Mortgage Refinance Guide

If you are considering refinancing your mortgage with a nationwide home mortgage loan company, there are several things you need to know about the junk fees you’ll be paying. Nationwide mortgage companies like Countrywide are notorious for overcharging and taking advantage of their borrowers. Here are several tips to help you avoid paying too much for your next mortgage loan.

Nationwide Home Mortgage Loan Junk Fees

If you’re using the Internet for your mortgage search you’ll need to watch out for “Computerized Loan Origination Fees.” These are fees passed on to you by a third party website such as Lending Tree for simply filling out a form on their website. This fee is frequently buried in the fine print and if you’re not careful you could be out of pocket for as much as $1300 unnecessarily. How does mortgage scam work?

Computerized loan origination fees are charged by websites engaged in lead generation. Lending Tree is one of the most notorious lead generation sites and had a class action law suite pending from 2006 for unfair business practices. These websites like lending tree actually have nothing to do with mortgage loans. They put up a fancy website, spend a small fortune advertising on television collecting your personal information, and sell it to the highest bidder.

While lead generation isn’t necessarily bad, in Lending Tree’s case it’s what they’re not telling you that will cost you money. Lending Tree claims there is no fee for using their service; however, if you read the fine print on their Licenses and Disclosure page you’ll find out that if you take out a mortgage from one of the lenders in their “network” you will have a fee on your Good Faith Estimate of up to $1300. This “Computerized Loan Origination Fee” is paid by the lender out of your pocket to Lending Tree for their part in “arranging” your mortgage.

On one hand you have Lending Tree claiming there is no fee for using their website; however, you’ll have to pay the lender this unnecessary fee because you filled out a form on Lending Tree’s website. This “little white lie” could cost you $1300! This is but one reason why choosing a nationwide home mortgage loan company might not be a smart move.

Beware Yield Spread Premium

Another thing you have to watch out for when taking out a mortgage loan is Yield Spread Premium (YSP). Never heard of it before? Most homeowners haven’t and what’s more according to the Secretary of Housing and Urban Development Yield Spread Premium will cost American homeowners $16 billion dollars this year alone. So what is YSP?

Simply put, Yield Spread Premium is the markup of your mortgage rate for a commission. This markup is what makes mortgage rates “retail.” When your mortgage broker quotes you an interest rate they base a proper quote on sixteen pieces of you financial information, including their commission based markup. Your mortgage broker knows the rate you qualify from the wholesale lender; however, they mark this mortgage rate up because the lender pays them a bonus for overcharging you. The broker receives one percent of your mortgage amount for every quarter percent they overcharge you. This bonus is paid in addition to the perfectly reasonable origination fee you are paying for their services. If you agree to pay this unnecessary markup you are effectively doubling, even tripling your mortgage broker’s commission for your loan.

The good news is that garbage fees and Yield Spread Premium can be avoided when taking out a mortgage loan. You can refinance your home with a wholesale mortgage rate without paying too much at closing. To learn more about avoiding YSP and other garbage fees charged by Nationwide Home Mortgage Loan Companies, register for a free mortgage DVD. Request yours today, the DVD is free with no obligation.

If you are considering using a mortgage broker to refinance your home mortgage loan, there are several things you need to know before choosing a broker. Mortgage brokers are very similar to used car salesmen as the more you pay the higher their commission will be. Mortgage lenders actually pay an incentive to brokers for overcharging you. This incentive is called Yield Spread Premium and avoiding this markup needs to be your number one priority when refinancing. Here are the basics you need to know when choosing the right mortgage broker to refinance your home.

Yield Spread Premium: What You Need to Know

Mortgage brokers are compensated for the work by charging you an “origination fee” for the loan and by a premium paid by the wholesale lender. This premium is paid when the broker marks up the interest rate that your lender approved you. The “Yield Spread Premium” is the difference between the wholesale rate you were approved and the interest rate your broker tells you that you qualified. This markup is what makes mortgage rates retail; fortunately, homeowners who understand how this works can avoid paying it and qualify for wholesale mortgage rates.

Many mortgage brokers tell you not to worry about the premium because the fee is being paid by the lender. The problem with this reasoning is not the fact that the lender is paying the fee, but why they’re paying it in the first place. This fee is a reward to the broker because you’ve agreed to refinance with an above market mortgage rate. Your broker receives a commission of one percent of your loan amount for every .25% you agree to overpay. Most brokers omit their markup from your Good Faith Estimate so you’ll have to pay close attention to your HUD-1 statement. Look for this unnecessary markup to be disclosed around line 810 of the HUD-1.

