Mortgage Refinance Guide

If you’re in the process of refinancing your home you can save yourself thousands of dollars by getting a wholesale mortgage rate. The problem for many homeowners is that that they don’t know how get wholesale rates; most mortgage brokers would simply laugh at you if you told them “give me a wholesale mortgage rate.” Here are several tips to help you negotiate with mortgage brokers and find the right person to arrange your home loan.

Not Every Mortgage Broker Will Negotiate

The problem with negotiating with a broker is that not all brokers are in a position where they can negotiate. If you’re speaking to a salesperson from a large brokerage house they will probably not have the authority to negotiate for the terms you’re looking for. The reason for this is that the owner of the brokerage will be splitting the commission with the salesperson meaning you’ll always pay more than you have to with a mortgage broker in this situation.

This is also true of mortgage brokers that employ their own salespeople. Suppose for instance, you’re charged a one percent origination fee for your home loan. Your broker pockets this fee and will most often pay the salesperson from the Yield Spread Premium on your loan. Loan offers that don’t have origination fees are making up the difference often by doubling the amount of Yield Spread Premium on your loan. If you want a wholesale mortgage rate and plan on keeping your home for a long time you’ll need to avoid Yield Spread Premium completely.

If you’re not already familiar with this retail markup of your mortgage rate for a commission here is an article about the basics of Yield Spread Premium.

Self Employed Mortgage Brokers Are Best

It’s always better to work with the owner of the company you are dealing with. A self-employed mortgage broker that has been working for ten years or longer is the perfect candidate for arranging your mortgage. Working out of their home? Even better. One reason why working with a self employed mortgage broker is better is that they simply don’t have the overhead expenses that come with posh offices and support staff. A self employed mortgage broker is more likely to negotiate with you and agree to your terms for the loan.

What To Ask For When Refinancing

If you plan on keeping your home for the duration you’ll want to pay a one percent origination fee without any Yield Spread Premium on the loan. Some mortgage brokers argue that paying the origination fee will only raise your closing costs; however, agreeing to a higher mortgage rate that includes Yield Premium will result in a mortgage payment that could be as much hundreds of dollars higher per month than it has to be.

You can learn more about finding the right mortgage broker to arrange your loan by registering for my free video tutorial. Register today and you’ll learn how to refinance with a wholesale mortgage rate without paying garbage fees to your lender or broker.

You might be asking yourself “What the heck is a Broker Bank?” Most people have never heard of broker banks…in fact, prior to 1999 they didn’t exist. Here are the basics that every homeowner needs to know about Mortgage Broker Banks when refinancing a home loan.

Before the Real Estate Settlement Procedures Act was amended to require mortgage brokers to disclose their profit margins made from locking and closing mortgages with above market rates, banks were losing a large portion of their profits to mortgage brokers.

The Banking Lobby decided to do something about this and spent millions of dollars lobbying Congress to have the disclosure laws changed; their goal was to gain an unfair advantage in the marketplace by requiring mortgage brokers to disclose the commission based markup of your mortgage interest rate.

What is a Broker Bank?

The banking lobby succeeded in having the law changed and of course banks are exempt from this new disclosure legislation. This change in the Real Estate Settlement Procedures Act sent mortgage brokers scrambling to take advantage of the same loophole exploited by banks. All a mortgage broker had to do was fund their own loans like a bank which would allow them to close in the name of their company instead of a wholesale lender…hence the Broker Bank was born.

The only reason a mortgage company or broker would choose to operate as a broker bank is to hide their markup of your mortgage interest rate. If you refinance your home with a bank or broker bank you’ll never know mortgage rate you could have had with an honest lender.

How to Recognize a Broker Bank

Banks are easy to spot; however, when it comes to recognizing broker banks things can get a little fuzzy unless you know what to look for. First of all, broker banks love to brag about doing their loans “in house.” The best way to find out if your mortgage broker is acting as a broker bank is to ask if they close in the name of the wholesale lender. If the answer you get is “no” and they are closing in their own companies name then you know with 100% certainty that they are a broker bank and cannot be trusted with your mortgage.

Beware Bank Wholesale Divisions

One of my readers emailed me that she was working with a broker for a loan through Wachovia. Her broker convinced her that this was okay because the lender wasn’t Wachovia directly, but their “wholesale division” known as Vertice. The problem with this logic is that the bank controls their wholesale division and the rate sheets provided to mortgage brokers from Vertice include the markup. On top of this the banks salespeople do not have the authority to negotiate for lower rates. Banks have enormous overhead they must cover and rely on overcharging to make a profit. This is true of every bank originated mortgage loan on the market today.

Do you think my reader paid too much for her mortgage refinancing with Wachovia? Absolutely…she never signed up for the free mortgage videos I offer and will pay thousands of dollars too much. It always amazes me why people don’t take advantage of a free product that will not only save them thousands of dollars in unnecessary finance charges but show them how to avoid garbage fees as well. Similar products sell for hundreds of dollars and don’t offer half as much insider mortgage scoop that I give away free every day. I guess the old saying is true…you can lead a horse (in some cases a goat) to water, but you can’t make her drink.

