4 Mortgage Refinancing Roadblocks

If you’re considering taking advantage of today’s low refinance mortgage rates, there are several roadblocks that could prevent you from qualifying. Your home’s loan-to-value ratio and credit status all weigh heavily on your application for mortgage refinancing. Here are four costly roadblocks you’ll want to avoid when refinancing your home loan with one of the top mortgage lenders like Amerisave.

Your Mortgage Loan-to-Value Ratio

One of the most common reasons for having your mortgage refinancing application denied is not having enough home equity. If you’re underwater in your home and your loan-to-value ratio is higher than 125% it will be difficult to refinance, even under the government’s old HARP program. The new HARP 2.0 should be widely available by the first quarter of 2012, which will not have loan-to-value requirements, meaning homeowners who are underwater in their mortgages now will be able to take advantage of today’s low refinance mortgage rates.

Your Mortgage Loan is too Big

If you’re currently paying on a jumbo mortgage loan and you don’t have superb credit you may find mortgage refinancing is out of reach. If your current mortgage balance is more than $417,000 your loan is most likely categorized as jumbo. If you find your application is denied because it falls outside the conforming loan limit of $417,000, you may still be able to qualify for mortgage refinancing by paying down the balance (cash-in refinancing) below the limit. This will also lower your loan-to-value ratio and the mortgage refinancing rates that you’ll qualify.

Bad Credit Mortgage Refinancing

Another common barrier to mortgage refinancing is your credit score. One of the most common mortgage mistakes is neglecting to check your credit reports for mistakes before applying. If your credit score is less than 620 you could have problems getting your application approved. Depending on how close to 620 you are after getting approved you may find the refinance mortgage rates you’re being quoted are much higher than what lenders are advertising. If you have less than perfect credit you may find an FHA mortgage is more accessible and can get you approved for mortgage refinancing. You won’t qualify for the rates you’re seeing on television; however, your payment could still go down based on getting approved.

Lack of Documented Income

If you’re self-employed or have lost part of your income, lenders could deny your application for a new home loan. Stated income mortgages are a thing of the past which makes mortgage refinancing for the self-employed extremely difficult. If your application for mortgage refinancing is denied because of your income a co-borrower could get you approved. You might also try shopping around for another lender with different underwriting requirements.

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You can learn more about getting qualified for today’s lowest refinance mortgage rates without paying unnecessary fees by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started with today’s lowest refinance mortgage rates for your next home loan…

Today’s 30 Year Fixed Mortgage Rate

If you are considering taking advantage of this month’s low mortgage rates but don’t want to pay too much when refinancing there are several things you need to know about the rate quotes you receive. Here are several tips to help you make sense of it all and avoid paying too much when refinancing your home loan.

Today’s 30 year fixed mortgage rate is 5.5% with .5% of Yield Spread Premium.

You won’t get this rate just by calling up your bank or going to a site like Lending Tree. This is as close as a wholesale rate that is available today and you have to go through a mortgage broker to get this rate without paying excessive points or fees.

You might not be familiar with Yield Spread Premium; this is the fee that inflates your mortgage rate to create a commission for the person arranging your loan. This artificial markup of your mortgage rate can be avoided if you understand mortgage rate sheets. You can get your hands on the lenders current rate sheet by asking to see it the day you lock your rate. An honest mortgage broker will show you the lenders rate sheet; dishonest brokers make excuses telling you that the rate sheets are “proprietary” and “confidential.”

If you want a wholesale or “par” mortgage rate you just have to learn how mortgage loans are priced using the lender’s rate sheets. Keep in mind that mortgage rate sheets change on a daily basis and that you are trying to avoid the markup of your mortgage rate to create unnecessary commission.

You can learn more about avoiding this unnecessary markup of your mortgage interest rate and other junk fees by registering for the free video tutorial found on this web site.

