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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Refinance Home Loans Online

Are you thinking about refinancing your home loan online? The Internet makes refinancing fast and hassle free; however, it is very easy to pay too much during the process. There are hidden fees and markup of your mortgage rate charged every time you refinance home loans online; unless you know how to avoid paying them. Here are several tips to help you refinance home loans online without paying too much in the process.

Refinancing Your Mortgage Online

The Internet makes it easy to contact lenders and collect a variety of mortgage quotes when refinancing. The problem with the mortgage quotes you collect on the Internet is that 99% of them have been marked up to create an “extra” commission for the mortgage company or broker arranging your loan. This “extra” commission is in addition to the perfectly reasonable loan origination fee (not more than one percent of your home loan) you’re already paying them for their services. (maybe even overpaying)

How does this markup work? Lenders reward mortgage companies and brokers that lock and close home loans with higher than necessary interest rates with a commission known as Yield Spread Premium. There are also a number of completely unnecessary junk fees they’ll attach to your loan such as “Computerized Loan Origination Fees” and “Mortgage Broker Courier Fees.” The good news is that once you learn to recognize this markup of your mortgage interest rate you can avoid paying it when refinancing, even avoid junk fees at closing.

How to Recognize Yield Spread Premium

The easiest way to avoid Yield Spread Premium is to be upfront with your mortgage brokers. Tell your broker that you understand how Yield Spread Premium works and will not accept any home loan that includes this commission based markup. Many mortgage brokers become defensive or angry when you ask them about Yield Spread Premium. If your mortgage broker does this you should simply find someone else to arrange the home loan for you.

Just because your broker agrees not to take Yield Spread Premium on your loan doesn’t mean you should take their word for it. Mortgage brokers have clever ways of hiding their markup in your loan documents and if you don’t know what to look for you could miss it. The first opportunity you’ll have to catch Yield Spread Premium on your home loan is when you lock in your mortgage rate. Make sure that you get written rate lock confirmation from the lender. Never accept verbal rate lock confirmation or accept a written rate lock on your mortgage broker’s letterhead. If your written rate lock didn’t come from the lender you haven’t locked your mortgage rate. Dishonest mortgage brokers often pass off bogus rate lock confirmation written on their own letterhead to hide their markup of your mortgage rate…don’t fall for this trick.

How to Get the Lowest Mortgage

Your last opportunity to catch Yield Spread Premium before closing is on the HUD-1 settlement statement. Make sure you get a copy of the HUD-1 before signing your loan contract and pay close attention to section 800 of this document. Yield Spread Premium will be disclosed as a fee paid to your broker listed in section 800 of the HUD-1. Other junk fees such as computerized loan origination fees and mortgage broker courier fees will also be listed on the HUD-1. You should question any “broker” fee listed on the HUD-1 other than your loan origination fee with a healthy dose of skepticism, including any loan processing fees.

How to Find the Best Mortgage Broker

If you’re having trouble finding a mortgage broker willing to work for a flat one percent origination fee without taking Yield Spread Premium, here are several tips to help you locate one. Your best bet in locating a mortgage broker that will not charge you Yield Spread Premium is to look for one that is self-employed. These brokers, especially ones working out of their homes do not have the overhead of larger brokerage firms and will be much more likely to negotiate the home loan you are looking for.

You can get more information about Refinance Home Loans Online by signing up for my free Underground Mortgage Videos. Here’s a sample of what you’ll get when you register:

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Mortgage Rates Are Rising…Did You Miss Out?

If you’ve been sitting on the fence about refinancing your home mortgage and are discouraged by reports of rising interest rates, it’s not too late to lower your monthly payment and put some cash in your pocket in the process.

There are several refinancing pitfalls you need to be aware of that drive up your mortgage rate and monthly payment; however, once you find the right person to arrange your new home loan you’ll be able to refinance without paying too much.

Here are several tips to help you get the lowest possible mortgage rate and monthly payment when refinancing your home loan.

Understanding Mortgage Rates

Notice that I said “find the right person to arrange your home loan.” You’re not going to get the best possible deal refinancing your home with a bank or one of the so called “Direct Lenders” you see advertising home loans. The reason for this is that almost every mortgage quote you’ll receive when refinancing has markup built into it to create a commission for the person arranging it, or a premium when your loan is sold. This markup of your mortgage rate is rarely talked about and cryptically disclosed only part of the time. What is this mortgage markup I’m talking about?

