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.

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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.

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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.

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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.

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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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).

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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.

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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.

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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.

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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.

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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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