30 Year Mortgage Rates FAQ

If you’re in the market to refinance your home mortgage loan and search for 30 year mortgage rate information on the internet, you’re bound to find a lot of confusing and conflicting information. How do you sort through the obvious crap and find honest rate information that does not include needles sales markup like the bogus mortgage rates you find on bankrate.com? Here are several tips to help you separate the wheat from the chaff when it comes to hunting for the lowest 30 year mortgage rates when refinancing your home loan.

How Are Mortgage Rates Determined?

The first thing you should know about mortgage rates is that they come in two flavors. There are the retail mortgage rates quoted to 98% of homeowners that don’t know any better and the wholesale rates offered to brokers by big mortgage companies like Countrywide. You might think you can bypass the broker and their markup by going to a wholesale lender directly; however, every lender out there has a wholesale division and a retail division. Contact lenders directly and you’ll always be dealing with their retail division and the same unnecessary markup of your mortgage rate that you’re trying to avoid.

How to Make Sense of 30 Year Mortgage Rates

Before diving into 30 year mortgage rate quotes there is some terminology you need to be familiar with. The first term I’ll cover is the discount point. Most people know about discount points…a fee you’ll pay to buy down your mortgage rate. What you might not know is that genuine discount points go directly to the wholesale lender…unlike the origination points people frequently overpay to the person arranging their loans. If you ever come across a “discount point” that is paid to the broker and not the lender this is a bogus charge that you should never agree to pay. Your broker quoted you a much higher rate then you qualified and pocketed your discount points.

Banks do the same thing…you might think your bank or credit union is getting you a good deal. What you probably don’t know is that banks are exempt from the Real Estate Settlement Procedures Act and never have to disclose how much of your rate is marked up to boost their profit margins.

The next term I need to cover is the so called “par mortgage rate.” What is a par mortgage rate? This is simply the 30 year rate that doesn’t require you to pay any discount points to get it and does not create any money for the broker. By not creating any money for the broker this means it has not been marked up for Yield Spread Premium. You can’t always get par rates when refinancing your home loan but you can come pretty close if you know where to look.

Mortgage brokers are the only way to get genuine par rates because they alone have access to the rates offered by wholesale lenders. The trick is to find a mortgage broker willing to give you access to wholesale rates without marking them up for a commission. Remember that bank mortgage rates always have markup built into them and will typically be half a point (or more) higher than rates offered by wholesale lenders. This is why you should never take out a mortgage loan from your bank or credit union.

The last term I’ll cover today is Yield Spread Premium. This is the commission created for the broker when you lock and close at a higher than par mortgage rate. You may be required to pay discount points to the lender to lower your rate; however, when it comes to creating cash for your brokers “bonus” it’s paid because you’re agreeing to a higher 30 year mortgage rate than you need to. Avoiding Yield Spread Premium needs to be your priority when refinancing your home loan.

Here are several examples how 30 year mortgage rates are quoted on rate sheets from a mortgage broker and a bank so that you understand how the broker and the lender profit from your loan

30 Year Mortgage Rates Offered By a Broker

6.25% ( Includes .25% Broker Markup) 1% Bonus to Your Broker
6.125% (Includes .125% Broker Markup) .5% Bonus to Your Broker
6.0% Par Mortgage Rate – Zero Bonus Paid or Discount Points Required
5.875% (Includes .5% Discount) Paid Directly to the Lender
5.75% (Includes 1.% Discount) Paid Directly to the Lender

When your mortgage rate is quoted higher than par a cash bonus is created for the broker. Rate sheets usually show this cash with parenthesis; however, your rate sheet might show this with a minus sign. When your 30 year mortgage rate is quoted below par, discount points are required to secure this rate for your loan.

The Same 30 Year Mortgage Rates From Your Bank

6.75% (.25% Markup) Goes to Your Bank (Service Release Premium)
6.625% (.125% Markup) Goes to Your Bank (Service Release Premium)
6.5% Par Mortgage Rate With Zero Markup
6.375% (.125% Discount) Discount Point Paid to the Bank
6.25% (.25% Discount) Discount Point Paid to the Bank

One thing to note here is that Yield Spread Premium only applies to mortgage brokers. When the markup is done by your bank this is pure profit and goes by the name Service Release Premium. As you can see in the previous example the so called “par rate” for the bank is .5% higher than the one offered by a broker. This is why you’ll never get a wholesale rate from your bank or credit union.

