much for Your Next Mortgage Loan

Avoiding Yield Spread Premium and junk fees is easier than you think. It’s all about negotiation with your mortgage broker to pay a flat origination fee without commission based markup of your mortgage rate. There are brokers out there willing to work for a flat origination fee of one percent without marking up your mortgage rate for a commission. If you can find a broker like this you’ll be able to take advantage of wholesale mortgage rates when refinancing, saving yourself thousands of dollars every year you keep the loan.

How to Find The Right Mortgage Broker

Finding the right mortgage broker for the job isn’t as hard as it sounds. The ideal mortgage broker does not work for a large firm or Internet website. They are self-employed, have five to ten years of experience, and if you can find one that works out of the home, even better. Why would you want a self-employed, homebound mortgage broker? These brokers do not employ expensive sales staff and do not pay for posh office spaces…therefore their overhead is much lower or non-existent. This mortgage broker is much more likely to negotiate with you over their commission than the fast talking salesperson sitting in a posh office.

You can learn more about refinancing your mortgage this holiday season without paying too much by registering for the free mortgage videos found on this website. Register today and you’ll receive a list of mortgage brokers in your area that do not markup mortgage rates for a commission and you’ll be on the road to saving thousands of dollars on your next mortgage loan.

Happy Holidays!
Robert

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How to Refinance Your Mortgage Without Getting Ripped Off

Robert — Fri, 19 Dec 2008 17:14:18 +0000

You may have heard on the news recently that mortgage rates are at a 50 year low and now is the perfect time to refinance your home loan. While its true rates are very low right now there a number of junk fees and mortgage broker tricks that can quickly turn that excellent mortgage rate into a horrible deal.

Here are several tips to help you take advantage of historically low mortgage rates without getting ripped off by the lender or mortgage broker.

Yield Spread Premium: What You Need to Know

The number one reason homeowners overpay for their mortgage loans is a little known fee known as Yield Spread Premium. Yield Spread Premium is so bad that the Secretary of Housing and Urban Development was recently quoted that American homeowners will overpay sixteen billion dollars this year alone.

What is Yield Spread Premium? Simply put Yield Spread Premium is the markup of your mortgage interest rate for a commission by the mortgage company or broker. The problem with this markup is that it is rarely disclosed and will cost you in addition to any other fees you pay for loan origination.

Here’s an example of how hidden Yield Spread Premium drives up your monthly mortgage payment costing you thousands of dollars unnecessarily. Suppose you are refinancing your existing home loan for $350,000. Your mortgage company quotes you a mortgage rate of 6.25% and charges you an origination fee of 3% for their part in arranging your loan. This means you will be required to pay $10,500 at closing for loan origination.

What your mortgage company isn’t telling you is that you actually qualified for a 5.5% mortgage rate and they have marked it up for a commission from the lender. The lender behind your loan rewards the mortgage company or broker for overcharging you by paying one percent of your loan amount for every .25% they markup your mortgage rate. In this example the mortgage company was paid an additional $10,500 for overcharging you in addition to the $10,500 you’re paying for loan origination. That’s right; your mortgage company doubled their commission by lying to you about your mortgage rate.

What does this mean for your monthly mortgage payment? With the mortgage rate you got at 6.25% your monthly payment will be $2155. If you had gotten the mortgage rate you deserve at 5.5% your payment would have been only $1980. That’s a difference of $175 per month or $2,100 you’re overpaying every year!

There is good news today since you’ve found this website. The free mortgage videos available online will show you how to avoid Yield Spread Premium when refinancing your mortgage and will get a wholesale mortgage rate. You will also learn which fees charged by the mortgage company and broker are garbage and can be avoided. There are a number of fees mortgage companies and brokers charge like rate lock fees that are complete garbage…if you want the best deal for your home loan you’ll need to avoid these fees in addition to Yield Spread Premium. Register today, you’ll get immediate access to the mortgage videos and materials in our password protected member’s area.

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Mortgage Refinancing and Your Loan to Value Ratio (LTV)

Robert — Fri, 19 Dec 2008 02:19:57 +0000

If you are considering mortgage refinancing, understating loan-to-value ratio could make the process less painful for you. Many homeowners glaze over at the “technical terminology” associated with mortgage loans like loan-to-value ratio and yield spread premium. If you are such a homeowner here are the basics you need to know about loan-to-value when refinancing your home loan.

Why Loan-to-Value Ratio is Important

When most people talk about loan-to-value ratio when it comes to a mortgage loan they are talking about avoiding Private Mortgage Insurance (PMI). While avoiding private mortgage insurance is important and can save you hundreds of dollars every month, loan-to-value ratios influence other aspects of your home loan including mortgage rate, payment amount, and loan approval.

Loan-to-Value Ratio Definition

Simply put your loan to value is the ratio between your mortgage amount and the value of your home. Suppose for instance you have a $200,000 home with a $100,000 mortgage loan. Your loan-to-value ratio or LTV in this example is 50 percent.

Different types of mortgage loans and lenders have different requirements for LTV ratios. Your primary residence for example can have an LTV as high as 96.5 percent and still qualify for an FHA mortgage loan. Conventional mortgage loan requirements range anywhere from 95 – 97 percent LTV. Thinking about a VA or Rural Housing loan? These loans can go as high as 100 percent LTV.

If avoiding Private Mortgage Insurance (PMI) is your goal you will need to have the loan-to-value ratio below 80%. Private Mortgage Insurance can add hundreds of dollars to your monthly payment amount and does nothing to protect the homeowner; this insurance simply protects the lender from certain types of losses if you default on your mortgage loan. Having a lower LTV ratio can also affect the mortgage rate you get when refinancing your home. Generally the lower your LTV the better your mortgage rate will be which in turn gives you the lowest monthly payment amount.

Having a favorable loan-to-value ratio could mean the difference between getting your loan approved or denied if you are a homeowner with less than perfect credit. Having a low loan-to-value ratio reduces the risk for the mortgage lender, making you more loan worthy. You can learn more about lowering your mortgage rate and payment amount when refinancing while avoiding lender junk fees by registering for the free mortgage videos available on this website.

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Refinance Fees

Robert — Sat, 13 Dec 2008 21:20:31 +0000

If you are in the process of refinancing your home mortgage one of your concerns is undoubtedly paying too much in refinance fees for the new mortgage loan.

How do you know which fees are garbage headed straight for your mortgage brokers pocket and which ones are absolutely necessary? Here are several tips to help you avoid paying too much for your next home loan.

Refinance Fees 101

The first thing you need to know about the fees you’ll be charged when refinancing isn’t exactly a fee; however, it is the single reason most homeowners overpay for their loans. Did you know that the person arranging your loan marks up your mortgage rate for a commission? This is almost always done without your knowledge or consent. The commission generated by this markup is known as Yield Spread Premium and is a percentage of your loan created when the broker locks and closes your loan with a higher than market interest rate. Lenders reward mortgage brokers with a commission because loans with higher than market rates bring in higher profits when sold to investors on the secondary mortgage market.

The fact that you know about Yield Spread Premium gives you a huge advantage over most homeowners. Avoiding this unnecessary markup isn’t as tricky as you might think…once you know how to recognize the markup in your loan documents you can find mortgage brokers willing to work for a flat origination fee as low as one percent of your loan amount.

How to Spot Mortgage Rate Markup

The first opportunity you’ll have to spot this unnecessary markup of your mortgage interest rate does not come with the Good Faith Estimate as you might think but from the lender’s rate lock confirmation. The Good Faith Estimates you receive when shopping for a mortgage are little more than a marketing tool used to draw you in to overpriced loan offerings; however, rate lock confirmation from the lender tells the real story about your loan.

First of all, make sure the lock confirmation you get is in writing and comes from the lender, not the broker. Some dishonest mortgage companies and brokers will try and pass off a written lock confirmation on their own company letterhead…if it isn’t in writing from the lender your rate lock is meaningless. Once you have written confirmation from the lender there are several important items disclosed on the lock. Your mortgage rate, Yield Spread Premium, points, and the duration of your lock are all detailed on the lender’s lock confirmation.

Mortgage Junk Fee

Never agree to pay a fee to lock in your interest rate. Mortgage lenders do not charge rate lock fees. This fee to lock your mortgage rate is pure garbage. If you agree to pay a rate lock fee it will go directly into your mortgage broker’s pocket.

You can learn more about mortgage refinance fees you need to avoid including strategies for refinancing with a wholesale mortgage rate by registering for my Underground Mortgage Videos.