There are two basic ways of refinancing your home mortgage loan. The first is by contacting your bank or credit union. Banks are direct lenders and cut out the middleman when refinancing right? Yes…somewhat; however, you’ll still face the same markup of your mortgage rate by a different name, driving up your monthly payment unnecessarily. Of course your banker will never admit this thanks to a loophole in the Real Estate Settlement Procedures Act… banks are exempt from disclosing any of their markup or profit margin on your loan. Your banker will probably show you the bank’s mortgage rate sheets for the day, swearing they’re not marked up; however, unless you know how to recognize this markup you’ll never know how low your mortgage rate could have been.

The second way people refinance their mortgages is with a mortgage broker. I know what you’re thinking; mortgage brokers have earned themselves a reputation for being sleaze buckets lower than a used car salesman… and in many cases rightly so. Mortgage brokers do have one redeeming quality in that they have access to wholesale mortgage rates. Most mortgage brokers aren’t going to let you have a wholesale rate, unless you know how to get it. That is the purpose of this article and the mortgage videos on this website.

How to Get The Lowest Possible Mortgage Rate

It’s true that mortgage rates are rising; however, would you know to recognize mortgage rate markup if you saw it? Don’t worry if you wouldn’t, most homeowners don’t know what the markup is let alone know how to recognize and avoid it. So what is this nefarious mortgage rate markup that drives up your monthly payment for no good reason? Before we discuss that I need to give you the framework for your ideal mortgage rate. What is ideal? In the industry the ideal rate is called a “par mortgage rate.” Simply put, a par mortgage rate is one that doesn’t cost you anything to get out of pocket in the form of discount points and does not create an “extra” commission for the person arranging your loan.

Remember that discount points are a fee you pay in exchange for a lower interest rate and that one point is one percent of your loan amount. On a $200,000 mortgage loan one discount point would be $2,000 due at closing. Mortgage rates are low enough that you’ll want to avoid paying discount points whenever possible. Get yourself a par mortgage rate and you won’t have to pay any discount points at all. The other type of points you’ll encounter are origination points. This is the mortgage broker’s fee for arranging your home loan. One percent is reasonable, it is not necessary to pay more.

What about this extra commission? Mortgage rates that have been marked up by the person arranging the loan create a commission or a “kickback” from the lender. This kickback is called Yield Spread Premium and costs the average homeowner in excess of $1,000 per year. Most people have a mortgage that includes this form of markup; in fact, the Secretary of Housing and Urban Development recently said homeowners overpay nearly sixteen billion dollars every year because of it. That includes your smug neighbor down the street…that guy’s overpaying too. Just think… you’re going to have a better mortgage loan that that guy once I’m finished with you.

Mortgage Yield Spread Premium

This markup of your mortgage interest rate for a commission known as Yield Spread Premium results when your mortgage broker locks and closes your home loan with a higher than necessary mortgage rate. There are several documents you receive in the process of refinancing your home that disclose Yield Spread Premium, if you know what you’re looking for. Your first opportunity to spot this unnecessary markup of your loan is when you lock your mortgage rate.

We all know locking is supposed to “guarantee” your mortgage rate for a period of time so that you can close on the loan. Some dishonest mortgage brokers charge a fee for locking your mortgage rate, but you should know there isn’t a single mortgage lender in the country that charges this for locking and it is pure garbage. Once you’ve you locked in your mortgage rate you should receive written confirmation of the lock from the mortgage lender. Never accept a verbal mortgage rate lock or any written confirmation that comes from the broker or mortgage company. If you don’t have written confirmation from the lender you either haven’t locked or the broker is trying to hide their markup of your mortgage rate. Any Yield Spread Premium on your mortgage loan will be clearly disclosed on your lender’s rate lock confirmation.

Your second opportunity to spot Yield Spread Premium on your mortgage loan when refinancing is just prior to closing when you receive the HUD-1 Settlement Statement. You’ll find Yield Spread Premium disclosed in section 800 of this document; although the lender might have a cryptic name for the fee. Often the markup is disclosed as “Paid Outside of Closing” or POC charges.

You can learn more about refinancing your home without unnecessary markup of your mortgage rate to get the lowest payment possible while avoiding junk fees by registering for my Underground Mortgage Videos. Here’s a sample with more you need to know about when to refinance and the unnecessary markup of your mortgage rate.