How do you find a mortgage broker willing to refinance your mortgage with a par 30 year mortgage rate without charging you garbage fees? Check out my free video tutorial series on this site and you’ll discover how to do this with an easy to follow step-by-step mortgage refinancing video guide.

Mortgage Loan Approval Is Becoming More Difficult

home mortgage points Mortgage Loan Approval Is Becoming More DifficultIt is becoming increasingly more difficult to get approved for a mortgage loan even with good credit. Mortgage lenders have been tightening standards for approval due to the credit crunch of late…and the end of the crisis is not yet in sight. Here are several tips to help make sure you qualify if you’re in the market to refinance your home mortgage loan in today’s topsy-turvy mortgage market.

What Mortgage Lenders Consider

Mortgages lenders look at a number of factors to not only approve your loan but assign you a mortgage rate. The top aspects lenders look at are your past credit history and the amount of cash you have; however, the single most important factor is your credit worthiness. If your credit score is below 700 right now your only option could be one of the FHA programs. While FHA loans are great the downside for you is that you will be required to purchase Private Mortgage Insurance (PMI). If you’re not familiar with PMI, this insurance protects the lender and the government from losses if you default on the loan.

The amount you’ll pay for PMI premiums depends on your credit history and can add hundreds of dollars to your monthly payment. While this is certainly a downside of Private Mortgage Insurance, if paying the premiums allows you to keep your home it’s certainly worthwhile.

How to Improve Your Credit Rating

To build a strong credit score you can start by paying down the balances of your credit cards so that you have not used more than half of your available credit. Suppose for example that you have a $5,000 limit on your cards…it is best not to exceed $2,500 in available credit. If you have used more than 50% of your available credit shifting the balances to other cards with less than half of the available credit used could improve your credit rating.

Pay More Than The Minimum Payment

Making the minimum payment every month will not help your financial situation. Set your own payment at least 25% higher than what you are due each month. This will not only improve your credit score but help pay down your balances as paying the card minimum will never get you anywhere. Don’t pay off your balances entirely…you want to show that you can use credit responsibly.

You can learn more about qualifying for a better mortgage and improving your credit score by registering for my free video tutorial.

Getting the Lowest Mortgage Rate Possible

home loan Getting the Lowest Mortgage Rate Possible
When it comes to getting your home loan, nearly everyone wants to get the lowest mortgage rate possible. The question is how to do this…the answer doesn’t have to be as confusing as it might seem.

The first step to getting the best mortgage rates possible is for you to understand how mortgage rates are determined and where you stand based on your credit history and credit score.

If you currently have a mortgage loan, have you been hearing rates other people qualified for or have looked in the newspaper and seen low rates that make yours look terrible? Are you wondering how some people can secure a lower rate? Perhaps you are looking to get a mortgage and you want to have the lowest rate possible but you don’t know how to do it.

Your first step is to learn all that you can about mortgage rates and how the rate is determined. One of the most important factors in your mortgage rate is your credit rating. Most loan companies and banks will use your FICO score (FICO is short for the Fair Isaac Corporation) to determine what rates you will be charged and if you will even be approved for the loan.

However, this doesn’t mean that you have to have perfect credit to get a good mortgage rate. The truth of the matter is the better your FICO score, the better your chance of a good mortgage rate but there are other ways you can try to lower your rates even if you have less than perfect credit.

First, it is essential you pay any and all of your existing bills on time and as soon as possible. Avoiding delayed payments will help add points to your credit score. It can also be helpful to pay more than the minimum amount on long term balances. Paying over the amount due shows that you want to pay off your debts and also helps improve your score over time. You should also avoid applying for new credit which can lower your score with each new credit check. These simple strategies combined can help you get the lowest mortgage rates possible for you.