Refinance Home Mortgage Guide

Are you considering taking out a new mortgage to refinance you existing loan and want the lowest possible mortgage rate? Did you know that wholesale mortgage are available to the average homeowner who knows how to get them and can save thousands of dollars? Here are several tips to show you how rates are quoted so that you can take advantage of wholesale mortgage rates.

Banks vs. Mortgage Brokers

There are basically two types of rate quotes out there today. There are mortgage rates quoted by banks that fund loans with their own money and rates quoted by mortgage brokers reselling loans from wholesale lenders. Both types of mortgage rates are considered “retail” mortgage rates because they include markup. Banks mark up their mortgage rates to make a profit when selling their loans to investors and mortgage brokers mark up their rate quotes to get a bonus from the lender for closing loans with above market mortgage rates.

Take out a mortgage from either one of these and you’ll pay too much just to give someone a profit. If retail mortgage rates are inflated to give someone a commission, how do you refinance your home loan without paying too much? The first thing you need to do when shopping for a mortgage is avoid your bank completely. Your bank will never negotiate with you over mortgage rates or fees because they don’t need to; banks aren’t even required by law to disclose their markup or profit margins on your loan thanks to a loophole in the Real Estate Settlement Procedures Act. With this in mind why would you give your business to someone that doesn’t have to play by the rules?

Understanding Yield Spread Premium

Now that you’ve ruled out banks for your next mortgage you need to understand how wholesale mortgage rates work. These rates are offered by wholesale lenders that do not deal with the public directly; you might think you can avoid the broker by contacting a wholesale lender yourself…the only problem is that every wholesale lender has a retail division that deals with the public. Only mortgage brokers have access to wholesale mortgage rates.

Now that you know that mortgage brokers are the only way to get wholesale mortgage rates, how can you find one that won’t rip you off? While it’s true that mortgage brokers have earned a reputation for being sleazy sales types there are honest people working in the industry…you just have to find them and learn how brokers make their money.

How Mortgage Brokers Are Paid

Brokers receive compensation from two sources in a typical mortgage transaction. When taking out a mortgage you are usually required to pay an origination fee for the broker’s services. Many brokers charge a “loan processing fee” on top of their origination fee; however, this processing fee is a garbage fee you should not agree to pay. What is a reasonable fee for loan origination? One point, or one percent of your loan amount is reasonable and fair compensation for your mortgage brokers services.

The second way that mortgage brokers receive compensation is from a commission paid by the lender. Commissions are usually paid for selling something…so you might be surprised what exactly your broker sells to earn this commission…it’s a higher mortgage rate. That’s right…your mortgage broker receives a commission from the lender for closing loans with above market mortgage rates. This commission is called Yield Spread Premium and according to the Secretary of Housing and Urban Development is responsible for homeowners in the United Sates overpaying billions of dollars for their home loans every year.

You Can Avoid Yield Spread Premium

Understanding that the rate quotes you receive include commission based markup is the first step to avoiding it. Your mortgage broker receives one percent of your loan amount for every quarter percent that you agree to overpay…tell your potential mortgage brokers that you understand how Yield Spread Premium works and you’ll be in a much better place to negotiate for a wholesale mortgage rate.

You can get started by contacting local mortgage brokers in your telephone book and tell them that you will pay a reasonable fee for loan origination but will not accept a mortgage that includes lender paid compensation or Yield Spread Premium. When negotiating with mortgage brokers you may be more likely to be successful negotiating with mortgage brokers that are self employed; representatives at a large brokerage firm may not have the authority or willingness to negotiate over Yield Spread Premium.

You can learn more about mortgage rates and refinancing your home with a wholesale loan by registering for a free video tutorial. Register today while these videos are still a free offer and you’ll learn how to avoid the retail markup and garbage fees that you hear about in the news.

If you’re in the process of refinancing your mortgage with a broker, the answer to this question is important if you want to avoid paying too much for your new home loan. The compensation your broker receives for originating your mortgage is not only based on the fee you pay but includes a kickback from the lender based on how much you agree to pay or overpay.

This lender kickback is the reason that American homeowners will overpay sixteen billion dollars for their home loans this year according to the Secretary of Housing and Urban Development. Here is an explanation of how your broker is paid and what you can do to avoid paying too much for your next mortgage loan.

Origination Points

The first method your mortgage broker is paid for their services is by charging you a fee. This fee is often called “origination points” or an “origination fee.” One point is the equivalent of one percent of your mortgage amount due at closing. How much is reasonable to pay for loan origination? In most cases you should not agree to pay the broker more than one percent for mortgage origination. Any more than one percent and your mortgage broker is taking advantage of you with this fee.