How to Find a Broker Without Paying Yield Spread Premium

This commission based markup of your mortgage interest rate can be avoided. If you’re up-front with potential mortgage brokers and let them know that you understand how Yield Spread Premium works you can refinance your mortgage with a wholesale mortgage rate. When comparison shopping for a broker you might have the best luck working with one that is self-employed. Large brokerage house may not give their mortgage brokers the authority to make you a deal that doesn’t include Yield Spread Premium. Whenever possible try and deal with the owner of the business and let them know up front that you will not accept any mortgage that includes lender paid compensation for a higher interest rate.

You can learn more about your mortgage refinancing options, including expensive pitfalls to avoid by registering for a free video toolkit.

If you are in the process of taking out a new mortgage to purchase your home or refinance your existing mortgage, the fees you pay can make the difference between getting a great mortgage loan and paying too much. The fees on your Good Faith Estimate are often cryptic and many brokers leave the most important loan processing fees out completely. Here are several tips to help you make sense of mortgage fees and avoid paying too much for your next mortgage loan.

Your Good Faith Estimate is Just an Estimate

The most important thing to understand about the Good Faith Estimate is that it is just an estimate. Mortgage brokers frequently lowball loan processing fees to make their loan offers appear more attractive. Brokers also frequently leave their markup of your mortgage rate off the Good Faith Estimate completely. If the Good Faith Estimate is unreliable, what can you use to get a good idea of what your loan processing fees are?

The good news is that the HUD-1 will accurately reflect all of your loan processing fees and markup. The problem is that you will not typically receive this document until 24 hours prior to closing. Once you have reconciled the loan processing fees and markup on the Good Faith Estimate with your HUD-1 statement you will need to have a heart-to-heart discussion with your mortgage broker about any discrepancies you find.

Beware Mortgage Junk Fees

There are a number of junk fees on your Good Faith Estimate and HUD-1 statement that you need to be aware of. One of the most notorious junk fees is the so called “rate lock fee.” Mortgage brokers charge this fee for “locking in” your mortgage interest rate. What you need to know about rate lock fees is that lenders do not charge your mortgage broker a fee for locking your rate. This fee is entirely invented by your broker to line their pockets at your expense and is complete garbage.

Other junk fees you need to keep an eye out for include broker courier fees, application fees, and loan processing fees. Many mortgage brokers try and justify their loan processing fees by telling you that they use a “professional loan processor” to prepare your file and charge you as much as $500 for the service. What do you get for your $500? Your “professional loan processor” will print out the required documents and mail the application and disclosure statements to you for signature, and then FedEx the entire folder to the underwriter for loan approval. Total “processor” time necessary, one hour maybe two…Is this paperwork shuffling worth a $500 fee? I don’t think so…do you?

Watch Out For Yield Spread Premium

If you’re not already familiar with Yield Spread Premium it is the markup your mortgage broker adds to your mortgage interest rate to get a commission from the lender. Many brokers leave this markup of your Good Faith Estimate altogether and then cleverly disguise it on your HUD-1 statement. When questioned about Yield Spread Premium many mortgage brokers get defensive, even angry. Your mortgage broker might tell you that because the fee is not coming out of your pocket you shouldn’t worry about it.

The problem with Yield Spread Premium is not the fact the lender is paying the broker a fee, but the reason the lender is paying your broker a fee. Your broker receives this fee because you’ve agreed to pay an above market mortgage rate and for no other reason. In fact, Yield Spread Premium is the number one reason people overpay for their mortgage loans and according to the HUD Secretary is responsible for overcharging homeowners in the United States nearly sixteen billion dollars each year.

Avoiding Yield Spread Premium needs to be your number one priority when applying for a mortgage loan. If you’d like to receive more advice about taking out a mortgage without paying too much, register for the free mortgage refinancing blueprint available from this website.

Very few homeowners understand how mortgage brokers are compensated for their work. As a result, nearly everyone overpays in one form or another…mortgage brokers are very similar to used car salesman. Pressure sales tactics and improper disclosure of fees and markup are common tactics employed by mortgage brokers…so much that the Secretary of Housing and Urban development was quoted saying that homeowners in the United States will overpay nearly sixteen billion dollars this year because of this abuse. Here are several tips to help you avoid being taken advantage of by understanding how mortgage brokers are compensated.

Loan Origination Fees

The first method of mortgage broker compensation that we’ll discuss today are loan origination fees. Origination fees are commonly referred to as “Origination Points.” Remember that a “point” is one percent of your mortgage amount due at closing. Origination points are different from the discount points you pay to your lender in exchange for a lower rate because this fee goes directly into your mortgage broker’s pocket.

