Refinancing Home Loan

When the Federal Reserve lowers short term interest rates mortgage refinancing becomes a hot topic for many homeowners. If you are considering refinancing your mortgage but are concerned about paying too much there are several things you need to know about shopping for a new home loan. Here are several tips to help you refinance your home loan without paying garbage fees or unnecessary markup of your mortgage rate.

Banks vs. Mortgage Brokers

The first thing you need to know is that you should never take out a mortgage from a bank or broker bank. Banks are exempt from the Real Estate Settlement Procedures Act and are not required to disclose their profit margins or markup of your mortgage rate. If you refinance your home loan with a bank you’ll never get a wholesale mortgage rate or anything close to it. The same is true of broker banks.

home mortgage loan Refinancing Home LoanWhat’s a broker bank? This is basically a mortgage company or broker operating as a bank. Many mortgage companies and brokers changed their businesses when the law changed in order to take advantage of the same loopholes as banks. The only way to recognize if your mortgage company or broker is acting as a broker bank is to ask if they close on the mortgage in the name of the company or the wholesale lender. If the answer you get is that they close in their own company’s name you are dealing broker bank and cannot refinance with wholesale rates.

Mortgage Broker Secrets

The biggest secret your mortgage broker is keeping from you is called Yield Spread Premium. This is the industry term for the commission your mortgage broker receives for marking up your mortgage interest rate. Brokers do this because lenders pay one percent of you loan amount for every .25 percent they overcharge you…something they do without telling you. There are ways to recognize this markup of your mortgage rate, and it is possible to avoid paying it when refinancing.

How to Recognize Yield Spread Premium

Your first opportunity to spot Yield Spread premium is on the Good Faith Estimate; however, many brokers intentionally omit it from this document. If you can get your hands on the rate lock confirmation from the lender, Yield Spread Premium is clearly disclosed; however, many brokers falsify rate lock confirmation to omit this markup. The last chance you’ll have to spot this markup is on the HUD-1 statement. If Yield Spread Premium is included with your loan it will be listed on lines 810 or 811 of this document. You may see it called a “broker rebate” or YSP paid to broker but this dollar amount is the kickback your broker receives for overcharging you.

Yield Spread Premium Can Be Avoided

Homeowners who learn to recognize Yield Spread Premium can negotiate with potential mortgage brokers to avoid paying it. You can learn more about refinancing your home loan without paying too much by registering for our free mortgage tutorial.

Mortgage Loan Assistance

paid outside of closing Mortgage Loan AssistanceIf you are in the process of taking out a mortgage to purchase your home or refinance an existing mortgage, doing your homework can save you thousands of dollars by avoiding expensive pitfalls in the loan process. If you’re looking for mortgage loan assistance for your new loan the free videos on this website can help you find a mortgage with a wholesale interest rate. Here are the basics you need to know to avoid being ripped off with your next mortgage loan.

What is a Wholesale Mortgage Rate?

Mortgage rates come in two varieties. There are wholesale rates which are typically not offered to members of the public and the retail mortgage rates offered by mortgage companies, internet sites, and mortgage brokers. If wholesale rates are not offered to the public, how do you go about getting one? In order to get a wholesale mortgage rate for loan you’ll need to enlist the help of a mortgage broker and understand how this person is compensated. Mortgage brokers have access to wholesale rates directly from the lenders. Your broker typically marks up this rate to get a commission from the lender; most often without telling you.

Why Mortgage Brokers Inflate Interest Rates

When a mortgage broker quotes you an interest rate the quote you are getting is for a retail mortgage rate. Yield Spread Premium is the markup your mortgage broker adds to your rate to get a commission from the wholesale lender behind your loan. The problem with this markup is that you are already paying for the broker’s services with an origination fee. Agreeing to a mortgage that includes Yield Spread Premium will double, even triple the compensation that your mortgage broker receives unnecessarily.

Mortgage Loan Assistance

The best advice I can give you about your mortgage is to avoid paying Yield Spread Premium on your loan. The origination fee you pay is more than ample compensation for the broker’s work. Some brokers try and justify Yield Spread Premium by saying that you’d have to pay more points on the loan if the fee wasn’t being paid; however, this is simply not true. Yield Spread Premium exists as an incentive for mortgage brokers to overcharge you and anyone that tells you differently is only thinking about their wallet.

Mortgage Refinancing Video Tutorial

The free videos available from this website walk you through the entire process of taking out a new purchase mortgage or refinancing your existing loan. Topics covered include understand how the mortgage markets work, improving your credit before applying, mortgage rate secrets, and a step-guide-step guide to comparison shopping, applying, and closing on the loan. Register for the videos today, access is free with no obligation.