Refinancing Home Mortgage, Avoid the Traps, Get Expert Advice » refinance mortgage loan

Current Mortgage Rates

Robert — Wed, 09 Jan 2008 00:56:41 +0000

If you’re in the process of refinancing your mortgage loan researching current mortgage rates won’t save you a dime unless you fully understand how mortgage rates are quoted. The rate quotes you collect on the Internet and by calling around from the yellow pages are retail quotes that include commission based markup. If you want the lowest possible mortgage rate when refinancing your home you’ll need to find wholesale mortgage rates. Here are several tips to help you research current mortgage rates from wholesale sources.

Understanding Mortgage Rate Quotes

In order to accurately quote an interest rate the mortgage lender needs sixteen pieces of information about your finances. If you’re working with a mortgage broker that quotes you mortgage rates without requesting detailed information about your finances this broker has no intention of honoring whatever mortgage rate they quote you. This is a bait and switch tactic employed by many shady brokers trying to push expensive loans with above market interest rates.

What You Need to Know About Yield Spread Premium

The second thing you need to know about current mortgage rates is that the quotes you receive include so called “retail markup.” Yield Spread Premium is a bonus paid to your mortgage company or broker for making up the wholesale rate the lender approved you. Lenders pay this commission because mortgage loans with above market rates sell like hotcakes to investors on the secondary mortgage market. Lenders can afford this incentive for overcharging you because it brings in a significant amount of profit for them.

Here’s how Yield Spread Premium works. Suppose your broker quotes you a current mortgage rate of 6.75 percent on a $250,000 fixed rate loan. Your broker charges you an origination fee of one percent or $2,500, which is a reasonable fee to pay for their services. Most homeowners would jump at a loan like this without thinking; however, it’s what you don’t know that will cost you thousands of dollars unnecessarily.

In this refinancing example, what your mortgage broke isn’t telling you is that you actually qualified for a current mortgage rate of 6.0 percent! The broker marked it up to 6.75 percent because the lender pays them an additional point (one percent of your loan amount or $2500 in this example) for every quarter percent they overcharging you. If you agree to this loan the lender pays your mortgage broker three points, or $7500 on top of the $2500 you’ve already paid them. Your mortgage broker walks away from the table with $10,000 for just a few hours work. Despite this ridiculous commission you might be wondering why you should care about this mortgage broker rebate paid by the lender.

If the money isn’t coming out of your pocket why should you care what the lender pays your broker? The problem with Yield Spread Premium doesn’t come from the fact that the lender is paying the fee, it comes from the reason this fee is being paid. Most mortgage brokers will never admit that they’ve marked up your mortgage rate to get a kickback from the lender; in fact, many become angry and defensive if you bring up the subject with them. The real problem is that your broker is marking your rate up behind your back without properly disclosing what they’re doing. Many mortgage brokers go so far as to forge rate lock confirmation documents to hide what they’ve done with your interest rate.

How to Recognize Yield Spread Premium

There are two documents you receive in the process of refinancing that disclose Yield Spread Premium. The first is your rate lock confirmation provided by the lender. This is not a document typed up by your mortgage broker “locking” your mortgage interest rate. If you get any kind of rate lock guarantee from the broker that did not come from the lender (written on your broker’s letterhead for example) then you have not locked in your mortgage rate. Make sure that you get written confirmation of the lock from the lender. This document will have any Yield Spread Premium clearly disclosed on it. If your mortgage broker stalls or refuses to provide this document from the lender you know what they’re hiding and cannot be trusted.

The second opportunity you’ll have to document Yield Spread Premium associated with your mortgage is the HUD 1 statement. Make sure you get this document at least 24 hours prior to signing your contract. It will fully disclose all of the fees and markup and needs to be gone over with a fine toothed comb before you sign anything. If Yield Spread Premium is a part of your new mortgage you will find this disclosed around lines 810-11. It may be listed as Yield Spread Premium, Mortgage Broker Rebate, or YSP paid to broker. The amount listed is in dollars; you might be shocked at the number you find there.

Fortunately you can avoid Yield Spread Premium when refinancing your home. Doing this allows you to take advantage of wholesale mortgage rates and save yourself thousands of dollars. You can learn more about finding current mortgage rates that do not include mortgage broker markup by registering for a free mortgage DVD.

If you’re a homeowner you need to watch this free DVD; it could save you thousands of dollars and countless mortgage headaches.

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Sample Good Faith Estimate

Robert — Tue, 18 Dec 2007 22:51:34 +0000

Many homeowners rely on the Good Faith Estimate when comparison shopping for a mortgage loan. While it’s true that the Good Faith Estimate gives you more information than the Annual Percentage Rate (APR) there are important limitations you need to be aware of before choosing a lender based on this document. Here are several tips to help you choose the best loan offer when refinancing your mortgage.

How do you really know which mortgage is better when refinancing? Do you choose the loan with the lowest mortgage rate regardless of closing costs and other fees? Do you go with a lender claiming to offer no fee mortgage refinancing and hope that you’re getting a competitive mortgage rate? When it comes to refinancing your home the answers to these questions are not black and white but depend on your individual financial situation. In order to make sense of your options when refinancing it helps to understand how loan originators and mortgage lenders make their money.

The first thing you need to know is that mortgage loans are sold on a commission basis. Your loan officer or broker is not interested in giving you a fair and accurate mortgage quote whatsoever; this person is only interested in selling you the loan that nets them the largest commission. To accomplish this goal the Good Faith Estimate that they give you may provide very little truth about the actual costs involved with your loan.

