Typical Loan Origination Fee

when refinancing makes sense Typical Loan Origination FeeIf you’re in the process of taking out a new home mortgage loan you might have questions pertaining to loan origination fees. What is a typical loan origination fee and what about mortgage brokers that claim the lender is paying this fee for you? There are no free lunches when it comes to mortgages and loans with “no origination fees” always come with a catch. Here is what you need to know about the typical loan origination fee in order to avoid paying too much for your next home mortgage loan.

Your Typical Loan Origination Fee

What’s a fair amount to pay for mortgage loan origination? First of all, you should understand what the loan origination fees are for. Your mortgage broker or loan company charges you a fee for their part in arranging your home loan known as a loan origination fee. Typical loan origination fees vary by broker and mortgage company; however, a one percent origination fee is a reasonable amount to pay for arranging your home loan. Many mortgage companies and brokers overcharge loan origination fees so you’ll want to comparison shop until you find someone willing to work for a flat one percent.

What About Hidden Origination Fees?

There is a hidden fee you need to know about before taking out a mortgage loan. Many mortgage companies charge you an origination fee, (often overcharging you) and then take a hidden fee paid by the lender on top of it. This hidden fee drives up your mortgage payment unnecessarily and often doubles even triples the compensation your broker receives for their work. You get stuck paying as much as a hundred dollars or more per month more than you need to and the broker doubles their take at your expense.

What is this hidden fee the Secretary of Housing and Urban Development blames for overcharging homeowners in the United States to the tune of sixteen billion dollars this year alone? I am of course talking about Yield Spread Premium. Don’t worry if you’ve never heard of Yield Spread Premium (YSP) as most homeowners have not.

The simplest definition of Yield Spread Premium is a fee paid by mortgage lenders for home loans that are locked and closed with higher than necessary mortgage rates. Your mortgage lender approves you for a specific mortgage rate based on your credit and financial details; however, the mortgage company or broker almost always quotes you a much higher rate to get this extra commission from the lender. As a result your mortgage payment is much higher than it need be and the reason most people overpay for their mortgage loans.

If you want the lowest possible mortgage rate for your home you’ll need to avoid this unnecessary markup for a hidden origination fee. You don’t have to be a financial guru to find someone willing to work for a one percent loan origination fee without including Yield Spread Premium on your mortgage; you simply need to find the right person for the job.

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Bad Credit Mortgage Interest Rate

If you’ve been thinking about refinancing your home mortgage loan but don’t think you’ll be able to take advantage of today’s low rates because of your credit, you might be surprised to learn how accessible low mortgage rates are.

While your credit score plays a factor in qualifying for a mortgage loan, getting the lowest mortgage rate and payment depends not on your credit history but how much about mortgage loans you know.

It’s true… learn the ropes and you’ll find that you qualify for a better mortgage rate than that snobbish neighbor on your block with their perfect credit rating. Here’s what you need to know in order to refinance your mortgage getting the lowest possible payment with less than ideal credit.

Just How Bad is Bad Credit?

There are limitations of course to how bad your credit can be in order to qualify for a traditional mortgage loan; assuming your credit score is not a barrier to loan approval your actual credit score is a non-issue. It doesn’t matter if your credit score is 650 or 750, once you’re approved your credit score has nothing to do with the mortgage rate you receive. What should you do if you cannot qualify for a traditional mortgage loan because of your credit? There are lenders that specialize in this type of home loan; even if you are unable to qualify for a traditional mortgage loan the strategies taught on this website can still save you thousands of dollars. What you need to know is that responsibility for setting your mortgage rate does not lie with the lender. So, if the mortgage lender doesn’t set your interest rate upon loan approval, who does?

Mortgage Interest Rates 101

It might surprise you to learn that the person responsible for determining your mortgage interest rate and ultimately whether or not you get a good deal or overpay is none other than your old friend the mortgage broker. You see, mortgage brokers work from daily lender rate sheets. These mortgage rate sheets quote interest rates for the same loans, with and without points. Keep in mind that a point is a fee you’ll pay to qualify for a specific mortgage rate and not all mortgage rates require paying points. In fact, some mortgage rate quotes actually create points for the broker, which is something you’ll want to avoid when refinancing. Remember that one point is 1.0% of your loan amount and the sweet spot that you’re looking for with your new mortgage is an interest rate that does not require cash out of your pocket or creates an “extra” commission for the person arranging your home loan.