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Refinance Mortgage Rates

Robert — Wed, 30 Jul 2008 17:27:45 +0000

If you are in the process of refinancing your home mortgage loan, getting a good deal from a reputable lender is probably at the top of your to-do list. The mortgage industry has suffered a major setback in the United States recently with lenders tightening their standards and cutting corners on loan offerings.

In the midst of the so-called “credit crisis” how can you be sure that you’re getting a good deal on your mortgage rate and aren’t paying garbage fees to the broker or lender? Here are several tips to help you find the lowest refinance mortgage rates for your home loan when refinancing.

Understanding Mortgage Rates

Mortgage shopping for most people involves collecting rate quotes from a few online lenders or calling a broker out of the phone book. Some people ask for a Good Faith Estimate and compare fees; however, very few people actually understand how mortgage rates are quoted and nearly everyone pays too much for their home loans. What most people don’t understand is the “retail” nature of mortgage interest rates.

Mortgage lenders operate their businesses on a wholesale basis. They do not lend directly to the public but rely on mortgage brokers to resell their loans. There is one exception; nearly every wholesale lender operates a retail division. You might think that you can avoid retail markup on your loan by contacting the lender directly and skipping the mortgage broker…if you try this you’ll be dealing with their retail operation and paying the same markup of your mortgage rate.

Mortgage Refinance Rates

Why are mortgage rates marked up? Like any other retail mortgage refinance rates have been marked up to give a commission to the broker arranging the loan. This markup is called Yield Spread Premium. Understand how Yield Spread Premium works and you can save yourself as much as several thousand dollars every year that you keep the loan.

How does Yield Spread Premium work? When your mortgage broker submitted your loan application they “mark up” your mortgage rate higher than the lender is willing to approve you to get a commission. Your mortgage broker might be telling you that you qualified for a 6.75% mortgage rate; however, what there not telling you is that you could have been approved at 6.25%. The broker marked up your mortgage rate by .50% because the lender pays them a bonus of 1% for every .25% they overcharge you. On a $250,000 loan that bonus is $5,000 on top of whatever origination fee you agree to pay for their services.

What does this .5% markup mean for your monthly payment amount? If you had refinanced with the mortgage rate you deserve at 6.25% your monthly payment would be approximately $1500 on a 30 year fixed rate mortgage. Dial that up to 6.5% and you’re paying an extra $960 every year just to give your mortgage broker a bonus.

There is good news for homeowners that do their homework before refinancing. You can avoid paying this unnecessary markup of your mortgage interest rate without paying junk fees to the lender and broker with my free mortgage refinancing system. Register today and you’ll get immediate online access to the videos, a list of recommended brokers in your area and everything you need to secure the lowest possible rate when refinancing your home loan.

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Refinance Bad Credit

Robert — Wed, 25 Jun 2008 21:59:46 +0000

If you’re considering refinancing your mortgage and have less than perfect credit, there are steps you need to take before applying to improve your credit. Mortgage approvals are becoming more difficult these days even for homeowners with good credit. If you are going to have your application for refinancing approved you will need to improve your finances not only to get approval, but to qualify for the lowest possible mortgage rate. Here are several tips to help you refinance with bad credit.

Check Your Credit History First

The first thing you’ll need to do before contacting a mortgage broker is to request copies of your three credit reports and carefully check for errors. Your credit records are maintained by three separate companies that do not always share information. These three credit agencies are Equifax, Experian, and Trans Union. You don’t have to pay for these reports as Congress passed a law requiring each of them to provide you with one free copy of your credit history every 12 months. You can request these free credit reports by visiting the website annualcreditreport.com.

Dispute Inaccurate Information

If you find mistakes in your credit history you’ll need to dispute the error and allow enough time for the correction to be reflected in your credit score. It is not uncommon to have mistakes with one credit agency that are not reflected in the other credit agencies. Mistakes are common so it is very important to review your credit reports every year and follow that credit agency’s procedure for disputing inaccurate information as quickly as possible.

Pay Your Bills on Time

Late payments kill your credit score. Always make your payments on time, especially your mortgage payment. When paying your credit cards make sure you pay at least 20% more than the minimum payment that is due in a given month. Pay your credit cards down to at least 50% of the available balance. You can shuffle balances around between cards that have balances less than 50% if you don’t have the cash on hand to pay your cards down.

Work With a Mortgage Broker

Mortgage brokers have access to programs that you might not be able to find on your own. A good mortgage broker can help you not only improve your credit but can often work around your financial shortcomings to get your loan approved. You have to be careful when choosing the right person as brokers work for a commission and the loans that bring them the largest commissions are not necessarily the best loan for your situation. You can learn more about finding the right person to originate your mortgage without paying too much by registering for my free mortgage video tutorial.

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How to Get a Wholesale Mortgage Lender

Robert — Mon, 25 Feb 2008 21:56:26 +0000

The first thing you should know about getting the best deal when refinancing your home loan is that you cannot bypass the middleman to get a wholesale rate. It doesn’t matter which wholesale lender you try and contact when refinancing…every lender has retail divisions that deal with the public. Here are the basics you need to know to qualify for a wholesale mortgage rate when refinancing your home loan.

You’ll Have to Use a Broker

If you want wholesale rates there’s no way around working with a mortgage broker. Banks and credit unions never offer their customers wholesale rates and the big Internet lenders you see are simply banks pretending to be something they’re not. So what is a mortgage broker?

Mortgage brokers are simply loan originators that do not fund the loans they close with their own money. They are basically salespeople reselling mortgage loans for wholesale lenders. Your mortgage broker gets paid by charging you an “origination fee” and from a “rebate” paid by the wholesale lender. Lenders reward mortgage brokers for marking up the interest rate you qualified and closing your loan with above market rates. This rebate paid by the lender is called Yield Spread Premium and you’ll need to avoid it if you want to refinance with a wholesale rate.

How Yield Spread Premium Works

Suppose the mortgage you are refinancing is for $300,000. Your mortgage broker locks and closes your loan with a mortgage rate of 6.5%; however, what the broker doesn’t tell you is that you qualified for 6.0% mortgage rate. Because your mortgage broker locks and closes your home loan .5% higher than necessary this creates 2% of Yield Spread Premium for the broker. Your mortgage broker pockets $9,000 in addition to the fees you’re already paying for overcharging you.

Finding the right mortgage broker to originate your home loan without lining their pockets with Yield Spread Premium is a skill you can easily learn. Give me an hour of your time and I’ll show you how to refinance your home with a wholesale mortgage rate without paying garbage fees with free videos…Register for yours today.

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Four Tips to Lower Your Mortgage Payment When Refinancing

Robert — Thu, 07 Feb 2008 21:53:11 +0000

If you’re considering refinancing your mortgage there are a number of reasons for taking out a new home loan.

Some people choose to refinance because of a financial hardship, others want to borrow cash against the equity in their homes; however, the most common reason is to get a lower monthly payment.

Here are several tips to help you get that lower payment and take back control of your paycheck.

How to Get Lower Mortgage Payments

The method you choose to lower your mortgage payment depends on your situation and your financial goals. Here are four of the most common methods used to get a lower monthly payment:

I. Extend the term length of your new home loan.

The easiest way to lower your monthly payment is to take your current mortgage balance and stretch it out over a longer amount of time. Suppose for example that you purchased your $300,000 home at seven percent five years ago and want refinance the balance of $280,000. Your current monthly payment is $1,200; however, refinancing with a 6.5% interest rate over forty years would lower payment to $850…a savings of $350. Keep in mind that by extending the term length of your loan you will be paying more to the lender in the long run for your financing.

II. Choose an Adjustable Rate Mortgage with a lower mortgage rate.

A short term fix for many homeowners is to choose an adjustable rate mortgage. If you expect your income to increase in the near future or plan on selling your home within a few years a hybrid ARM could be a sure fit. Hybrid Adjustable Rate Mortgages have the advantage of a fixed rate period that lasts as long as five years before the lender starts adjusting your mortgage rate. Hybrid Adjustable Rate Mortgages are an excellent way to take advantage of lower adjustable rate loans while protecting yourself from economic uncertainty.

III. Consider Interest Only or Option Adjustable Rate Mortgage Loans

If you’re interested in the lowest possible payment amount option ARMs, while risky, provide the lowest possible minimum payment. The problem with this type of loan is that if you only make the minimum payment amount every month you’re not paying enough to cover all of the interest due that month. The unpaid interest is simply added to your loan balance which results in a mortgage that actually grows over time. This is a bad thing. If you want to limit your risk but need a lower payment than a traditional ARM, consider an interest only loan.