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Refinance Fees You Need to Avoid

mortgagehelp Refinance Fees You Need to AvoidIf you are in the process of shopping for a home loan there are a number of Refinance Fees you need to avoid if you don’t want to overpay. Many of these fees are charged by the lender; however, there are several refinance fees that do nothing but line your mortgage broker’s pockets. Here are several tips to help you avoid paying too much for your next mortgage loan.

Refinance Fees

When refinancing your home mortgage loan you can reasonably expect to pay many of the same fees you paid when purchasing your home. The problem is that you probably didn’t have a good idea which of those fees were necessary and which were pure garbage when you purchased your home. Refinance fees typically come from three sources: the lender, the broker, and third party companies involved with closing your mortgage.

Mortgage Broker Refinance Fees

Honest mortgage brokers explain their fees upfront and will typically only charge you a loan origination fee. This refinance fee will often appear in your loan documents as “origination points” and a reasonable amount to pay for loan origination is one percent of your mortgage amount. Many brokers charge as much as five percent or more; however, you should never agree to pay this much for a mortgage broker’s services.

There are a number of mortgage broker junk fees you’ll want to keep an eye out for when refinancing. At the top of this list is the so called “rate lock fee.” Lenders never charge a fee for locking in your mortgage rate. If your mortgage broker is charging you a fee for locking in your interest rate you’re probably dealing with a dishonest mortgage broker. Another warning flag to watch out for is if your broker verbally locks your mortgage rate or provides you a written lock on company letterhead. Rate lock confirmation should always come from the lender and be confirmed in writing. If you have verbally locked your mortgage rate you haven’t locked anything.

Dishonest mortgage brokers pass of their own rate lock confirmation and tell you the rate lock from the lender is proprietary or confidential and that you cannot see it. They tell you this because they’re hiding a fee they receive from the lender for marking up your mortgage rate…more on this fee later; however, you know you are dealing with a 100% dishonest mortgage broker if they will not show you the rate lock confirmation in writing from the lender. Other junk fees include broker courier fees and processing fees. If you find these on your Good Faith Estimate or HUD-1 statement you’ll want to have a heart-to-heart with your mortgage broker and strongly consider taking your business somewhere else.

Mortgage Lender Refinance Fees

Once your mortgage broker has completed processing your application the loan is transferred to underwriting at your mortgage lender. You can expect to pay underwriting fees at this stage of the game however, most of the lender fees are not junk fees and cannot be avoided. Your mortgage company or broker is responsible for 90% of the junk fees you’ll encounter when refinancing your mortgage loan unless you refinance with a bank or credit union.

Many homeowners think they’ll get the best deal and avoid junk refinance fees by sticking with their bank or credit union. Unfortunately this simply isn’t true…banks and credit unions are exempt from key legislation in the United States known as the Real Estate Settlement Procedures Act that requires mortgage companies and brokers to disclose their profit margins and markup on your loan. This means if you refinance your home loan with a bank or credit union you’ll never know how much they’ve marked up your mortgage loan or how much you’ve overpaid. Never refinance your home mortgage with a bank or credit union.

Hidden Refinance Fees

Now that you know banks and credit unions are a bad idea there is one hidden fee you need to know about before choosing a broker to refinance your home loan. Mortgage brokers receive their compensation for arranging your loan from two sources. We’ve already discussed loan origination fees and you now know that a reasonable fee to pay your broker is one percent of your loan amount, but what about this “hidden” compensation? Did you know that mortgage lenders reward brokers for overcharging you? This reward doesn’t come from overcharging you on refinance fees but by marking up your mortgage interest rate.

Mortgage lenders know that the majority of their profit comes from selling your home loan to investors on the secondary market. What better way to boost their profits by selling your loan with an above market mortgage rate for a premium fee. This is why mortgage lenders reward brokers for marking up your mortgage rate. This markup of your mortgage rate creates a percentage of your loan amount for the Mortgage Company or broker. Known as Yield Spread Premium this fee is a cash bonus paid when you lock and close your mortgage loan with a higher than market mortgage rate.

Yield Spread Premium is usually disguised in your loan documents and rarely talked about by your broker. In fact, many mortgage brokers become angry and defensive when questioned about Yield Spread Premium. This is another warning flag that you’re dealing with a potentially dishonest broker if they refuse to discuss Yield Spread Premium on your loan. How can you spot this unnecessary markup of your mortgage rate? I’ll tell you…

Your first opportunity to recognize and avoid Yield Spread Premium comes not on the Good Faith Estimate but on the rate lock confirmation from your lender. This is why many dishonest mortgage brokers refuse to show you the confirmation claiming that it’s confidential and proprietary. Rubbish! They just don’t want you to see how much they’ve marked up your mortgage rate and the fee your lender is paying them for overcharging you!