If you’d like to learn how to refinance your mortgage with a wholesale rate without paying lender and broker garbage fees, register for my free video tutorial.

If you’re in the process of shopping for a lender to refinance an existing mortgage or for a loan to purchase your home, there are several things you need to know about prospective mortgage lenders. Doing a bit of homework before your refinance will not only help you avoid crooked nationwide lending companies but could save you thousands of dollars. Here are several tips to help you find the perfect lender for your next home loan.

There are literally hundreds of mortgage lenders and banks out there offering mortgage loans. How do you choose the best lender for your situation?

Before I can answer this question it is important to understand the difference between retail and wholesale mortgage rates. Nearly all of the quotes you receive from banks and mortgage companies are retail quotes that include commission based markup. How can you get a wholesale mortgage rate? Many people think that if they contact a wholesale lender directly they can cut out the middleman and the retail quote. This simply isn’t the case…even if you contact a wholesale lender yourself you’ll be dealing with the retail division of that lender and will not get a wholesale rate. The only way to get a wholesale rate is by finding the right mortgage broker to originate your home loan.

How to Shop for a Mortgage Loan

Mortgage shopping means collecting quotes from dozens of lenders and comparing rates, points, and closing costs right? If the quotes you collected on the Internet and from local mortgage companies and brokers were correct this would be the right way to shop for a home loan. The problem is the quotes you receive are not accurate. Most mortgage companies will tell you exactly what you want to hear to get your business…and then switch you to a loan that charges what they want you to pay. How do mortgage lenders do this and get away with it?

Good Faith Estimates Are Not Your Friends

The Good Faith Estimate your banker or broker gives you is just that…it’s an estimate. Given in “good faith”…but what does that really mean? Absolutely nothing…shopping for a mortgage is a lot like dating. Mortgage companies always put their best foot forward to make a good impression and get you to go on that second date. Once they’ve got you that’s when you find out about all the excess baggage in fees and interest rate markup…often too late. What is this hidden interest rate markup? If you spent any amount of time reading the mortgage articles posted on this website you’ll have heard of Yield Spread Premium.

Hidden Commission Fees

Yield Spread Premium creates a hidden commission for your broker. Don’t think you can avoid this hidden commission going with a bank or credit union. While you won’t be paying for Yield Spread Premium with a bank mortgage loan you still have the same markup…only with a different name. When your mortgage rate is inflated by a bank or credit union the hidden commission is called Service Release Premium. Only in this case there’s nothing you can do about it due to a loophole in the Real Estate Settlement Procedures Act. The only way to get a wholesale mortgage rate is with an honest mortgage broker.

You Can Take Out a Mortgage and Pay Only 1%

Paying one percent of your loan amount is a perfectly reasonable fee for the work your mortgage broker does on your loan. There is no reason whatsoever to tolerate any markup of your mortgage rate for Yield Spread Premium to go in your mortgage broker’s pocket. So what is Yield Spread Premium? Simply put, it is a percentage of your loan amount created when the mortgage broker locks and closes your home loan with an above market interest rate. Here’s an example to illustrate the concept.

Suppose your existing home loan is for $300,000. Your mortgage broker closes your new loan at 6.25%. What you don’t know is the lender behind your loan approved you for 5.5%. The spread between what you got and what you could have had creates a hidden bonus for your broker of 3% of your loan amount. This means your broker pockets $9,000 in addition to any of the fees they charge you for loan origination, processing, or other garbage fees found on your Good Faith Estimate. Where does this $9,000 come from? The broker receives a kickback of 1% for every .25% you agree to overpay. In the previous example you overpaid .75% (6.25%-5.5%=.75%) which created 3% of Yield Spread Premium.

What does this mean for you? On a 30 year mortgage at 6.25% your payment will be $1,850 when it could have been $1700. You’re throwing away $150 per month which is $1800 a year just because your mortgage broker lied to you for a commission. I don’t know how you feel about it but $1800 is a lot of money. The good news today is that you can avoid this unnecessary markup of your mortgage rate if you find the right broker to build a relationship with. Do this and you’ll have a win-win relationship for both of you…you get someone to originate your loans without ripping you off and your broker gets a loyal customer for life…clearly a win-win situation for both of you.

How to Find an Honest Mortgage Broker

There are hard-working mortgage professionals out there that don’t abuse Yield Spread Premium…you just need to know how to find them. By finding the right self-employed mortgage broker to originate your loan you’ll avoid garbage fees and commission based markup of your interest rate. You can learn more about finding the right mortgage broker for the job and avoiding all of the unnecessary crap thrown at you by dishonest mortgage companies by registering for my free mortgage video tutorial.

If you are considering refinancing your mortgage you might wonder what valid reasons are for taking out a new home loan. There are a number of different reasons people choose to refinance their mortgage loans; with mortgage rates at the lowest levels since 2004, now is the perfect time for you to get a new home loan. Here are several tips to help you decide if mortgage refinancing is right for you and to show you how to avoid paying too much for the new loan.

Why Refinance Your Mortgage?

