Home Mortgage Refinancing Guide

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

What Mortgage Lenders Consider

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

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

How to Improve Your Credit Rating

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

Pay More Than The Minimum Payment

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

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

Refinancing your mortgage loan with the wrong broker will cost you thousands of dollars and in today’s economy could even result in the loss of your home.

Remember that mortgage brokers are salespeople and come in multiple shapes in sizes with their own personalities. How can you tell if your mortgage broker is a dud? Here are several tips to help you find the right person to refinance your home mortgage.

Beware Endless Chatter

Like any other salesperson the mortgage broker that talks but never listens to you is the wrong person for the job. Dishonest mortgage brokers use never ending banter to distract you from something they may be hiding in your loan contract. Trust your instincts…if your mortgage broker comes across as a sleazy sales type that talks your ear of endlessly without letting you get a word in you should probably find another broker.

Sloppy With Paperwork & Deadlines

Being punctual is essential when it comes to your mortgage loan. If your mortgage broker is sloppy with paperwork it could cost you money. If your mortgage broker tells they will call you at a certain time and does not keep their appointments consider this a bad sign and move on to another mortgage broker.

Inexperience Costs You

When shopping for a mortgage broker it’s always a good idea only to work with those who have ten years of experience or more. If your broker has to consult the underwriter or someone else in the office before responding to your questions consider it a lack of experience and move on. Don’t worry about hurting anyone’s feelings…you’re not looking to make friends, you want a better mortgage right?

Good Mortgage Brokers Aren’t Hard to Find

The ideal mortgage broker is one that has a minimum of ten years experience, is self employed, and does not employ a sales staff. Finding a mortgage broker that fits this profile working from home is even better. Why? Mortgage brokers with fancy offices and sales staffs have to pay for their plush offices and the salaries of their sales staff.

This means they are going to be much less likely to negotiate fees and things like Yield Spread Premium on your loan. Remember, you’re paying for that fancy office and the hummer parked outside. You can learn more about refinancing your mortgage without paying too much today by registering for our free video tutorial.

There may come a time throughout the life of your home loan in which you decide to refinance or would like to know how to refinance. The more you know about refinancing your mortgage the better off you will be. Here are the steps you will need to take when you are ready to refinance your home loan to make sure it is the right thing for you.

Step One: Do Your Research

Learn as much about refinancing as possible before you begin the process. Basically, when you refinance a home loan it means that you will be receiving a new home loan that will be used to pay off the original mortgage that you owe. This can benefit you in several ways such as lowering your interest rates which will reduce the overall amount that you owe and it can also reduce your monthly payments. In some cases it can even shorten the length of the loan. You should also learn about your credit history because it will be a factor in determining the interest rates you can receive. The better your credit the lower rates you can expect.

Step Two: Compare Mortgage Lenders

Before you choose a lender to use for refinancing you need to take some time to compare different ones to see what they have to offer. You will find that there is a big difference between lenders and comparing these differences will help you make an informed decision. Here are a few of the things that you need to take into consideration. Look at the interest rates and fees that you will be charged for using that specific lender. Carefully consider the terms of the mortgage. Keep in mind that it may be possible for your current lender to offer you a better deal than anyone else so don’t exclude them when comparing lenders.

Step Three: Use Caution

Before you refinance your home loan you need to make sure that you will actually be benefiting yourself in the end. Go over all the details and make sure you know exactly what you will be paying before you accept the new loan. If you will not be saving any money when all is said and done, then it would be pointless to take out the new loan.

Refinancing your home loan can be very beneficial provided you follow the steps above to ensure you receive the best offer possible. You may even be able to borrow a little extra with the new loan that will allow you to do some remodeling or consolidate your higher interest debts and gain a tax deduction.

If you’re considering refinancing your home loan with a mortgage broker there are several things you need to know in order to avoid paying too much. Mortgage brokers can be an excellent resource for finding loan offers you wouldn’t have access to on your own; however, unless you know how to negotiate with mortgage brokers you’ll be refinancing with a mortgage rate that includes commission based markup and unnecessary junk fees.

Here are several tips to help you find the right mortgage broker allowing you to refinance with wholesale mortgage rates while avoiding garbage fees.

What Are Retail Mortgage Rates

The biggest mortgage broker secret today is also the sleaziest. Mortgage brokers take wholesale rates and markup them up to get a commission from the lenders. They do this even though you’re paying them an origination fee for finding you a loan…lining their pockets at your expense. Here’s an example how this commission based markup works.

Suppose you’re refinancing a $250,000 mortgage loan for 30 years at 6.75%. Your mortgage broker charges you an origination fee of 1.25% which means you’ll have to pay $3,125 at closing for your broker’s services. What your mortgage broker isn’t telling you is that you actually qualified for a 6.0% mortgage rate from the lender that approved your application and they’ve secretly marked your rate up to 6.75%. Most mortgage brokers never admit that they’re doing this with your interest rate and if you were to question the markup they would try and explain it away.

