Are you considering taking out a new mortgage loan and don’t want to pay too much in the process? Are you unsure what to look for when comparing loan offers or how to screen mortgage brokers for the junk fee toting scam artists?
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that can save you thousands of dollars on your next home loan.
Mortgage rates are at all time loans but choosing the wrong person to arrange your new home loan could quickly become an expensive nightmare. Here are several tips to help you avoid paying too much for your next mortgage loan.
Getting Mortgage Help Now
The key to getting the best possible deal for your home loan is not finding the best lender, but finding the right person to arrange your loan. You don’t want to rely on a bank or a faceless mortgage giant for something as critical as your home mortgage loan; you need to find the right local, self-employed mortgage broker for the job. Why should your mortgage broker be self-employed? Large companies and brokerage firms working out of posh office spaces that employ expensive sales staff are going to be much less likely to broker the type of deal you’re looking for on your new home mortgage. Most mortgage companies simply have too much overhead and are not willing to negotiate fees. Found a self-employed mortgage broker working from home? Even better still…
What is a Good Deal on a Mortgage Loan?
Would you recognize a good deal on a mortgage loan if you found one? What makes one mortgage better than another? Is it fees from the lender or from the mortgage broker that you need to worry about? While there are underwriting fees that you’ll be required to pay, most lender fees are pretty standard when taking out a mortgage loan. The same can’t be said for mortgage broker fees… in fact the blame for most people overpaying for their home loans lies squarely with their mortgage brokers.
Mortgage Broker Compensation: What You Need to Know
Don’t get me wrong, mortgage brokers are providing a valuable service and deserve to be paid for their work; however, many brokers feel they have a right to more of your hard earned money than they deserve and use downright dirty tricks to get it. What you need to know about your mortgage broker is how they get paid for arranging your home loan. Brokers get paid in two ways; they charge you, the homeowner an origination fee for their services and they can get paid a commission by the lenders. You might think that it’s better to have the lender pay the mortgage broker’s fee than to have it come out of your pocket right? One problem with this line of reasoning is that you don’t always get to choose how your mortgage broker gets paid for arranging your loan. In fact, most brokers won’t tell you about the fee being paid by your lender and go to great lengths to hide it from you in your loan documents. Why do you think that is?
First, let’s talk about the origination fee. What is a reasonable amount to pay your mortgage broker for loan origination? Plain and simple: one percent, and not a penny more. Not one and a half percent, not two percent and for God’s sake not three percent. One of my readers commented recently that her mortgage broker charged her 1.5 percent not for the origination fee, but to lock in her mortgage rate on top of the origination fee! (Gobsmacked by the nerve of that broker) Here’s a tip… rate lock fees are pure garbage. There isn’t a single lender out there that charges a fee for locking in your mortgage rate. One percent for loan origination is more than ample compensation for the work your mortgage broker does arranging your loan.
Now what about this lender paid mortgage broker fee? Should you be concerned that the lender is paying your mortgage broker a fee for arranging your home loan? It’s not the fact that this fee is being paid by the lender that should concern you, but why the lender is paying your broker that should worry you. Why would your mortgage lender pay the broker a fee when you’re already paying a mortgage origination fee? What’s in it for them? Mortgage lenders reward brokers for locking and closing home loans with higher than market mortgage rates with a fee known as Yield Spread Premium. That’s right, for every .25 percent that your broker marks up your mortgage rate the lender pays them a commission of 1.0 percent of your loan amount. Mortgage lenders do this because home loans with above market mortgage rates bring them a premium profit when the loans are sold on the secondary market.
This one percent commission from the lender is paid in addition to the origination fee you’re already paying the mortgage broker at closing! You can see how Yield Spread Premium can effectively double, even triple your mortgage broker’s compensation for arranging your loan and why many brokers become defensive, even angry when questioned about it. You should see some of the scathing comments and emails I receive from mortgage brokers who think they are “entitled” to this fee paid by the lender at your expense. This brings me to my next point… if the mortgage broker is marking up your mortgage rate for a commission what does this do to your monthly payment amount?
Mortgage Help Is Available
Suppose for example you are refinancing your home mortgage for $315,000. Your mortgage broker quotes you an interest rate of 5.50 percent. Not bad… on a thirty year, fixed-rate mortgage your payment at 5.50 percent interest will be $1,790 per month. What you don’t know is that you actually qualified for 5.0 percent and if you had the mortgage rate that you deserve your monthly payment would have been only $1,690! That’s $1,200 per year down the drain every year just to give the mortgage broker a commission at your expense! Adding insult to injury you’re paying this mortgage broker $3,150 out of your own pocket for arranging this loan! (And that’s only if the broker agreed to a one percent origination fee…)
The good news is that you don’t have to throw your money away for an unnecessary mortgage broker commission. To learn more about avoiding Yield Spread Premium and other junk fees like mortgage rate lock fees register for my Underground Mortgage Videos. You’ll get immediate access to these online videos in the password protected member’s area without downloading anything to your home computer.