The most common reason for refinancing is to secure a lower monthly payment. In order to lower your payment you first have to qualify for a lower mortgage rate…how much lower depends on your situation.

You may have heard of the so called “two percent rule” of mortgage refinancing; this rule says you should not refinance unless the new mortgage rate is two percent lower than your current rate.

This “two percent rule” is complete rubbish…you can save yourself a lot of money refinancing with a rate less than two percent…it just depends on how long it takes to recoup your expenses form refinancing. You can easily determine how long it will take to recoup your expenses if you know the new payment amount. Simply divide your total closing costs including any penalty you have to pay for early repayment by the difference between the new payment and the old payment amounts. This will tell you the number of months it will take you to recoup your expenses from refinancing your home loan and realize a savings.

Lower Payments Are Not The Only Reason

There are cases where it makes sense to refinance with a higher monthly payment. If your goal is to build equity in your home at a faster rate you could refinance with a shorter term length in addition to qualifying for a lower mortgage rate. While this would get you a higher payment you would be paying less to the lender in finance charges and would build equity in your home at a much faster rate.

Other reasons for refinancing to a higher monthly payment include borrowing against your home equity. Refinancing your home loan and taking cash back is generally cheaper than taking out a home equity loan or line of credit. Since you’re borrowing against the equity in your home you can use the cash for any reason and have the advantage of making one monthly payment instead of two with a home equity loan.

Watch Out For Garbage Fees

Once you’ve decided that mortgage refinancing makes sense you’ll need to be careful to avoid garbage fees and commission based markup of your mortgage rate. Taking out a mortgage is a lot like buying a used car…if you’re not careful it’s easy to overpay thousands of dollars for your new mortgage loan. You can learn more about your mortgage refinancing options including costly pitfalls to avoid by registering for our free mortgage video tutorial.

If you’re refinancing your home loan in the State of California and are looking for a wholesale mortgage lender, there are several things you need to know about wholesale interest rates. Most homeowners do not understand how mortgage rates are quoted and overpay thousands of dollars every time they take out a home loan. Here are several tips to help you find a California wholesale lender without paying markup and unnecessary junk fees.

How Are Mortgage Rates Quoted?

In order to accurately quote a mortgage rate the lender needs to have sixteen factors of financial information from you. If you receive rate quotes without providing detailed financial information I can tell you whoever gave you the quote has no intention of honoring it. This is a common tactic of shady mortgage brokers practicing bait-and-switch scams. They’ll promise you the moon and when the deal falls through they switch you to a more expensive mortgage loan that brings them the largest commission.

Once you provide your financial details and get a quote you should know that you have a “retail” mortgage rate quote. Mortgage companies and brokers that deal with the public quote rates that include commission based markup. You might think that going directly to a wholesale lender will cut out the middleman and get you wholesale interest rates; however, these wholesale lenders all have retail divisions that deal with the public and only offer their best rates to mortgage companies and brokers.

What is Commission Based Markup?

When you take out a home loan from a mortgage broker you will pay an origination fee for the broker’s services. This fee ranges from less than one percent to as much as three or four percent. (One percent is a reasonable amount to pay the broker…any more and you’re being taken advantage of) The problem with commission based markup is that you’re already paying for the broker’s work. What your mortgage broker isn’t going to tell you (and frequently becomes angry or defensive if you question him or her about it) is that they are marking up your interest rate to get a kickback from the lender.

See wholesale lenders know that mortgages that have above market interest rates bring them huge profits when they sell your home loan to investors, so they reward mortgage companies and brokers for closing loans with above market rates. The higher your mortgage rate the higher the reward for the person closing your home loan. What does this mean for you? A higher mortgage rate means higher monthly payments and money that you’re throwing away on unnecessary finance charges. You’re already paying the broker for their services; on top of your fee they’re helping themselves to your money in the form of a higher mortgage rate.

This commission based markup of your mortgage rate is called Yield Spread Premium and will easily double, often triple the compensation your mortgage broker receives for your loan. Sounds sleazy right? Here’s an example to show you just how sleazy Yield Spread Premium is. Suppose you are refinancing a $300,000 home loan at 6.5% and the mortgage broker charges you 1.5% for loan origination. That means you have to come up with $4,500 at closing to pay the mortgage broker. What you’re broker isn’t telling you is that you actually qualified for 6.0% from the lender and that they’ve marked it up because the lender pays them 1% of your loan amount for every .25% you overpay.

In this example the broker receives an additional 2% or $6,000 on top of the $4,500 you’re already paying for their services. That’s $10,500 for a few hours work and you get stuck paying an above market interest rate.

Finding California Wholesale Lenders

The good news for you today if you’re refinancing in California or any other State for that matter, is that there are ways to refinance your home without paying Yield Spread Premium. (Or lender junk fees) You can find honest mortgage brokers willing to work for reasonable origination fees if you know how to shop for a mortgage loan.

You can learn more about comparison shopping for California Wholesale Lenders when refinancing and avoiding unnecessary garbage fees by registering for a free mortgage video tutorial. Register today; the videos are free and can save you thousands of dollars on your next mortgage loan.