Many mortgage brokers go so far as to fabricate rate lock confirmation from the lender to hide what they’re doing with your mortgage rate. If you were to see the actual rate lock from the lender this markup of your interest rate is clearly disclosed. The final opportunity you have to catch your mortgage broker’s dirty little secret is on the HUD-1 statement. The fee your broker receives for overcharging you is disclosed around lines 810-811 of this document; you will often see it called mortgage broker rebate, YSP paid to mortgage broker or Yield Spread Premium.

In the previous example he mortgage broker receives 1% of your loan amount for every quarter percent that they secretly overcharge you. This mortgage broker walked away with $7,500 on top of the $3,125 you’re already paying for their services. That’s $10,625 for a few hours of dishonest work. Don’t be a victim of these mortgage broker secrets…by doing your homework you can avoid this unnecessary markup of your mortgage interest rate and garbage fees like loan processing fees and rate lock fees to name just to name a couple.

You can learn more about refinancing your mortgage with a wholesale rate by registering for a free mortgage video tutorial. The videos will show you not only how to avoid paying too much with unnecessary junk fees and markup of your mortgage interest rate, but how to tune up your credit score before you apply for a new mortgage and get the lowest possible interest rate. Register today while this is still a free offer.

Your monthly mortgage payment amount is determined by the amount you borrowed and the mortgage you qualified. Mortgage rates are currently at their lowest levels since 2005; if your financial situation has changed since you purchased your home you could significantly lower your payment with a lower mortgage rate. Here are several tips to help you decide if this is the right time to refinance your home loan.

Wholesale Mortgages Rates

If you are a homeowner with good credit the current wholesale mortgage rate is 5.5 percent. Refinancing your mortgage with wholesale rates can be tricky as most homeowners don’t understand how mortgage rates are quoted. The rate quotes your receive online and from your mortgage broker are actually “retail” mortgage rates and can be as much as a half percent to a full percent higher than the going wholesale rate.

What Makes Mortgage Rates Retail?

Mortgage brokers are basically commission based salespeople. Your broker is compensated for their work in two ways; you will pay an origination fee for their services and the lender pays a “rebate” to the broker for closing your loan. A reasonable fee to pay for loan origination is one point, or one percent of your loan amount. If you can get away paying less than one percent you’re doing well, but what about the broker rebate paid by the lender? Should you be concerned about this fee since it’s not coming out of your pocket?

The short answer is yes. You should be very concerned about this fee not because the lender is paying it, but why the lender is paying. Broker rebates are paid for one reason and one reason only. This rebate is a reward for closing loans with above market mortgage rates. That’s right; your mortgage broker receives a bonus form the lender for overcharging you. In the industry this “reward” is called Yield Spread Premium and could wind up costing you thousands of dollars in unnecessary finance charges.

The Mortgage Industry Has a Dirty Little Secret…

Here’s an example to illustrate how the broker rebate works. Suppose you refinance your home for $300,000 and your broker tells you that you qualify for a 6 percent mortgage rate. You agree to pay one point for loan origination which is a perfectly reasonable fee to pay the mortgage broker. This fee amounts to $3,000 paid out of your pocket at closing. But what is your mortgage broker not telling you?

Today’s wholesale mortgage rate is 5.5%. If you agree to a 6.0% mortgage rate that means the loan has .5% Yield Spread Premium. Mortgage lenders pay one point for every quarter percent the broker overcharges you. In this example the broker receives an additional $6,000 on top of the $3,000 you’re already paying. That’s $9,000 for a few hours work and that’s only half the problem.

The real stink of Yield Spread Premium comes form the fact the most brokers will never admit what they’re doing with your mortgage rate and never properly disclose this fee. Most mortgage brokers leave it off the Good Faith Estimate entirety, give you a bogus rate lock confirmation instead of the one from your lender and if you happen to catch the rebate on your HUD-1 statement explain the fee away by saying “It’s not coming out of your pocket, don’t worry about it.

What’s Wrong With Yield Spread Premium?

By accepting an above market mortgage rate your payments will be higher than they need be and you’ll be wasting money on unnecessary finance charges. Because this fee is never properly disclosed your mortgage broker is all but lying to you about the loan and taking money out of your pocket. Is this the mortgage you thought you were getting when the broker quoted you a six percent interest rate?

The good news is that you can avoid mortgage broker rebates when refinancing. There are honest mortgage brokers out there that will work for the origination fee alone without marking up your mortgage rate; you just have to find one. A good place to start is the Upfront Mortgage Brokers Association; members of this association agree to conduct their business following certain ethical and professional standards. Not every State has members however; if your State does not you can still find honest mortgage brokers by doing your homework and shopping for the right broker.

You can learn more about refinancing your mortgage with a wholesale mortgage rate by registering for a free DVD. Register today, this mortgage DVD is yours free with no obligation.