The mortgage rate you’ll receive when refinancing your home loan depends on how well you can negotiate when shopping for the right person to arrange the mortgage. Negotiation not your thing? Don’t worry… it’s a lot easier than you think as long as you’re upfront with the mortgage brokers you contact. I’ve put together a very simple screening process you’ll learn about shortly to weed out mortgage brokers that take lender kickbacks and charge you junk fees.

If you take one thing away from this article in needs to be that the mortgage rate you qualify for has little to do with your credit score and is determined by the person you choose to arrange your home loan…

Because the person you choose to arrange your mortgage is paid by commission you can bet the home loan that gets them the biggest commission is not going to be the right home loan for your situation. So how does this commission I’m talking about affect your mortgage rate? Remember that I told you that lender rate sheets quote mortgage rates that either require or create points? The sweet spot in the middle is the mortgage rate that neither costs nor creates points for the broker. When you pay points in exchange for a lower mortgage rate the fee you’re paying is called a “discount point.” Conversely, when you unknowingly accept a higher than necessary mortgage rate when refinancing, points are created for the broker in the form of an unnecessary commission known as Yield Spread Premium.

Notice that I said “higher than necessary” mortgage rate creating an “unnecessary” commission for the broker. This isn’t to say that the mortgage broker should not be paid for their work; on the contrary, this is what the loan origination fee is for. The problem is that many mortgage brokers feel they are entitled not only to your origination fee, but also to Yield Spread Premium on the loan driving up your mortgage payment unnecessarily. (By the way you shouldn’t pay more than one percent for the loan origination fee.)

Shouldn’t You Just Avoid Refinancing With a Mortgage Broker?

At this point you might be saying to yourself “I already knew that mortgage brokers are shady… I’ll just avoid all this crap and refinance with my bank.” It makes sense right? Banks are direct lenders… refinance with a direct lender and you not only cut out the middleman but their commission also. The problem is that not only does your bank and every other “direct lender” under the sun take the same markup of your mortgage rate but thanks to a convenient loophole in disclosure laws your bank is not required to disclose their markup or profit margin on your loan. Banks simply do not give their customers par mortgage rates… ever. You cannot avoid working with a mortgage broker if you want the lowest possible rate and payment, bad credit or not.

It is possible to refinance your home with a par mortgage rate without a stellar credit rating and you don’t have to be a financial guru to pull it off. You can refinance your home without paying points or Yield Spread Premium on the loan, get the lowest payment and look like a hero to your family. All you need to do is find the right mortgage broker for the job.

You can learn more about a bad credit mortgage interest rate and refinancing your home loan without paying points or mortgage junk fees by registering for my Underground Mortgage Videos. Register today and you’ll get immediate access to the mortgage videos online without downloading anything to your computer.

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Here’s a sample of what you’ll get when you register… The refinancing techniques in these free mortgage videos save the average homeowner $1000 per year.

Mortgage Annual Percentage Rate

Are you in the market to refinance your existing mortgage loan? Do you find terms like APR, Mortgage Rate, and Points confusing and misleading?

You’re not alone…most homeowners never fully understand what the Annual Percentage Rate is or how points affect their mortgage rate and closing costs. Here are several tips to help demystify mortgage loans and save you thousands of dollars when refinancing your home loan.

Annual Percentage Rate

You’ll see it listed as APR for short…but what is Annual Percentage Rate really? The Truth in Lending Act of 1974 requires lenders to disclose the costs of a loan to allow homeowners to compare loan offers. This law was supposed to make it easy to make apples to apples comparisons of any mortgage offer you’re considering; however, the problem you’ll find when comparing one apple to another is that your lender could just as easily hand you a mango that they’ve designated an apple. Here’s why.