Why Yield Spread Premium is Bad

You’ve learned how mortgage brokers make money from arranging your loan and you’ve learned about Yield Spread Premium; however, you might be asking why should I care about a fee paid by the lender? After all it’s not coming out of my pocket right? Wrong! It’s not the fee you should be concerned about but rather the reason your mortgage lender is paying this fee. Remember your mortgage broker receives this fee for marking up your mortgage rate. Your broker is paid one percent of your loan amount for every .25 percent they markup of your interest rate. What does this markup do to your monthly payment amount?

Suppose you’re refinancing your home for $300,000 and the broker quotes you a mortgage rate of 5.5 percent, charging you a loan origination fee of one percent or in this case $3,000. Sounds like a good deal right? What you don’t know is that you actually qualified for a 5.0 percent mortgage rate and the broker marked it up by .5 percent to get a bonus from the lender of $6,000. What does this markup do to your payment? At 5.5 percent on a fixed rate 30 year mortgage your monthly payment will be $1,700 per month. If you had the mortgage rate you deserve at 5.0 percent your monthly payment would be only $1600 per month! That’s $1,200 a year you’re throwing away just to give your mortgage broker an unnecessary bonus for overcharging you!

Happily Yield Spread Premium can be avoided. If you’ve read this far you’re head and shoulders above most homeowners out there who have never heard of Yield Spread Premium. You can learn more about avoiding the unnecessary markup of your mortgage rate and other junk fees by registering for the free mortgage videos on this website.

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Mortgage Rates Predictions

Home mortgage rates are at near all time lows and many of you might be wondering how to predict when they will bottom out.

Mortgage interest rates are extremely difficult to forecast; sometimes when the Federal Reserve lowers short term interest rates mortgage interest rates actually go up. Sometimes when the stock market takes a hit and bond yields are up mortgage rates go down.

The truth is no one can actually predict when mortgage rates are going to bottom out…anyone that tells you can is selling you a loan.

How can you get the lowest mortgage rates?

Instead of relying on a questionable Mortgage Rate Forecast you can save yourself thousands of dollars by concentrating on what aspects of your mortgage rate you can control. There is one factor affecting your mortgage rate that 90 percent of homeowners have never heard about…namely the commission based markup of your interest rate. You might thing that when you apply for a home loan the lender runs your credit, looks at your qualifying ratios, and will approve your loan with the interest rate you deserve. This simply is not the case.

Beware Your Mortgage Loan Originator

Your mortgage company or broker you choose when taking out a mortgage actually determines whether or not you’ll pay too much for your next home loan. Pick the wrong person for the job and you’ll overpay thousands of dollars every year you keep this mortgage. All because of a little known fact called Yield Spread Premium. Simply put…this is the commission based markup of your interest rate. The broker arranging your mortgage gets paid in two ways. They get paid by charging you an origination fee for their work and they get paid by marking your mortgage rate up for a kickback for lender.

How Yield Spread Premium Works

Yield Spread Premium is a percentage of your home loan amount created when the broker or mortgage company locks and closes your loan with a higher than market interest rate. When you get approved for your home loan the lender approves you for a certain mortgage rate, say 5.5%. The broker turns around and marks this up telling you that you qualified for 6.25% because the lender pays them 1% of your loan amount for every .25% they markup up your loan.

Suppose you’re refinancing your home for $200,000 taking out a fixed rate loan for thirty years will get you a payment of $1,231 at 6.25%. If you had gotten the mortgage rate you deserve at 5.5% your monthly payment would be $1,135 per month. That’s $1,152 that you’re throwing away every year because your mortgage broker took advantage of you!

Mortgage Rates Predictions

As you can see it’s much more important to make sure your loan does not include Yield Spread Premium than it is to try and make mortgage rates predictions. When you avoid Yield Spread Premium you’ll be taking advantage of wholesale mortgage rates and can negotiate with your broker to pay only a one percent mortgage origination fee. There are honest mortgage brokers out there that do not abuse Yield Spread Premium; you just have to find the right person for your loan.

You can learn more about finding the right person to arrange your next mortgage without taking advantage of you by checking out my free Underground Mortgage Videos… and don’t let anyone pull the wool over your eyes making meaningless mortgage rates predictions.