IV. Borrow Against Your Equity to Take Back Your Budget

Cashing out the equity in your home to pay off other bills could be the solution for a budget that is out of control. When you refinance your mortgage and take cash back to pay off other bills you get to deduct the interest paid on this debt from your taxes.

Getting the lowest possible payment when refinancing can only happen if you qualify for the lowest mortgage rate. The mortgage quotes you receive shopping on the Internet and by calling your mortgage broker all include commission-based markup. If you want the lowest possible payment you’ll need to qualify for a wholesale mortgage rate…you can learn more about refinancing wholesale without paying junk fees with our free mortgage video tutorial. Register today while this is still a free offer; you’ll get immediate access to the videos on your PC and free live support to answer any questions you have.

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Can You Break Your Mortgage Rate Lock?

Robert — Thu, 24 Jan 2008 17:14:26 +0000

Since mortgage rates have been in near freefall this week several people have asked me about breaking mortgage rate locks. Here’s the skinny you need to know about locking in your mortgage rate.

Can you break your mortgage rate lock and walk away from the table at any time?

While most mortgage brokers will tell you that a rate lock is an agreement between you and the lender that you cannot walk away from, the truth is that you can and the pressure you mortgage broker is applying is a load of crap. Can’t say that I blame them, after all their commissions are on the line…but the truth is you can walk away from the table at any time…Even After You’ve Signed The Contract.

Mortgage Rate Locks

What is a mortgage rate lock? Really all rate locks are is a “promise” from your lender to give you a certain mortgage rate if you close before the lock expires. Are mortgage lenders obligated to honor their rate locks?

The answer may surprise you… No, lenders are not obligated to honor thier own rate locks. Mortgage lenders build so much wiggle room into their rate locks they can back out of them almost at will. You’re not signing a contract when you lock in your mortgage rate but if rates go down 99% of lenders will not give you the lower rate.

If your mortgage lender refuses to give you the lower rate why should you stay? A mortgage is a huge financial commitment and you should make sure you’re getting the best possible deal before signing on the dotted line. Don’t ever let a mortgage broker or lender pressure you into thinking that since you’ve locked in a mortgage rate you’re obligated to take out the loan. This type of pressure sales is not only unethical but a despicable practice.

Your Rights Under The Law

You can walk away from the table at any time. If you’re being pressured by a broker or your gut tells you something isn’t right, walk away. Mortgage brokers and lenders are a dime a dozen and there are honest people working in this industry that want to get you a good deal in exchange for your business. What can you do if you already signed the loan contract? You still have time to change your mind. There are three business days before your loan is funded that you can change your mind and walk away from the deal. See Three Day Rescission for more information about backing out before your loan is funded.

To summarize, a rate lock does not mean you are obligated to borrow. Never let anyone pressure you into any type of loan…this is a sure recipe for disaster. Do your homework, learn about Yield Spread Premium and make informed decisions when it comes to your mortgage. All the information you need to do this is available for free on this website.

You can learn more about your mortgage refinancing options, including the best approach to refinancing your home without paying too much by checking out my free Underground Mortgage Videos. Register today for instant online access without downloading anything to your computer.

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Interest Only Mortgages

Robert — Thu, 17 Jan 2008 23:09:15 +0000

If you are in the process of refinancing and are considering interest only mortgages, there are several things you should know to reduce your risk. Interest only mortgages are suitable for homeowners that need a low monthly payment for a short period of time; however, these loans are often abused by people who don’t understand how they work. Here are a several tips to help you decide if refinancing with interest only mortgages is right for you.

Adjustable Rate Mortgages 101

Interest only mortgages are a type of Adjustable Rate Mortgage. These loans are called “adjustable” because the lender periodically changes the interest rate to the loan’s index plus their margin. Adjustable Rate Mortgages are based on a number of different indexes ranging from the Federal T-bills to the London Interbank Offered Rate Index. The index that your interest only mortgage is tied to will be specified in your loan contract. Margin is your lender’s markup of the index for a profit; the amount of margin on your loan is determined by your credit and the lender you have chosen. When shopping for any Adjustable Rate Mortgage it is important to compare the margin from one lender to the next because this markup has an impact on your monthly payment amount.

Interest Only Adjustable Rate Mortgages

Interest only mortgages are a special type of Adjustable Rate Mortgage where your payment amount in the beginning is based only on the amount of interest due that month. Because you’re only paying the interest due, during the interest-only period you will not pay down any of your loan balance. What many homeowners don’t realize is that the interest only period does not last forever. Eventually the lender is going to want their money back and when this happens your mortgage payments will go up.

The length of your interest-only period is specified in your loan contract and typically lasts for up to five years. When the lender resets your loan you will have a mortgage payment amortized for the time remaining in your loan contract. Suppose for example that you take out a 30 year, interest only adjustable rate mortgage with a 5 year interest only period. At the end of the interest only period your payments will be based on a repayment period of 25 years. This means your payments will be much higher than a standard 30 year, adjustable rate mortgage.

As long as your budget can support the new, higher payment amount you shouldn’t have a problem when the lender resets your mortgage. Payment shock occurs for homeowners who are not expecting the higher payment because they don’t understand how interest only mortgages work and their budgets cannot support the payments. If you find yourself in this situation you could be facing foreclosure in as little as 120 days if your mortgage payment becomes too much to manage.

Refinancing as an Option

At the end of your interest only period you do have the option of refinancing before your payments go up. By choosing another interest only mortgage or opting for a less risky hybrid adjustable rate mortgage you can minimize your risks of payment shock while taking advantage of the lower rates offered by interest only mortgages.

You can learn more about your mortgage refinancing options, including strategies for minimizing your risk and avoiding lender junk fees by registering for a free video tutorial. These videos were produced by a retired mortgage broker and will show you how to refinance with a wholesale mortgage rate without paying too much. Click here to register for your free mortgage videos.

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Understanding Mortgage Rate Quotes

Robert — Tue, 04 Dec 2007 00:04:49 +0000

The mortgage quotes you receive when shopping for a new lender do not give you the actual interest rate you qualify when refinancing. The rate quotes you get are “retail” mortgage quotes that include unnecessary commission based markup. Here are several tips to help you understand how mortgage rates are quoted so you can refinance with the actual mortgage rate you qualify.

Mortgage Yield Spread Premium

The commission based markup of your mortgage rate is called Yield Spread Premium and you can avoid paying it by understanding mortgage quotes and learning how to read lender rate sheets. In order to understand how commission based markup works it is helpful to understand how mortgage brokers and other loan originators are compensated.

Mortgage Broker Compensation

Mortgage brokers are compensated for their work from two sources. You will be required to pay the broker a fee for their part in arranging your loan. This fee is commonly called an origination fee or origination points and should not be more than one percent of the amount you are refinancing. The second method is the so called “lender paid compensation,” or Yield Spread Premium. This fee is paid by the lender as an incentive for overcharging you. For every .25 percent your broker inflates your mortgage rate they receive one percent of your loan amount in lender paid compensation.

Why do lenders reward mortgage brokers for overcharging you? The majority of profit for a lender comes from selling mortgage loans to investors on the secondary market. Mortgage loans with above market interest rates bring premium profits for the lenders and this is why your broker is rewarded for overcharging you.

How Mortgage Rates Are Quoted

Every wholesale lender publishes their rate sheets by fax or online each day. Mortgage brokers use these rate sheets to quote you a rate; however, the quote you get is not based on your credit or financial details as you might expect. Your mortgage quote is based on how much the broker thinks you’re willing to pay in addition to the mortgage rate you qualified. Just like a used car salesman your mortgage broker quotes you an interest rate with their commission check in mind.

How to Avoid Yield Spread Premium

Most homeowners unknowingly agree to retail mortgage rates without knowing their broker marked up the interest rate. This amounts to paying thousands of dollars unnecessarily over the lifetime of the loan. Yield Spread Premium is a completely unnecessary fee because you are already paying a perfectly reasonable origination fee for your mortgage broker’s services. Homeowners who learn to recognize this markup can find honest mortgage brokers and negotiate to avoid paying it. This is much easier than it sounds and you can save yourself thousands of dollars refinancing with a wholesale mortgage rate.

How to Recognize Yield Spread Premium

Many mortgage brokers become defensive when asked about Yield Spread Premium. If your broker gets angry or tells you not to worry about the fee because it’s being paid by the lender you are probably dealing with a dishonest person. Tell your prospective mortgage brokers that you understand how Yield Spread Premium works and will pay a reasonable fee for their services but will not accept loan offers with this “lender paid” compensation.