Annual Percentage Rate is an expression of the total costs you’ll pay every year as a percentage of the loan amount. The law requires mortgage lenders to tell you what the APR is; however, there is no standard for lenders to calculate the APR or requirements that all fees and charges be listed. This means that every lender you encounter when refinancing your mortgage will have a different way of calculating the APR and may only include the lenders fees, not your broker’s origination fees and markup.

APR is a Marketing Tool

These days the Annual Percentage Rate is largely a marketing tool designed to get you into the office or on the phone to generate a lead. Most of the numbers you see are purely fictional and should not be relied on when choosing a mortgage loan. How should you compare loan offers? Shopping for a mortgage correctly isn’t a matter of comparing loan offers like you would compare a bottle of Ketchup at the grocery store. Instead of trying to find the right lender or loan, concentrate your efforts on finding the right person to arrange you mortgage and the rest will fall into place.

How to Find the Right Mortgage Broker

Finding the right mortgage broker when refinancing your home loan is easier than you think. If you look in the phone book you’ll find a lot of fancy mortgage brokers with posh offices and company hummers decked out with their company logos. Think these folks are the right people to originate your loan? Think again. Posh offices, expensive sales staff, receptionists, cappuccino makers, and company hummers cost a lot of money. These mortgage brokers have huge overhead costs to keep their businesses afloat and have minimum targets they need to bring in on each loan.

This means because of their overhead costs these mortgage brokers will never be willing or able to negotiate their origination fees or Yield Spread Premium on your loan. It’s your money but these broker’s think they’re entitled to it…someone’s gotta make that hummer payment right?

How do you find the right mortgage broker to refinance your home loan? Look for a small, self-employed mortgage broker that has been in the business for ten years or longer. Does this broker work out of their home? Even better…less overhead means these mortgage brokers will be willing and able to negotiate for your business.

You can learn more about finding the right broker to refinance your home loan without paying commission based markup of your mortgage rate or junk fees by registering for my Underground Mortgage Videos available on this website.

Refi Problems You Need to Avoid

annual percentage rate Refi Problems You Need to AvoidIf you are considering refinancing your home mortgage loan you might be concerned about refi problems that can arise during the closing process. There are a number of junk fees and markup that can turn that new mortgage loan you’re applying for into an expensive mistake. Here are several tips to help you avoid Refi Problems that result in overpaying for your next mortgage loan.

Refi Problems

Most homeowners have no idea how the person arranging their mortgage is compensated for their work. Assuming you will not be refinancing your mortgage with a bank due to loopholes in the Real Estate Settlement Procedures Act which allows the bank to overcharge without telling you, the next mortgage you have will be arranged by a mortgage broker.

Mortgage brokers are paid for their work by two sources. Brokers can charge you a loan origination fee, often as much as five percent, which you will pay at closing for their part in arranging the loan. One percent is a reasonable amount to pay for loan origination, so don’t be afraid to bring this up when shopping for a loan. The second way mortgage brokers are compensated is with a fee paid by the lenders in the form of Yield Spread Premium.

Mortgage Yield Spread Premium

Mortgage lenders pay a fee to the broker for locking and closing your loan with an above market mortgage rate. You might think this isn’t a problem because the fee is not coming out of your pocket but you need to consider why lenders pay this fee. Lenders reward mortgage brokers for closing loans with above market mortgage rates because these loans bring them a premium profit when the loans are sold to investors on the secondary market. What you need to know about higher than market mortgage rates is that they result in a higher than necessary mortgage payment, a payment you’ll be making every month that you keep your loan.

Here’s an example to illustrate how Yield Spread Premium drives up your mortgage payment unnecessarily. Suppose for example you are refinancing your California mortgage for $350,000. The broker quotes you a mortgage rate of 5.75% and charges you an origination fee of 2%. This means you’ll have to fork over seven thousand dollars at closing for the mortgage broker’s fee. What your broker isn’t telling you is that you actually qualified for a 5.0% mortgage rate and they’ve marked it up to get a commission from the lender.

You might be asking “What’s a measly .75% between friends?” Here’s what that .75% on your mortgage rate does to your monthly payment. Your monthly payment with a mortgage rate of 5.75% on a 30 year fixed rate loan will be $2050. If you had gotten the mortgage rate you qualified for at 5.0% your monthly mortgage payment would be only $1,875 per month! That’s a difference of $2,100 every year that you keep this loan! Still think Yield Spread Premium isn’t a Refi Problem you need to be worried about?