Wait a minute, isn’t the Good Faith Estimate required by law? Mortgage lenders are required by law to provide you a copy of the Good Faith Estimate; however, this document is merely an “estimate” given in “good faith.” We all know that estimates have a nasty habit of changing before everything is said and done. Another problem with your Good Faith Estimate is that your loan officer or broker knows that most people have no idea what wholesale mortgage rates are, or even how they work. Because this person is paid by commission it’s not in their best interest to give you a good mortgage rate. The more you pay when refinancing, the more money they stand to make.

Because your Good Faith Estimate is just an estimate, like many other salespeople, loan officers and mortgage brokers tend to “stretch the truth” in order to get a sale. I say stretch the truth; however, in most cases this means flat out lie. These people know the wholesale rate that your lender approved you; however, they mark this mortgage rate up to get a commission from the lender. This markup of your mortgage rate is frequently omitted from the Good Faith Estimate entirely.

This is why most mortgage quotes you receive are anything but accurate.

Did you know that an honest mortgage broker needs 17 pieces of information before they can quote you an accurate mortgage rate? If your loan officer or broker is not asking you for the following information they are just feeding you a line to get your application processed.

Here is the information need to accurately quote a mortgage interest rate:

1. Loan Type: Mortgage Refinance or New Purchase
2. How Much Are You Borrowing?
3. If Purchasing, Do You Have a Down Payment?
4. What is Your Credit Score?
5. What Type of Property Do You Have?
6. Will You Be Taking Cash Back?
7. What is Your Employment Status?
8. What is Your Property Address?
9. Is Anything Being Paid in Escrow?
10. What is Your Home’s Value or Purchase Price?
11. Is This Your Primary Residence?
12. What Type of Loan?
13. What Term Length?
14. How Long Have You Been Employed?
15. Do You Have a Bankruptcy?
16. Has Your Property Been Listed For Sale?
17. Are You a US citizen?

If you receive rate quotes without providing this information you are getting a bogus quote. The person quoting you has no intention of honoring the rate they are giving you. You can save yourself a lot of money and future headaches by avoiding this person all together.

The good news is that you can find honest mortgage brokers willing to work for a reasonable origination fee without marking up your mortgage rate. You can learn more about choosing the best mortgage offer for your situation when refinancing, including expensive pitfalls to avoid with a free mortgage refinancing DVD.

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How to Qualify For the Best Mortgage Rate When Refinancing Online

Robert — Tue, 08 May 2007 00:07:33 +0000

Everyone loves a good deal and qualifying for the lowest mortgage interest rate can save you a pile of cash over the life of your mortgage loan. There are however, a number of problems that come up when refinancing online and if you’re not careful result in overpaying thousands of dollars. Here are several tips to help you qualify for the best mortgage rate while avoiding costly mistakes when refinancing your mortgage.

Check Your Credit First

One of the factors your mortgage rate is based on is your credit score. Your credit score is derived from the contents of your credit reports; everyone has three reports which are maintained by the three credit agencies of Equifax, Experian, and Trans Union. The problem with these credit reports is that they are extremely prone to errors and if you don’t check before refinancing you could be overlooking a costly error. The good news is that Congress recently passed a law requiring these credit agencies to provide you a free copy of your credit report once every year. You can request your credit report by visiting the website: http://annualcreditreport.com

Read The Fine Print Before Clicking

The next costly mistake many homeowners make is neglecting to read the fine print before entering their contact information into a form. Most mortgage websites you run across have absolutely nothing to do with mortgage loans and exist only to capture user information and sell it to mortgage lenders and brokers. The problem with many of these sites is that the fee is passed on to you the unsuspecting homeowner. This fee is called a “Computerized Loan Origination Fee” and in the case of several well know mortgage sites including Lending Tree.com could cost you as much as $1,300. You can learn more about refinancing your mortgage with our free mortgage refinancing video tutorial.

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Benefits of Mortgage Refinancing

Robert — Wed, 25 Apr 2007 00:18:46 +0000

Refinancing your home mortgage gives you the opportunity to get cash and lower your monthly payment. For many people their homes are the single largest asset they own; this also makes the mortgage payment the largest expense for their budgets. There are several ways to lower your monthly payment and put cash in your pocket even if you cannot qualify for a lower interest rate.

Cash back refinancing allows you to take advantage of the equity you have built in your home. For many homeowners refinancing with cash back is a more affordable option than a second mortgage or home equity line of credit. Refinancing with cash back allows you to qualify for a lower mortgage rate because your home is secured by only one loan.

If your financial situation has changed since purchasing your home you may qualify for a better mortgage rate. Many homeowners find being promoted, taking a new job, getting married or divorced changes their qualifying ratios and improves the mortgage rate they receive. Even if your credit prevents you from qualifying for a lower mortgage rate you can still lower your payment amount by extending the term length of your loan. Term length is the amount of time you have to repay the mortgage; the most common term lengths are 15 or 30 years. There are now 40 and 50 year terms to allow the greatest amount of flexibility when refinancing with cash back.

The cash you receive from refinancing can be used for any reason; many homeowners use this money to consolidate higher interest debt. The advantage of using the money for this reason is that you gain a tax deduction for consolidating your bills. Other common uses include home repairs and renovations and education expenses. You can learn more about refinancing your mortgage while avoiding costly mistakes with our free mortgage tutorial.

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