Ask your mortgage broker to show you the rate sheet from the wholesale lender on the day you lock in your rate. Make sure the rate sheet comes from the lender and is not something typed up on the mortgage broker’s letterhead. If the broker refuses to show you the rate sheet or makes excuses this person is not being honest with you; find another mortgage broker that will be.

You can learn more about your mortgage refinancing options, including costly pitfalls to avoid with a free mortgage DVD.

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Yield Spread Premium for Dummies

Robert — Sun, 25 Nov 2007 22:46:34 +0000

Many homeowners have never heard of Yield Spread Premium and do not understand why their mortgage rate is marked up. Yield Spread Premium sounds complicated; however, once you understand why it’s there, you can avoid paying this unnecessary markup. Cutting the fat from your mortgage rate by as little as a quarter point can lower your monthly payment by hundreds of dollars in many cases. Here are the basics you need to understand about Yield Spread Premium and mortgage interest rates.

Why Yield Spread Premium?

From the lender’s point of view this markup is all about return on investment. Wholesale lenders make the majority of their profits selling mortgage loans to investors on the secondary market. Mortgages with above market interest rates bring these lenders premium profits; this is why lenders incentivize overcharging homeowners with retail mortgage rates.

There’s a lot that goes on behind the scenes when your mortgage broker quotes you an interest rate. Once your broker understands your financial situation they’re sizing you up much like a used car salesman does when you walk onto the lot. Your mortgage broker knows the wholesale mortgage rate you qualify from the wholesale lender; however, the broker wants to up sell you on a higher mortgage rate because of this incentive from the wholesale lender. Here’s an example to illustrate how Yield Spread Premium works.

Suppose you are refinancing your 1st and 2nd mortgage loan for a total of $250,000. You wanted to consolidate these two mortgages with a lower interest rate and one payment. The broker tells you that you qualify for a 6.75% fixed rate loan and charges you 1.5 points for the origination fee. One point in this example is $2,500 as a point equals one percent of your loan amount. What your mortgage broker isn’t telling you is that you actually qualified for a 6.0% mortgage rate and they’ve marked it up for a commission from the lender.

In this example the mortgage broker receives $3,750 from you in origination fees. This is compensation for their work in arranging your mortgage; however, a reasonable amount to pay is no more than one percent. In this example 1.5 percent is too much. In addition to overcharging you for origination fees, the mortgage broker receives a commission from the lender for inflating your interest rate. In this example the broker pockets an additional 3.0%, or $7,500 for overcharging you. This fee is Yield Spread Premium. The broker walks away with $11,250 at your expense for little more than a few hours work.

Yield Spread Premium is Dishonest

The overwhelming majority of mortgage brokers will never admit what they’re doing with your mortgage rate. Those that do often become defensive and even angry about any questioning regarding this fee; they will tell you “since the fee isn’t coming out of your pocket don’t worry about it.” The fact of the matter is this fee is advantageous and dishonest. A bill is currently making its way through the House of Representatives making Yield Spread Premium illegal. If this happens how will your mortgage broker afford their boat payments? Too bad for them.

Until Yield Spread Premium is illegal, savvy homeowners who learn to recognize this unnecessary markup can avoid paying it when refinancing. By avoiding Yield Spread Premium you’ll be able to refinance with wholesale mortgage rates, potentially lowering your monthly payment amount by hundreds of dollars. Refinancing with a wholesale mortgage rate isn’t as difficult as you think. You’ll need to find a mortgage broker willing to work for the origination fee alone, without receiving the kickback from the wholesale lender. Honest mortgage brokers do exist; however they can be difficult to find.

How to Find an Honest Mortgage Broker

Your best bet in finding an honest person to originate your mortgage is to look for a local, self-employed broker. A representative a large brokerage house may not have the authority to refinance your mortgage without Yield Spread Premium; in this case mom and pop shops can be the best way to go. Start by contacting local mortgage brokers in your phone book and telling them that you are looking for a mortgage without Yield Spread Premium. Explain that you understand how the markup works and are willing to pay a reasonable origination fee for their work; however, you will not accept a higher mortgage rate for any lender paid compensation. Once you find a mortgage broker willing to work for an origination fee alone you are well on your way to saving thousands of dollars on your next mortgage.

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FHA Secure Refinance

Robert — Sun, 11 Nov 2007 20:29:09 +0000

The FHA Secure mortgage program helps homeowners who are falling behind on their Adjustable Rate Mortgages and could be risking foreclosure. This program is currently limited to homeowners that purchased their homes with Adjustable Rate Mortgages scheduled to reset; however, it could be expanded in the future to include homeowners with Fixed Rate Mortgage loans.

Risky Adjustable Rate mortgages are causing many Americans to fall behind on their payments and are contributing to a record number of mortgage foreclosures in this country. Homeowners that have fallen behind on their payments typically have a difficult time refinancing their loans because they are unable to qualify for a new mortgage. FHA Secure refinancing allows these homeowners to qualify for low interest rate, government insured, fixed rate mortgage loans.

FHA Secure mortgage loans are insured by the government; however, these loans are made through conventional mortgage lenders. These lenders are required to follow FHA guidelines for underwriting mortgage loans and you will have to get a new appraisal on your home. The downside of refinancing with an FHA Secure loan is that you will be required to pay for Private Mortgage Insurance and the premiums will be based on your past credit history. Private Mortgage Insurance lowers the risk of administering this program for the FHA; homeowners with poor credit ratings will be required to pay higher premiums than those with good credit ratings.

The FHA hopes to help 80,000 homeowners with this program and more when the program is expanded. If you are considering refinancing with an FHA Secure mortgage you will need to do your homework and shop for a mortgage that does not include unnecessary markup of your interest rate and junk fees. Many homeowners think that because they are getting a mortgage from the FHA they don’t have to worry about lenders taking advantage of them; however, this is simply not the case. Banks still charge Service Release Premium and wholesale lenders still pay Yield Spread Premium on mortgage loans insured by the FHA.

If you’d like to refinance your home with an FHA Secure mortgage without getting ripped off by a predatory mortgage lender, register for a free video tutorial. Get started today, these videos are yours free with no obligation and will show you how to avoid foreclosure by refinancing your mortgage with an FHA Secure mortgage with a wholesale mortgage rate.

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Mortgage Rates and Your Credit Score

Robert — Thu, 25 Oct 2007 00:44:19 +0000

If you are considering mortgage refinancing it is well worth your time to review your credit before you contact lenders. Your credit scores influences not only the type of mortgage products you will qualify, but how much each loan will cost you. Before applying for a new mortgage it is important to review your credit records for errors…this will save you a good deal of time and frustration down the road. Here are the basics you’ll need to know about your credit score before refinancing your home mortgage loan.

What Are Credit Scores?

Your credit score is one of the major factors determining the type and amount of mortgage you will qualify when refinancing. Your credit score is a snapshot of the contents of your credit reports and is intended to provide a numerical estimate of your ability to manage personal finances. Your credit score is based on the following aspects of your credit reports:

1. Your history of making on-time payments.
2. How much available credit you have.
3. Reports made by your creditors.
4. Negative information including judgments, leans, or bankruptcy.

Keep in mind that because you have three credit reports you’ll have three corresponding credit scores. Credit records are maintained by three for-profit companies: Equifax, Experian, and Trans Union. These credit bureaus use complicated and secretive algorithms for distilling the contents of your credit files into a numerical representation of your likelihood to repay your mortgage in a timely manner. Credit scores range from 300 to 850; the higher your credit score the less you’ll pay for refinancing your mortgage loan.

How Are Credit Scores Calculated?

Understanding how your credit score is calculated is the first step to improving your credit and qualifying for the best mortgage rate possible. If your credit score needs improvement concentrating on the following areas will allow you to make the most significant improvements in the least amount of time.

35 Percent of your credit score is based on your history of making payments on time. Making all of your payments on time, especially your mortgage payment will have the largest impact on improving your credit score. Even if you make only one late payment prior to applying for a mortgage it could have a significant negative impact on your credit and the mortgage rate you will qualify.

30 Percent of your credit score is based on the amount of outstanding debt you have. The amount of credit you have used measured against your total credit available or the limits on each of the accounts listed on your credit reports represents your available credit. Maxing out your credit cards has a large negative impact on your credit score. Many financial advisors agree that maintaining no less than 25% of your available credit will have the largest favorable impact on your credit score.

15 Percent of your credit score is based on the amount of time that you’ve been using credit. The longer your credit history of favorable reporting, the higher your score will be. Your credit reports are the record of your use of credit so it is important to ensure that your credit records are error free on a yearly basis.