What is a reasonable origination fee? Many homeowners are shocked to find origination fees as high as three and four percent on their Good Faith Estimate…and rightly so. A reasonable fee to pay your mortgage broker for their part in arranging your loan, regardless of a new home purchase or refinancing your existing mortgage is one percent of your loan amount. (Not a penny more)

Beware Junk Fees

Mortgage brokers are notorious for padding your Good Faith Estimate with junk fees. Application fees, processing fees, broker courier fees, rate lock fees are utter garbage that you should simply refuse to pay. Take the “rate lock fee” for example. Wholesale lenders never charge the broker a fee for locking in a mortgage rate. The fact that many brokers invent rate lock fees is ludicrous…the same thing goes for the “loan processing fee.” Many brokers claim that they use “professional loan processors” to prepare your folder for the underwriter and charge as much as $500 for the service.

If I was paid $500 an hour for printing out loan documents prepared by computer and Fedexing your file to the underwriter we wouldn’t be having this discussion today. When reviewing the Good Faith Estimate with your mortgage broker tell them that if they want your business they need to drop the junk fees and give you a fair deal.

Yield Spread Premium

The ultimate sleazy trick employed by mortgage brokers today is including Yield Spread Premium (YSP) in your mortgage interest rate. Yield Spread Premium is the markup that makes mortgage rates “retail.” Your broker qualifies you for a specific interest rate from a wholesale mortgage lender. This person will then markup up that interest rate because the lender pays them a bonus for loans closes with above market interest rates. Think your mortgage broker will tell you that they’ve done this to your mortgage rate? Think again…in fact many brokers become defensive and angry when questioned about Yield Spread Premium.

How does your mortgage broker cover up the fact that they’ve marked up your mortgage interest rate? Most brokers omit this markup from the Good Faith Estimate entirely. After all, it’s just an estimate given in “good faith.” Your broker’s not really breaking the law by leaving it off the Good Faith Estimate; however, they have no choice but to list this markup on the HUD-1 statement. The problem with the HUD-1 statement is that brokers have clever ways of justifying and disguising the markup.

What does Yield Spread Premium look like? If the markup is listed on your Good Faith Estimate it will be found around lines 810-811. You’ll notice that the HUD-1 statement looks very much like a Good Faith Estimate but will a more complete disclosure of fees. If Yield Spread Premium is present you will see it listed as YSP, Yield Spread Premium paid to broker, or some variation of Lender Paid Fees. Your mortgage broker may tell you not to worry about this fee because it’s being paid by the lender…as long as it’s not coming out of your pocket what do you care, right?

Wrong! The reason you should care and get downright angry about Yield Spread Premium is because of the reason your lender is paying the fee. Lenders pay one point (remember a point is one percent of your mortgage) for every .25% your mortgage broker overcharges you. This is in addition to the point that you’re already paying for loan origination. Because of this markup you get stuck paying hundreds of dollars in unnecessary mortgage interest and your broker walks away with double, often triple the compensation for their work.

Now the question you’re asking becomes “How Can I Avoid Paying This Ridiculous Markup of My Mortgage Interest Rate?” The answer is simple: Homeowners who learn how to recognize this unnecessary markup of their mortgage interest rate can negotiate with potential mortgage brokers to avoid paying the markup.

If you would like to learn more about taking out a mortgage without paying too much to the broker, register for this free Mortgage Refinancing Blueprint.

If you are considering refinancing with a mortgage broker, negotiating with your broker is an important part of choosing the right loan for your situation. Here are several tips to help you negotiate with mortgage brokers and avoid overpaying for your next mortgage.

Before choosing a mortgage broker you need to make sure that person is really a mortgage broker and not a broker-bank. What’s a broker-bank? Mortgage broker-banks are simply banks pretending to be mortgage brokers. Banks do this to exploit loopholes in the Real Estate Settlement Procedures Act (RESPA) that requires mortgage lenders to disclose all of the markup and fees associated with their loans. Banks and broker-banks are exempt from RESPA laws and do not have to tell you how much they mark up your mortgage interest rate. Never take out a mortgage from your bank or from a broker bank.

How can you tell if your mortgage broker is a broker and not a broker-bank? Ask them if they close on your mortgage in the name of the wholesale lender. If they close on your mortgage in the name of their own company, they are a broker-bank and you should scratch that mortgage broker off your list. Once you’ve determined your mortgage broker is not a broker-bank, tell your mortgage broker you will pay 1-1.5% of your mortgage amount for origination fees, a reasonable processing fee, (your processing fee should not be more than $400) and all necessary third party fees but zero markup of your mortgage interest rate. This markup of the mortgage rate by your mortgage broker is called Yield Spread Premium and the broker does this to get a bonus from the wholesale mortgage lender.

If your mortgage broker agrees to these terms, ask this person to see the lock sheet from the wholesale mortgage lender and compare it to the rate lock given to you by the mortgage broker. If you find a mortgage that meets your needs and does not include Yield Spread Premium you’ve avoided 90% of the mistakes homeowners make when attempting to negotiate with mortgage brokers. You can learn more about your mortgage options including costly mistakes to avoid by registering for our free, six part mortgage refinancing video tutorial.