Yield Spread Premium

The second method of mortgage broker compensation that I’ll discuss today is called Yield Spread Premium. This is a fee, also called a P.O.C. charge (Paid Outside of Closing Fee) paid by the lender. You might be asking “If this fee is paid by the mortgage lender, why should I care about it.” The problem with Yield Spread Premium doesn’t come from the fact that your lender is paying the broker a fee, but why this fee is being paid in the first place. Mortgage brokers receive Yield Spread Premium as an incentive for closing loans with above market mortgage rates.

Mortgage Yield Spread Premium is a commission paid to your mortgage broker for overcharging you. That’s right…for every quarter percent you agree to overpay for your new mortgage loan the broker gets a kickback of one additional percent of your loan amount. In most cases this will double, even triple your mortgage broker’s compensation for your loan. The problem with this markup is that most mortgage brokers will never admit that they’ve marked up your mortgage rate and go great lengths to conceal what they’re doing.

How to Recognize Yield Spread Premium

The first opportunity to spot this markup of your mortgage rate is when you lock in your rate. If your mortgage broker actually requests a rate lock from the lender he or she will receive written confirmation of the lock. This rate lock from the wholesale mortgage lender will clearly display any markup of your mortgage interest rate. The problem is that many brokers type up a bogus rate lock confirmation on their own company letterhead that does not include Yield Spread Premium. This rate lock is completely worthless because it did not come from the lender and only serves to hide what the broker did to your mortgage rate.

Many brokers falsify this document and never actually lock in your mortgage rate. When the deal falls through because there was no lock the broker will find a way to switch you a more expensive mortgage product. This is a common bait-and-switch tactic used by many dishonest mortgage brokers. When you lock in your mortgage rate always insist on seeing the actual guarantee from the lender and never accept anything on your mortgage broker’s letterhead.

Yield Spread Premium on Your HUD-1

Your second opportunity to catch Yield Spread Premium on your loan is with the HUD-1 Statement. Your mortgage broker cannot falsify this document; however, you might not recognize the fee as Yield Spread Premium. If your loan includes the lender kickback it will be disclosed on lines 810-811 of the HUD-1. You might see it called “mortgage broker rebate” or “YSP paid to broker.” Whatever dollar amount you find on this line is the kickback your broker receives for overcharging you.

You Can Refinance With a Wholesale Mortgage Rate

Most homeowners don’t understand that they can refinance with a wholesale mortgage rate without paying this “retail” markup. You can find mortgage brokers willing too give you wholesale rates once you know how to negotiate the deal. If you’d like to learn more about negotiating with mortgage brokers for wholesale rates register for our free mortgage video tutorial.

If you are in the process of refinancing your mortgage you might encounter POC charges. POC stands for “Paid Outside of Closing” and is a fee paid to your mortgage broker. Why does your broker receive this money and should you be concerned about how it affects your mortgage rate? Here are several tips to help you understand POC charges and avoid being taken advantage of when refinancing your mortgage loan.

What Are Paid Outside of Closing Fees?

This charge appears on your HUD-1 statement on line 810-811. It is frequently called a mortgage broker rebate but you will also see it called Yield Spread Premium or YSP paid to broker. This fee is a commission paid by the lender for closing your loan with an above market mortgage rate. That’s right; your lender rewards the broker for overcharging you.

P.O.C. Charges = Yield Spread Premium

Yield Spread Premium is the technical term for the incentive paid to your broker for overcharging you. Your broker knows the mortgage rate you qualify based on your financial details; (it actually takes sixteen pieces of financial information form you to accurately quote a mortgage rate) however, your broker marks up the rate based on what they think you’ll pay. Imagine a used car salesman pricing a car based on how naive they think the buyer is…mortgage brokers work in much the same.

Your mortgage broker marks up your rate because the lender pays a bonus of one percent of your loan amount for every quarter percent they overcharge you. This kickback from your lender is the Yield Spread Premium and will often double or even triple your mortgage broker’s compensation for originating your loan, at your expense of course.

How Can You Avoid P.O.C. Mortgage Charges?

Fortunately homeowners who do their homework can avoid POC charges and refinance their home loans with wholesale mortgage rates while avoiding unnecessary garbage fees. Refinancing with a wholesale rate can save you thousands of dollars and RefiAdvisor’s free DVD will show you how to do just that. Register for your free refinancing DVD today, the videos are yours with no obligation.

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.