10 Percent of your credit score is based on the number of creditors making inquiries into your credit reports. An inquiry is made before applying for new credit and having too many flags you as a risk to potential lenders. Most inquires made stay in your credit files for a period of one year before dropping off. Because inquires have a negative impact on your credit score it is important to limit them while shopping for a mortgage loan. Accessing your own credit report does not count as an inquiry and does not have a negative impact on your credit score.

10 Percent of your remaining credit score is based on the different types of credit you use. This includes revolving accounts like your credit cards and installment accounts like your car loan and mortgage. Your mortgage payment history is an important aspect of your credit score and you should always strive to make the payments timely.

What Is The Ideal Credit Score?

If you are a homeowner with a credit score below 500 you can still qualify for a mortgage; however, you’re going to pay a lot more and be forced to accept less favorable terms. If your credit score is above 700 you will qualify for the best mortgage programs with the lowest interest rates. You can learn more about improving your credit score prior to refinancing your mortgage with a free video tutorial and wholesale mortgage rate quote.

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Mortgage Refinancing Secrets

Robert — Thu, 06 Sep 2007 21:38:33 +0000

The mortgage industry is complicated and constantly changing. In order to get the best deal possible for your home it is important to understand how the market works and how lenders and loan originators make their money. In doing this you will be able to make educated decisions that affect your financial well-being.

Mortgages loans in the United States are regulated by three congressionally appointed entities (corporations). These organizations are Fannie Mae, Freddie Mac, and Ginnie Mae. Together they set the limits for borrowing, known as the conforming loan limit. They also purchase and insure mortgage debt ensuring that lenders have the funds necessary to grant loans. These lenders pool their loans and sell them to investors on the secondary mortgage market; this is where the majority of profits are made. Here are the basics you’ll need to understand before refinancing your mortgage.

Mortgage Rate Secrets

Mortgage rates move up and down on a daily basis. There are a number of factors that contribute to rising or falling mortgage interest rates. When people talk about mortgage rates they’re not just talking about one rate; “mortgage rates” are made up of many different interest rates.

Mortgage rates come from not only the Prime Rate, but Treasure Bill Rates, Treasury Notes, Bonds, the Federal Funds Rate, the LIBOR index, 6 month CDs, and Fannie Mae/Ginnie Mae Security Rates just to name a few. Interest rates are influenced by the laws of supply and demand. When the demand for credit is high, interest rates go up. The opposite is also true, when the economy slows and the demand for credit goes down so do interest rates.

You may have heard about the “Mortgage Crisis” in the United States. The mortgage industry’s problems are threatening to drag the US economy into a recession; however, this is good news for interest rates. Bad economic news usually results in lower interest rates where favorable economic conditions result in higher rates. Another way of approximating the direction mortgage rates are headed is to look at bond prices. Bond prices and mortgage rates tend to move in opposite directions. When bonds are up, mortgage rates are down, vice versa.

Debt to Income Ratio

The mortgage rate you receive is determined not only by economic conditions but by your credit and qualifying ratios. Debt to Income Ratio is simply your total debt divided by your total monthly income before deductions. Most traditional lenders do not want your Debt to Income Ratio higher than 40%; however, some bad credit lenders have been known to approve loans as high as 60%. The rule-of-thumb with your debt ratio is typically the less debt you have the better your mortgage rate will be.

Credit History Secrets

Credit scores are one of the most confusing and intimidating aspects of refinancing your mortgage. When you submit your application for a new mortgage the broker will run a merged credit report from all three credit bureaus. They do this because the three credit bureaus of Equifax, Experian and Trans Union do not share information well. This report provides three credit scores and your mortgage application will be based on the median credit score. (You have three credit scores because you have three credit reports…one from each credit bureau)

Suppose Your Credit Scores Are:

Experian FICO – 701
TransUnion Empirica – 708
Equifax Beacon – 688

Your mortgage application will be based on the FICO score of 701. The rule-of-thumb when qualifying for a traditional, conforming mortgage loan is that you need a credit score of at least 620. Anything less than 620 and you’re considered a sub-prime borrower. If your credit score is 720 or better you have excellent (A+) credit.

If your credit scores are low there are steps you can take to raise them before applying. There are three types of debt you need to consider. These types include mortgage debt, installment debt, and revolving debt. Installment debt is anything with fixed payment amounts such as your car payment and revolving debt can change on a monthly basis like your credit cards. You should pull all three of your credit reports by visiting the website annualcreditreport.com; recent legislation requires all three credit bureaus to provide you with a free copy of your credit reports each year at this site.

Thirty five percent of your credit score is based on your history of making on-time payments. If you have any 30 day late payments on your credit report this will drag down your credit score. Never let a mortgage payment go 30 days late….ever. You can improve your credit score by shuffling your revolving debt (credit cards) so that you have not used 50% of your limit. Some credit cards may not report their limits and if you have one like this on your credit report it is damaging your score because the credit bureau considers the card maxed out. If your credit limits are not accurately reflected on your credit reports contact the credit card company and ask them to correct the discrepancy.

Loan-to-Value Ratio

The final piece of the puzzle that makes up your qualifying ratios is Loan-to-Value Ratio. Your Loan-to-Value Ratio or LTV is calculated by dividing your mortgage amount by the appraised value of your property. The higher the LTV, the less equity you have in your home and the greater a risk you are for the lender. If you have less than 20% equity or have a LTV greater than 80%, your lender could require you to purchase Private Mortgage Insurance (PMI) to qualify for your loan.

Private Mortgage Insurance (PMI)

This “insurance” does nothing for you as a homeowner besides draining your wallet. PMI protects the lender from certain losses due to foreclosure. This insurance is often expensive and can add hundreds of dollars to your monthly payment. Fortunately, there are ways around Private Mortgage Insurance and your best bet for avoiding this unnecessary expense is what’s known as an 80/20 or piggyback loan.

Piggyback loans are essentially two mortgages…the first for 80% and the second for the remaining 20%. The downside of using an 80/20 loan is that the mortgage rate on your second loan will be higher due to increased risk for the lender. You will need to weigh the pros and cons of paying this higher mortgage rate against the expense of PMI premiums.

This is the first article in a series of articles entitled “Mortgage Refinancing Secrets.” You can learn more about your refinancing options, including costly mistakes to avoid with my free video tutorial. Register today using the DVD link at the top of this page.

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FHA and VA Streamline Mortgage Refinancing

Robert — Tue, 28 Aug 2007 19:45:00 +0000

VA and FHA mortgages are government insured loan programs intended to help those with low income and veterans purchase homes. Because these loans are insured by the Federal government they have less risk for mortgage lenders allowing people that might not otherwise qualify to purchase homes. Traditional mortgage loans are also insured; however, they are not insured by the Federal government but by lending institutions like Fannie Mae and Freddie Mac.

FHA mortgage loans are underwritten and insured by the Federal Housing Administration. These loan programs are typically for first time homebuyers with credit problems and require a minimum three percent down payment. Closing costs can be rolled into the loan balance with FHA programs; however, there are mortgage insurance premiums of up to 1.5% required by the housing administration. There are also borrowing limits imposed on FHA loans that vary based on the State the home is purchased.

VA mortgage loans are underwritten and insured by the Veteran’s Administration for individuals that have served in the armed forces of the United States. Unlike the FHA, the VA does not require mortgage insurance or a down payment. VA mortgage loans carry a funding fee of 2.15 percent and this fee can be rolled into your mortgage balance along with closing costs.

FHA and VA Mortgage Loans Losing Popularity

FHA and VA loans are becoming increasingly less popular and Congress has even considered doing away with these programs since 1995. One reason these loans are becoming less popular has been the abundance of loan programs available for homeowners with poor credit or little or no down-payment. Many of these programs do not have lender fees or mortgage insurance requirements.

It is possible to find 100% financing without paying insurance or rolling fees in with your closing costs. The recent credit crisis in the United States could bring FHA and VA loans back into favor as qualifying for a mortgage loans becomes increasingly difficult for homeowners with “bruised” credit ratings.

What is Streamline Refinancing?

FHA and VA loans allow for “streamline refinancing.” This means that you can refinance your mortgage with minimal documentation and underwriting without paying lender fees. The basic requirements are that you not be delinquent in your mortgage payments, that refinancing results in a lower payment, and that you cannot receive cash back from refinancing the loan.

There are a number of different mortgage programs available for streamline refinancing. Many lenders charge a higher mortgage interest rate for rolling closing costs into your loan balance. This is why comparison shopping and having a current appraisal is important before you apply for streamline refinancing. You can learn more about your mortgage refinancing options, including expensive mistakes you’ll want to avoid with my free mortgage toolkit.

