wholesale-mortage-rate

Refinancing your mortgage with a wholesale mortgage rate can save you thousands of dollars in unnecessary finance charges. By doing your homework before refinancing you will not only learn how to take advantage of the wholesale nature of mortgage interest rates, but learn how to avoid the junk fees added by your broker and lender. Here are several tips to help save you money when refinancing your home mortgage loan.

What are Wholesale Mortgage Rates?

Wholesale mortgage rates are offered exclusively by wholesale lenders. You will never get a wholesale rate form a bank or credit union and the only way to get them is to find a mortgage broker willing to let you. The problem with mortgage brokers is that one of they ways they are compensated for their services is by marking up your interest rate for a commission. This broker added markup is what makes mortgage rates “retail” and is called Yield Spread Premium.

How to Avoid Yield Spread Premium

How do you find a mortgage broker that won’t markup your mortgage interest rate? Yield Spread Premium is a significant part of most brokers’ income; eliminate this and they’re only working for the origination fee you agree to pay them. One of the biggest problems with Yield Spread Premium today is that the fee is not properly disclosed. When questioned about this markup most brokers try and explain the fee away or simply tell you that because it’s not being paid out of your pocket you shouldn’t worry about it.

Every single mortgage broker you encounter when refinancing your mortgage loan knows about Yield Spread Premium and makes an income from it; however, if you agree to a mortgage with this markup you’ll pay thousands of dollars in unnecessary finance charges. There are mortgage brokers willing to work for a reasonable origination fee without marking up your mortgage rate. Many of these brokers belong to a professional organization known as the “Upfront Mortgage Brokers Association.” Members of this professional association agree to conduct themselves adhering to certain professional and ethical standards….meaning they will not mark up your mortgage rate for a commission and hide the fact that they’re doing it.

The Upfront Mortgage Brokers Association maintains a registry of its members categorized by State on its website. You can search for a member in your state by visiting http://www.upfrontmortgagebrokers.org. If you’re living in a State that doesn’t have any members you can still take advantage of wholesale mortgage rates; however, you’ll have to do some negotiating to find the right broker.

Beware Mortgage Broker Junk Fees

In addition to Yield Spread Premium, there are a number of junk fees you’ll need to keep an eye out for when refinancing. If you find anything on your Good Faith Estimate or HUD-1 statement that resembles a “Broker Courier Fee,” “Rate Lock Fee,” Loan Processing Fee,” or “Application Fee” you should question your mortgage broker as to the validity of these charges. The “Rate Lock Fee” is a perfect example of a garbage fee invented by your mortgage broker. No mortgage lender charges a fee for locking in your interest rate; if you find a rate lock fee in your loan documents this fee has been fabricated by your broker and will go straight into their pocket.

You can learn more about refinancing your mortgage with a wholesale interest rate while avoiding ridiculous garbage fees by registering for a free mortgage DVD. Register today; you’ll get immediate access to the membership area and all of the training materials that will save you thousands of dollars on your next mortgage loan.

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

Mortgage Yield Spread Premium

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

Mortgage Broker Compensation

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

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

How Mortgage Rates Are Quoted

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

How to Avoid Yield Spread Premium

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

How to Recognize Yield Spread Premium

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

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

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

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Refinancing your mortgage loan can be a stressful time for any homeowner. No one wants to pay too much when taking out a new loan; however, most homeowners don’t fully understand how loan originators and lenders make their money. Learning how your mortgage broker is compensated for their work will not only help you avoid paying too much but show you how to refinance your home with a wholesale mortgage rate. Here are several tips to help you refinance your home with a wholesale mortgage rate.

First Things First: What is a Loan Originator?

Mortgage loans are retail products like any of the other purchase we make as consumers, and there’s always someone in the middle trying to make a buck. This “middleman” is your loan originator. This person could be a mortgage broker or a loan representative at the mortgage company arranging your loan.

Mortgage loans are funded by wholesale lenders that do not deal with the public directly. You might think that by contacting a wholesale lender you’ll get around the middleman and refinance with a wholesale interest rate; however, most wholesale lender have retail divisions and will not get a wholesale mortgage rate by tying to slip on past the middleman.

How Do You Get a Wholesale Rate?

In order to gain access to wholesale mortgage rates when refinancing you’ll need to enlist the help of a mortgage broker. There are problems you’ll need to overcome to get wholesale mortgage rates; mainly that your mortgage broker is paid by commission and a large portion of their bottom line comes from closing loans with retail mortgage rates.

What Are Retail Mortgage Rates?

Retail mortgage loans include the loan originator’s markup of your mortgage interest rate. In order to fully understand your mortgage loan you need to understand how loan originators, in this case your mortgage broker, are compensated for their work. Mortgage brokers receive their compensation from two sources. The first is by charging you an origination fee, also called origination points, for arranging your mortgage loan.

This origination fee is charged as a percentage of your mortgage amount. Remember that one “point” is one percent of your loan amount and you should never agree to pay more than one percent to the broker for loan origination. If your mortgage broker refuses to negotiate on the origination fee you should find another broker for your new mortgage loan.

The second way that your loan originator receives compensation is by marking up your mortgage interest rate which is what we are attempting to avoid. This markup of your mortgage interest rate by the loan originator is called Yield Spread Premium. According to the Secretary of Housing and Urban Development, unnecessary mortgage rate markup will cost American homeowners nearly sixteen billion dollars this year. Markup of your mortgage rate by the broker is completely unnecessary because you’re paying the broker a perfectly reasonable origination fee for their work. Not only is Yield Spread Premium unnecessary but most mortgage brokers forget to mention that they’re charging you the markup or try and explain it away. If your mortgage broker tells you not to worry about Yield Spread Premium because the fee is being paid by the lender they’re lying to you.

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