The Internet is an excellent resource for comparing mortgage rates. The only problem with online rate quotes is that unless you find mortgage companies and brokers that will not charge you Yield Spread Premium, the quotes you receive have been marked up unnecessarily. Here are several tips to help you compare mortgage rate quotes without overpaying for your next mortgage.
If you are a homeowner with good credit and are not borrowing more than $415,000 to refinance your mortgage ($415,000 is the 2007 conforming loan limit set by Fannie Mae and Freddie Mac), your primary consideration for the new loan should be the interest rate and fees you pay. This means you need to find rate quotes that do not include Yield Spread Premium.
If you’re not already familiar with Yield Spread Premium, this is your loan originator’s markup of your mortgage rate for a commission. Your loan representative marks up your interest rate to get a bonus from the wholesale lender in addition to the fees you are already paying for loan origination. If you accept a mortgage that includes Yield Spread Premium you are effectively paying double for the new loan; not to mention thousands of dollars in unnecessary mortgage interest.
When comparison shopping for a new mortgage, remember that rate quotes by themselves are basically worthless. You also need to consider fees and closing costs listed on the Good Faith Estimate before making a decision. The Good Faith Estimate is an itemized list of all fees associated with a mortgage that the lender is required to provide you within three days of receiving your application. This three day rule doesn’t help you when you’re comparison shopping; however, most mortgage companies will provide you a Good Faith Estimate before you submit an application if you ask for it.
Watch out for anything on the Good Faith Estimate that resembles an application fee, broker courier fee, or lock fee. These are mortgage garbage fees you should simply refuse to pay. Tell your loan representative that you understand how Yield Spread Premium works and will not accept any loan offer that includes this markup. You can learn more about refinancing your mortgage while avoiding expensive homeowner mistakes like Yield Spread Premium with our free mortgage video tutorial.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