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Current FHA Mortgage Rate

How to Pick a Lender When Refinancing Your Mortgage

Robert — Tue, 21 Aug 2007 00:19:56 +0000

Mortgage refinancing can be a confusing process for many homeowners. Mortgage loans are retail products like the appliances in your kitchen and refinancing is not so much choosinig a lender as picking a loan originator. Here are several tips to help you find a loan originator that won’t take advantage of you when refinancing your mortgage.

What is a Mortgage Loan Originator?

Your loan originator is the person arranging your loan and handling the paperwork. This person could be a mortgage broker, loan officer at the bank, or a representative at a mortgage company. Finding the right person to originate your loan will make the difference between getting a good deal and making an expensive mistake.

Who should you choose to originate your mortgage? You can scratch the loan officer at your bank off the list right away, and for good reasons. Banks are exempt from the Real Estate Settlement Procedures Act that protects homeowners by requiring lenders to disclose their profit margin and markup on your loan. Because banks are not required to play by the same rules as other lenders you’ll never know how much they mark up mortgage interest rates.

If we eliminate banks, you have the choice of refinancing with a traditional mortgage company or a broker. Mortgage brokers have access to wholesale mortgage interest rates and an honest broker is more likely to refinance your mortgage with a wholesale rate than a mortgage company representative. The downside of working with a mortgage broker is that these individuals are paid by commission and giving you a wholesale interest rate doesn’t yield the best commission.

What Are Wholesale Mortgage Rates?

Wholesale mortgage rates come from wholesale lenders. Your loan originator is what makes mortgage rates “retail.” Loan originators mark up mortgage rates because the lender pays them a commission of one point for every quarter percent you agree to overpay. Suppose you qualified for a 6.0% mortgage rate but your broker quotes you 6.5%. If you agree to this loan your originator pockets two percent of your loan amount on top the origination fees they’ve already charged you.

Yield Spread Premium is Unnecessary Markup

The difference between the wholesale mortgage rate you were approved and the rate you close after markup is called Yield Spread Premium. This unnecessary markup of your mortgage interest rate only serves to boost your broker’s commission at your expense. Many brokers try and explain away Yield Spread Premium as “lender paid fees,” telling you not to worry about it because it’s not coming out of your pocket. Don’t fall for these lies; you’re agreeing to an above market interest rate and it is coming out of your pocket.

You can learn more about refinancing your mortgage with a wholesale rate with my free mortgage tutorial. Simply click the DVD image at the top of this page to get started today, free with no obligation.

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Is Fixed Rate Mortgage Refinancing Right For You?

Robert — Thu, 16 Aug 2007 22:32:22 +0000

If you’re in the process of refinancing your home mortgage, you might be wondering what type of interest rate is right for you. There are two basic types of mortgage rates to choose from when refinancing your home. In a previous article I discussed the pros and cons of Adjustable Rate Mortgages; today we’ll discuss the merits of refinancing your home loan with a fixed rate mortgage.

What Are Fixed Rate Mortgage Loans?

Fixed rate mortgages are simply mortgage loans with a contracted interest rate that does not change for the entire duration of your loan. This means that your mortgage payment will never change due to market or economic conditions. Your interest rate and payment amount are “locked-in” as long as you keep the loan.

What are the Advantages of Fixed Rate Mortgage Loans?

While it’s true that fixed rate mortgages typically come with higher interest rates than a similar Adjustable Rate Mortgage, the amount of risk associated with these loans is significantly lower. Because Adjustable Rate Mortgages change their interest rate and payment amounts over time you’ll always run the risk of payment shock. If you have a low tolerance for financial risk and need a mortgage payment that you can plan your budget around consider refinancing with a fixed rate mortgage.

If you are an individual that takes chances with your finances you could benefit from an Adjustable Rate Mortgage. These mortgages come with much lower payments and when used correctly you can minimize the risk. Adjustable Rate Mortgages are great for homeowners that need short term financing with an ultra-low payment. There are a number of choices for your Adjustable Rate Mortgage including interest-only and option mortgages. You can learn more about choosing the best Adjustable Rate Mortgage for your situation with my free mortgage tutorial.

How Your Interest Rate Determines Your Mortgage Payment

There are two factors that determine your mortgage payment amount. These factors are the mortgage rate you qualified and the term length you choose when refinancing. Term length is the amount of time you have to repay your mortgage and determines your loan’s amortization schedule. The length of term you choose is inversely proportional to your payment amount. Loans with short term lengths have higher payments and those with long term lengths have lower payments. If you need the lowest possible mortgage payment there are now loans available with 40 and 50 year term lengths.

Choosing the best type of mortgage rate for your situation should be an easy decision. Finding a loan originator that will not charge you Yield Spread Premium when refinancing your loan will be much more difficult. Yield Spread Premium is the unnecessary markup of your mortgage interest rate to give your mortgage broker a bonus and is the reason most homeowners in the United States overpay for their mortgage loans. You can learn more about your mortgage refinancing options, including expensive pitfalls to avoid with my free video tutorial. You can register today for free by clicking the DVD image at the top of this page.

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What Every Homeowner Should Know About Yield Spread Premium

Robert — Fri, 10 Aug 2007 20:16:46 +0000

Yield Spread Premium (YSP) is a concept every homeowner in America needs to understand; however, very few people know what it is or how to a avoid it when taking out a mortgage loan. According to the Secretary of Housing and Urban Development, Yield Spread Premium is responsible for homeowners in the United States overpaying nearly sixteen billion dollars this year. Here are the basics you need to know about Yield Spread Premium and how you can avoid paying the markup.

What is Yield Spread Premium?

Simply put, Yield Spread Premium is the markup of your mortgage interest rate by the person originating your mortgage loan. Your loan originator could be a mortgage broker, Internet lender, or a local mortgage company. Banks are not included in this discussion because the do not charge Yield Spread Premium. This doesn’t mean bank loans do not have markup; bank loans have the same markup but due to loopholes in disclosure laws this markup is called Service Release Premium and is the topic of a later discussion.

How Does Yield Spread Premium Work?

The examples I’ll use here today will all be loans originated by a mortgage broker; however, brokers are the only type of lender that charges Yield Spread Premium. Nearly every mortgage quote you find on the Internet includes markup of some kind. Your challenge as a homeowner is learning how to recognize this unnecessary markup so that you can negotiate to avoid paying it.

Yield Spread Premium is a bonus or “kickback” paid by your lender. Many loan originators try and explain Yield Spread Premium away by telling you that you don’t have to worry about his fee because the lender s paying it; that it doesn’t come out of your pocket. Don’t be fooled by this lie. While it’s true the lender pays Yield Spread Premium, it is being paid because you’ve accepting an above market interest rate. To add insult to injury you’re already paying a perfectly reasonable fee for the mortgage broker’s services. Many brokers feel they’re entitled to Yield Spread Premium on top of the origination fee you’re already paying. If you agree to accept a loan that includes Yield Spread Premium you are doubling and in many cases tripling your broker’s commission.

Yield Spread Premium in Action

Here’s an example of a typical brokered mortgage transaction that includes Yield Spread Premium. In this example our homeowner is called Jeannie. Jeannie is refinancing her $250,000 mortgage and taking $50,000 back to consolidate her higher interest debt. Jeannie is doing this because she’ll pay less interest on the debt when it’s secured by her home and she can deduct all of the interest she pays on her Federal income tax. Like many homeowners Jeannie has never heard of Yield Spread Premium and has chosen a mortgage broker recommended to her by a friend without comparison shopping rates or fees.

Jeannie’s first mistake is choosing a mortgage broker based on the recommendation of her friend. Comparison shopping is an important part of choosing a mortgage loan, regardless of Yield Spread Premium. Because you’ll be required to pay an origination fee and closing costs it is important to consider these fees when choosing a mortgage company or broker. Jeannie’s broker is charging her 2% for loan origination, because she skipped comparison shopping she doesn’t know this is too much and a reasonable fee for loan origination should not be more than 1% of her loan amount.

Jeannie’s broker tells her that she qualifies for 8.75% mortgage rate on a $300,000 30-year fixed rate mortgage. Her broker explains that the interest rate is higher because she’s taking cash back but assures her this is a good deal. Can you see the problems Jeannie’s overlooked? Aside from paying entirely too much for loan origination, Jeannie’s mortgage rate is high not because she’s taking cash back, but because her mortgage broker marked it up. The wholesale lender approved her for a 7.75 mortgage rate; however, the rate she was quoted includes a whopping 1.0% Yield Spread Premium.

