Are you thinking about refinancing your home loan online? The Internet makes refinancing fast and hassle free; however, it is very easy to pay too much during the process. There are hidden fees and markup of your mortgage rate charged every time you refinance home loans online; unless you know how to avoid paying them. Here are several tips to help you refinance home loans online without paying too much in the process.
Refinancing Your Mortgage Online
The Internet makes it easy to contact lenders and collect a variety of mortgage quotes when refinancing. The problem with the mortgage quotes you collect on the Internet is that 99% of them have been marked up to create an “extra” commission for the mortgage company or broker arranging your loan. This “extra” commission is in addition to the perfectly reasonable loan origination fee (not more than one percent of your home loan) you’re already paying them for their services. (maybe even overpaying)
How does this markup work? Lenders reward mortgage companies and brokers that lock and close home loans with higher than necessary interest rates with a commission known as Yield Spread Premium. There are also a number of completely unnecessary junk fees they’ll attach to your loan such as “Computerized Loan Origination Fees” and “Mortgage Broker Courier Fees.” The good news is that once you learn to recognize this markup of your mortgage interest rate you can avoid paying it when refinancing, even avoid junk fees at closing.
How to Recognize Yield Spread Premium
The easiest way to avoid Yield Spread Premium is to be upfront with your mortgage brokers. Tell your broker that you understand how Yield Spread Premium works and will not accept any home loan that includes this commission based markup. Many mortgage brokers become defensive or angry when you ask them about Yield Spread Premium. If your mortgage broker does this you should simply find someone else to arrange the home loan for you.
Just because your broker agrees not to take Yield Spread Premium on your loan doesn’t mean you should take their word for it. Mortgage brokers have clever ways of hiding their markup in your loan documents and if you don’t know what to look for you could miss it. The first opportunity you’ll have to catch Yield Spread Premium on your home loan is when you lock in your mortgage rate. Make sure that you get written rate lock confirmation from the lender. Never accept verbal rate lock confirmation or accept a written rate lock on your mortgage broker’s letterhead. If your written rate lock didn’t come from the lender you haven’t locked your mortgage rate. Dishonest mortgage brokers often pass off bogus rate lock confirmation written on their own letterhead to hide their markup of your mortgage rate…don’t fall for this trick.
How to Get the Lowest Mortgage
Your last opportunity to catch Yield Spread Premium before closing is on the HUD-1 settlement statement. Make sure you get a copy of the HUD-1 before signing your loan contract and pay close attention to section 800 of this document. Yield Spread Premium will be disclosed as a fee paid to your broker listed in section 800 of the HUD-1. Other junk fees such as computerized loan origination fees and mortgage broker courier fees will also be listed on the HUD-1. You should question any “broker” fee listed on the HUD-1 other than your loan origination fee with a healthy dose of skepticism, including any loan processing fees.
How to Find the Best Mortgage Broker
If you’re having trouble finding a mortgage broker willing to work for a flat one percent origination fee without taking Yield Spread Premium, here are several tips to help you locate one. Your best bet in locating a mortgage broker that will not charge you Yield Spread Premium is to look for one that is self-employed. These brokers, especially ones working out of their homes do not have the overhead of larger brokerage firms and will be much more likely to negotiate the home loan you are looking for.
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