Getting the lowest mortgage rates can be tricky, especially if you choose the wrong person to arrange your next home loan. Pick the wrong person and you’ll not only get too high a mortgage rate but you’ll pay mortgage junk fees in the process. Here are several tips to help you find the right person to arrange your next home loan while avoiding unnecessary markup and mortgage junk fees.
Mortgage Rate Secrets
When it comes to mortgage loans what you don’t know will hurt you. Did you know the average homeowner in the United States overpays $100 or more per month for their home loan? This because the person arranging the loan pulled a fast one with the mortgage rate… In fact, the Secretary of Housing and Urban Development stated this mortgage trick will cost homeowners in the United Sates sixteen billion dollars this year alone. Don’t want to be a victim of this statistic you say? You don’t have to be…and I’ve got the tools for you to ensure that you’re not.
Where to Get a Mortgage Loan
Before we get into where to find the perfect mortgage loan I should talk about where not to get a home loan.
1. Stay away from your bank. Banks are exempt from the Real Estate Settlement Procedures Act and are not required to disclose any of their markup or profit margins to you. If you take out a home loan from your bank you’ll never know how much you’ve overpaid because the bank is simply not required to tell you. Ignorance is bliss right? Only if you like throwing your money away…
2. Stay away from faceless Internet Mortgage lenders. We’ve all seen the commercials on TV; however, spend a few minutes reading the fine print from the Lending Trees of the world and you’ll quickly discover just how bad their junk fees are.
3. Avoid mortgage brokers that charge Yield Spread Premium and other junk fees. I’ll get into Yield Spread Premium in a moment as this is the hidden junk that causes most people to overpay.
So where is the best place to get a mortgage loan? The best home loan around isn’t going to be from a place, it’s from a person. That’s right, getting the best deal for your mortgage isn’t about shopping around for the best loan offer… it’s all about shopping for the right person to arrange your home loan.
Who Is the Right Person to Arrange Your Mortgage?
The right person isn’t a mortgage banker or the hotshot broker in the yellow pages with a company hummer. These people will be unwilling or unable to negotiate the type of mortgage deal that will get you the lowest possible mortgage rate. What you’ll need to find is a small-time, self-employed mortgage broker willing to work for a flat fee without marking up your mortgage rate for an “extra” commission. What is this extra commission that drives up most people’s mortgage payments unnecessarily wasting thousands of dollars? In the mortgage business the fee created when your mortgage rate is called “Yield Spread Premium.”
Yield Spread Premium Definition
Yield Spread Premium is an amount of money created when the person arranging your loan gets you to pay an unnecessarily high mortgage rate. The lender and your mortgage broker both know the interest rate you qualify; however, the broker overcharges you to collect this fee. Many mortgage brokers today are motivated solely by greed and line their pockets at their customer’s expense. The good news is that you can avoid this unnecessary markup of your interest rate and mortgage broker tricks saving thousands of dollars. It doesn’t matter if you’re refinancing your existing mortgage or taking out a purchase loan…these mortgage tactics work for both.
How does this mortgage rate markup work? Mortgage lenders reward brokers for loans that close with higher than necessary mortgage rates with a commission of 1% for every .25% they overcharge you. This is on top of the origination fee that they’re already charging you, double dipping their fee if you will. What you’ll need to avoid this is find the right mortgage broker instead of shopping for a loan offer. When you’re shopping for a mortgage broker tell them that you understand how Yield Spread Premium works and will not accept any mortgage that includes this markup. Offer to pay this person a flat, one percent mortgage origination fee for a home loan without Yield Spread Premium attached. There are honest mortgage brokers willing to work for one percent, you just have to find one.
What About Mortgage Junk Fees?
Just because you find a mortgage broker willing to work for a one percent origination fee doesn’t mean you shouldn’t be concerned about junk fees. There are a number of junk fees that mortgage brokers slip into their loans just to boost their fees. You should carefully review your HUD-1 statement for junk fees prior to closing. Don’t rely on the Good Faith Estimate you receive as this document is little more than marketing propaganda used to lure homeowners into overpriced mortgage loans. When it comes to fees your HUD-1 Settlement Statement is the final word.
If you find anything on your HUD-1 that resembles a mortgage broker courier fee or rate lock fee you should question consider taking your home loan somewhere else. These fees, especially rate lock fees are pure junk used by dishonest mortgage brokers to boost their profit at your expense. If you are working with a broker that charges a rate lock fee you can be certain you’re dealing with a dishonest mortgage broker that cannot be trusted…period.
You can learn more about avoiding junk fees and getting the lowest possible mortgage rate for your next home loan by registering for my free Underground Mortgage Videos. Here’s a sample of what you’ll learn when you sign up:
Register today, these mortgage refinancing videos are yours free with no obligation.
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.