Mortgage brokers mark up interest rates because the lender pays them 1.0% of the loan amount for every .25% the homeowner agrees to overpay. In Jeannie’s case she is paying $6,000 out of her own pocket for the broker’s services. Her mortgage broker helped himself to an additional 4% for a total of $18,000 for overcharging Jeannie. Your mortgage company or broker will never admit they’re doing this and it is frequently left off the Good Faith Estimate. Mortgage lenders with the exception of banks are required to disclose Yield Spread Premium on the HUD-1 statement; however, they all have clever ways of disguising or explaining away their markup.

Let me make one thing clear; Yield Spread Premium serves no other purpose than to give your mortgage broker or loan originator a commission. Occasionally, an honest broker will allow you to use Yield Spread Premium in lieu of a down payment; however, these transactions are fairly rare. While the unnecessary markup of your mortgage interest rate for the broker’s commission is perfectly legal, it is occasionally a topic of heated debate in Congress.

How Can You Avoid Yield Spread Premium?

Once you’ve learned to recognize Yield Spread Premium you can negotiate with your loan originator to avoid paying the markup. Remember that many brokers conveniently leave Yield Spread Premium off of your Good Faith Estimate; however, it will appear on lines 810-811 of the HUD-1 statement. You can negotiate with potential mortgage companies and brokers by telling them that you understand how Yield Spread Premium works. Tell them you will pay a reasonable fee for the origination of your mortgage, not more than one percent but will not accept any “lender paid” compensation with your loan.

Many brokers will argue with you or get angry when discussing their compensation; if you encounter an individual like this it’s time to move on to the next broker. It may be helpful for your negotiations to deal with the owner of the brokerage firm you are considering. Junior mortgage brokers may not have the authority to put together the deal you are looking for on your loan.

You can learn more strategies for mortgage refinancing without overpaying by checking out my free Underground Mortgage Videos. Register today with no obligation and get immediate access to my password protected membership area that your lender would rather you didn’t see.

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Mortgage Refinance Information

Robert — Tue, 07 Aug 2007 20:20:40 +0000

If you are a homeowner considering a new mortgage to refinance your existing loan, the process can be intimidating. No one wants to pay too much for anything and mortgage refinancing is no exception. You may have arrived at this site searching for “mortgage refinance information” and you’ve come to the right place. Here are several tips to help you find the perfect mortgage when refinancing.

How to Get Started Refinancing Your Mortgage

The first thing you need to do before shopping for a new lender is to take stock of your credit Your credit score largely determines the interest rate you will qualify for when refinancing, and if you have mistakes in your credit reports it will cost you. Credit reports are maintained by three separate credit reporting agencies and they’re not very good at sharing information. Make sure you go over all three reports with a fine-tooth comb and dispute any errors you find with each credit agency.

The three credit agencies responsible for maintaining your records are Equifax, Experian, and Trans Union. There are hundreds of sites out there offering free credit reports and scores if you purchase their credit monitoring service. Don’t fall for these scams; recent legislation in the United States requires each credit agency to provide you with one free copy of your credit file every year. You won’t get a credit score using this service; however, your credit score is not necessary for refinancing. If you really want to know the score you can find out from the mortgage lender. Print out all three copies of your credit report by visiting the website annualcreditreport.com.

How to Shop for a New Mortgage When Refinancing

Once you’re certain that your credit reports are error free you are ready to begin comparison shopping mortgage offers. There are several different types of mortgage lenders, and types of lenders you need to avoid. The basic lender types you need to be aware of include wholesale mortgage lenders, banks, and correspondent lenders also known as broker-banks.

Mortgage Refinance Information

The Real Estate Settlement Procedures Act, RESPA for short, is legislation in the United States that protects homeowners by requiring mortgage lenders to disclose their markup and profit margins on your loan. You may already be familiar with the Truth in Lending laws that require lenders to disclose the cost of borrowing as an Annual Percentage Rate (APR). The problem with APR is that while lenders are required to disclose this figure, there is no standardized method of calculating the percentage and every lender calculates their APR differently. This lack of standardized calculating makes the Annual Percentage Rate worthless for comparing loan offers.

The Real Estate Settlement Procedures Act makes up for the shortcomings of the Annual Percentage Rate, except that banks and broker-banks are exempt from this legislation. The Banking Lobby spent millions of dollars lobbying congress so that your bank doesn’t have to play by the same rules as other mortgage lenders. Banks are not required to disclose any of the markup they add to your mortgage interest rate; if you refinance your mortgage the bank is the only one that knows how much you’ll overpay.

As for correspondent lenders and broker-banks, these are simply banks pretending to be mortgage brokers. How can you tell if your mortgage broker is not a broker-bank? Ask if the broker closes in the name of the wholesale lender or in the name of their own company. If the answer you get is the loans are closed in their company’s name you know that you’re dealing with a broker bank. Never refinance your mortgage with a bank, broker-bank, or correspondent lender.

Mortgage Refinance Information and Yield Spread Premium

Now that you know a wholesale lender is the way to go when refinancing your mortgage, how do you find a wholesale lender to approve your loan? The average homeowner does not have access to wholesale mortgage rates so we’ll need to rely on a mortgage broker to access them for us. Refinancing your mortgage with a broker is a lot like buying a used car. Most mortgage brokers have the used car salesman mentality when selling you a mortgage loan; brokers try and explain away their markup of your mortgage interest rate as compensation paid by the lender.

This markup of your mortgage interest rate by the broker is called Yield Spread Premium and is responsible for most homeowners unknowingly overpaying when refinancing. Yield Spread Premium is simply the difference between the mortgage rate your wholesale lender approves you and the interest rate you close with after the broker marks it up. Mortgage brokers charge you Yield Spread Premium because the wholesale lender pays them a bonus of one percent of your loan amount for every quarter percent you agree to overpay. Yield Spread Premium is nothing more than an incentive for overcharging you and is a topic of heated debate in Congress.

The good news for you is that you can avoid this unnecessary markup of your mortgage interest rate. By learning how to recognize Yield Spread Premium on your Good Faith Estimate and HUD-1 statement you can avoid paying this markup. You can learn more about refinancing with a wholesale mortgage rate and avoiding Yield Spread Premium with my free mortgage video tutorial. You can register for the tutorial by clicking the DVD image at the top of this page; the videos are free and there is no obligation whatsoever.

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How to Refinance with a Wholesale Mortgage Rate

Robert — Tue, 07 Aug 2007 00:07:07 +0000

One of the best kept secrets of the mortgage industry is that your mortgage rate is marked up to give the loan originator a commission. This markup is what makes your mortgage interest rate “retail.” Most homeowners have no idea this has happened or what they can do to avoid the unnecessary markup. Here are several tips to help you recognize and avoid retail markup when refinancing your mortgage.

The mortgage marketplace consists of wholesale lenders, banks, and broker-banks. When we eliminate banks and broker-banks from our list of potential lenders due to the holes in the Real Estate Settlement Procedures Act, your ideal mortgage will come from a wholesale lender.

How does the average homeowner get a wholesale mortgage loan? Can members of the public even deal with wholesale lenders? Many homeowners think that by contacting a wholesale lender directly they’ll get a wholesale mortgage interest rate; however, when you contact a wholesale lender you are always dealing with that lender’s retail division.

Because the average homeowner does not have access to wholesale mortgage rates, we’ll have to pay a third party to get them for us. A good mortgage broker can do just this; however, the problem is that mortgage brokers are paid by commission. The loan that gives your broker the best commission is not the mortgage you want to have.

How can you refinance your home using a mortgage broker without paying too much? Homeowners who understand how mortgage brokers are compensated can negotiate with their broker to pay a reasonable origination fee without any of the originator’s markup. The difference between the mortgage rate the wholesale lender approves you and the interest rate you close with is the retail markup you want to avoid. This markup is called Yield Spread Premium and according to the Secretary of Housing and Urban Development results in American homeowners overpaying nearly sixteen billion dollars each year.

The problem with refinancing with a mortgage broker is that most brokers will not admit what they are doing with Yield Spread Premium. Questioning your mortgage broker about this markup is a lot like haggling with a used car salesman over price. Many will try and explain away this markup by telling you their compensation is paid by the lender and doesn’t come out of your pocket. This is a lie because in exchange for “lender paid” compensation you’re accepting an above market mortgage rate and higher payments for the entire duration of your loan.

If you’re upfront with potential mortgage brokers when comparison shopping you can find an honest broker that will work for a reasonable origination fee. A reasonable origination fee is one percent of your loan amount and not a penny more. Tell your potential brokers that you understand how Yield Spread Premium works and will not tolerate lender paid compensation with your loan.