Yield Spread Premium Can Be Avoided

It is possible to refinance your home loan without Yield Spread Premium paying the mortgage broker a flat one percent origination fee for their work. Homeowners who know how to do this are able to take advantage of the wholesale nature of mortgage rates and save thousands of dollars in unnecessary mortgage interest every year. According to the HUD Secretary Yield Spread Premium will be responsible for American homeowners overpaying nearly sixteen billion dollars this year alone! Don’t be a part of this statistic…register for the mortgage refinancing tutorial on this website and you’ll learn how to refinance you home with a wholesale mortgage rate without paying junk fees to the lender or the broker.

Refinance Fees You Need to Avoid Today

mortgage broker Refinance Fees You Need to Avoid TodayIf you are in the process of refinancing your home mortgage and don’t want to overpay refinance fees when taking out a new loan, there are many junk fees you’ll need to avoid to ensure that you’re getting a good deal.

Most of the junk fees you’ll encounter when mortgage refinancing are from the person originating your loan and can be avoided if you know how. Here are several tips to insure you’re not overpaying refinance fees on your next mortgage loan.

Mortgage Loan Origination

What is mortgage loan origination anyhow? Can’t you just go to your bank or credit union and cut out the middleman when refinancing to get the best deal? You could go to your bank to refinance; however, because of a little known loophole in the Real Estate Settlement Procedures Act the bank can charge you the same fees you’ll pay with a mortgage broker and doesn’t even have to disclose them to you. That’s right, banks are the worst deal in mortgage loans thanks to the Banking Lobby which spent millions of dollars lobbying congress to be exempt from disclosure laws that protect homeowners from predatory lending practices.

Mortgage Broker Fees

Since banks are out of the picture due to unfair lending practices, the best option for your next mortgage loan is use a mortgage broker to arrange your loan for you. You don’t want just any mortgage broker since dishonest brokers pad their commissions with junk fees and mortgage rate markup; you’ll need to find an honest broke willing to work for a one percent origination fee…more on this later.

The first thing you need to know about refinance fees is that mortgage loans are retail products. The person arranging your loan is simply reselling loans from a wholesale lender for a commission. This commission comes from two sources: you and the mortgage lender. You’ll pay for mortgage loan origination by paying a flat origination fee. Ideally loan origination fees should only be one percent of your loan amount, which isn’t hard to negotiate; however, many mortgage brokers charge anywhere from two to five percent so you’ll want to be careful with this fee.

Yield Spread Premium

The second way mortgage brokers get a commission for their work is form the lender. Mortgage lenders pay a commission to the broker for locking and closing your loan with a higher than necessary interest rate. This markup of your mortgage rate creates a cash bonus for the broker for overcharging your and is known as Yield Spread Premium. If you want a good deal on your next mortgage loan you MUST avoid Yield Spread Premium or you’ll be thousands of dollars too much for as long as you keep the loan.

Yield Spread Premium sounds scary and most homeowners have never heard of the term however, like other mortgage garbage fees it’s not hard to avoid. When you negotiate a flat one percent origination fee without Yield Spread Premium you’ll be taking advantage of wholesale mortgage rates and saving thousands of dollars in mortgage interest. The mortgage videos on this website show you exactly how to do this in an easy to follow, step-by-step guide.

Junk Refinance Fees

There are a number of other refinance fees you’ll need to avoid that are pure garbage. If for instance your mortgage broker charges you a rate lock fee you’re probably dealing with a dishonest mortgage broker. There isn’t one single mortgage lender in the country that charges a fee for locking in your mortgage rate…this fee is pure garbage and headed right into your mortgage broker’s pocket if you agree to pay it. Other garbage refinance fees you should be on the lookout for include broker courier fees and loan processing fees.

You can learn more about refinance fees you need to avoid including strategies for refinancing your home loan with a wholesale mortgage rate by registering for my Underground Mortgage Videos available on this website. You’ll get immediate online access to the mortgage videos and all refinancing materials in our password protected member’s area.