How can you recognize Yield Spread Premium on your loan documents when refinancing? You can start by checking the Good Faith Estimate. The markup may or may not be listed here; however, if it’s present you’ll find it around line 810. If you can’t find Yield Spread Premium on the Good Faith Estimate your lender is required to disclose it on the HUD statement. Yield Spread Premium will always be found in the neighborhood of lines 810-811 of these documents.

You can learn more about your mortgage refinancing options, including costly pitfalls to avoid by checking out my free mortgage video toolkit. The toolkit is yours free with no obligation now or in the future. You can get it today by registering for my free Underground Mortgage Videos.

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Mortgage Refinancing for the First Time Homebuyer Part II

Robert — Wed, 01 Aug 2007 22:37:19 +0000

Continuing with my series on mortgage refinancing for the first time homebuyer I’ll pick up where I left off with mortgage terminology you need to know. If you missed part one you can catch up with Mortgage Refinancing for the First Time Homebuyer.

Advanced Mortgage Terminology

There are several terms related to key concepts you need to know before refinancing your mortgage. Among these concepts is the markup your mortgage broker adds to your interest rate to get a commission from the wholesale lender behind your loan.

Yield Spread Premium – This markup puts the “retail” in your mortgage loan. When the wholesale lender approves your application you qualify for a specific mortgage interest rate. Your broker knows this interest rate (many pretend they don’t) and marks it up because the wholesale lender pays a bonus of one percent of your loan for every quarter percent you agree to overpay. Homeowners who avoid paying Yield Spread Premium are able to refinance with a wholesale interest rate.

Service Release Premium – Similar to the Yield Spread Premium this is the markup added to your mortgage interest rate by a bank or broker-bank. Remember banks are exempt from the Real Estate Settlement Procedures Act and are not required to tell you that they’ve marked up your interest rate. Banks do this because they make the majority of their profit selling your loan on the secondary market; loans with above market interest rates make them the most money. What’s a broker bank? This is simply a bank pretending to be a mortgage broker.

Points – This is a fee you’ll be required to pay at closing. Points come in two varieties: you’ll pay origination points to the broker for their work on your loan and you may be required to pay “discount” points to the lender. Discount points are typically paid in exchange for something like a lower interest rate; however, some homeowners may find they are required to pay points for loan approval. One point is always one percent of your loan amount.

Garbage Fees – These are fees your loan originator or lender tries to “slip past” you. You’ll find your Good Faith Estimate loaded with unnecessary fees. Examples of common garbage fees are application fees, lock fees, and broker courier fees.

That’s all for mortgage terminology; in part three of this series on mortgage refinancing for the first time homebuyer I’ll cover strategies for comparison shopping for mortgage brokers that don’t unnecessarily markup your interest rate with Yield Spread Premium. You can learn more tips for refinancing without paying too much or being taken advantage of with my free mortgage refinancing toolkit. Simply click the DVD image at the top of this page for immediate access to the videos, free with no obligation.

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Mortgage Refinancing for the First Time Homebuyer Part I

Mortgage Refinancing for the First Time Homebuyer Part I

Robert — Tue, 31 Jul 2007 17:45:34 +0000

If you are a first time homebuyer considering a new mortgage loan the process of refinancing can be an intimidating proposition. No one wants to be taken advantage of by a greedy mortgage broker or pay more than they have to for the loan. Doing your homework before refinancing will help you avoid expensive refinancing pitfalls; here are several tips geared for first time homebuyers who are considering mortgage refinancing.

Mortgage Refinancing Terminology

Before you begin shopping for a new mortgage loan it is important to brush up on basic mortgage terminology. Here are several common terms you are likely to encounter and key concepts you need to know.

Mortgage Amortization – The process of paying down your loan balance over the loan’s term length; mortgage loans are front loaded with interest so in the beginning most of the payment is applied to interest. Over time more of your payment amount is applied to paying down the loan principle.

Term Length – The amount of time you have to repay your loan along with the mortgage interest rate determines your payment amount and amortization schedule. Common term lengths are 15 or 30 years; however, there are now 40 and 50 year mortgage terms available. Most homeowners considering refinancing would benefit most from a 15 year term length.

Mortgage Rate – Your interest rate represents the finance charge you are paying expressed as a percentage of your total loan amount. The mortgage rate along with term length is responsible for determining your monthly payment amount. Most homeowners don’t realize that mortgage loans are retail products and that “retail” mortgage rates include markup intended to give the loan originator a commission.

Mortgage Banker – Loan originators that close mortgage loans in their own name are considered banks and broker banks. These lenders are exempt from the Real Estate Settlement Procedures Act thanks to the Banking Lobby and are not required to disclose their profit margins or how much they’ve marked up your loan. You should never refinance your mortgage with a mortgage banker for this reason.

Mortgage Broker – These loan originators sell loans from wholesale lenders for a commission; mortgage brokers are compensated for the work they do in two ways. Your mortgage broker charges an origination fee for their service, also called origination points, and marks up your interest rate for a bonus from the lender. This markup of your mortgage rate is called Yield Spread Premium and is completely unnecessary.

Part two of this series, mortgage refinancing for first time homebuyers, will cover advanced mortgage terminology including Service Release Premium, Yield Spread Premium, and points. You can learn more about refinancing your mortgage without paying too much with my free mortgage toolkit; register today by clicking the DVD image found at the top of this page. The toolkit is free and you’re under no obligation now or in the future.

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Mortgage Help When Refinancing

Robert — Mon, 09 Jul 2007 19:10:19 +0000

If you are homeowner considering whether or not to refinance your mortgage but don’t know how to get started, there are a number of things you need to know to avoid paying too much. This article will steer you in the right direction when deciding if a new mortgage is right for your situation; however, for detailed strategies on refinancing with a wholesale mortgage rate consider registering for my free video toolkit.

Should You Refinance Your Mortgage?

If you’re seeking advice on whether or not it makes sense to refinance your mortgage you may run across the so called “two percent rule.” Basically, this rule states that you should not refinance your existing mortgage unless the interest rate on the new loan is at least two percent lower than what you’re paying now? Is this good advice? Absolutely not.

The Two Percent Rule is Rubbish

Rather than focus entirely on a loan that is “two percent lower,” it makes sense to evaluate the new mortgage on a cost per savings basis. What this means is you look at how much lower your monthly mortgage payment will be and how long it will take you to recoup your expenses from refinancing. Here’s a simple example to illustrate this point.

Suppose you’re refinancing and your new payment amount will be $100 lower; however, it’s going to cost you $3,500 to close on the new mortgage. Is this new mortgage a good idea? Divide your total cost by the amount you’re saving ($3500/$100=35) and divide by 12 months per year (35/12=2.9). This figure tells you that it will take you almost three years to recoup your expenses from refinancing before you realize any savings.

Can you live with three years to recover your expenses? The answer should depend on how long you plan on keeping your home. If you plan on moving before the three year period is up you’ll lose money by refinancing your mortgage. Lowering your monthly payment isn’t the only reason for refinancing; some homeowners refinance with a higher mortgage rate to take cash back or even pay down their mortgage faster with a shorter term length.

What About Wholesale Mortgage Rates?

Another thing to consider is how you can qualify for a wholesale mortgage rate. Many homeowners don’t realize that mortgage loans are retail products just like the appliances you purchase for your home. What makes a mortgage loan “retail” is the markup your loan originator adds to your interest rate for their commission. You’re already paying origination fees for this person’s services; however, most mortgage brokers feel their work is worth a lot more of your money. This is why they markup your mortgage interest rate.

Yield Spread Premium is a Bad Thing

Since you’re already paying a perfectly reasonable origination fee for refinancing the loan there’s no reason you can’t keep the interest rate your wholesale lender approved you. When your loan originator marks up your interest rate the difference between the rate you qualified and the mortgage rate you close with is called Yield Spread Premium. Loan originators include this markup because the wholesale lender pays them a bonus for overcharging you. For every quarter percent you agree to overpay when refinancing this person receives a bonus of one percent from the lender. Accept a mortgage that includes Yield Spread Premium and you’ll pay above market interest rates for the entire time you keep the loan.

You can Refinance Your Mortgage With Wholesale Rates

Homeowners who understand Yield Spread Premium can negotiate to avoid paying this unnecessary markup when refinancing. My free mortgage refinancing toolkit teaches strategies for refinancing your home without paying too much. You can register for this free toolkit using the links found at the bottom and top of this page.

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