Mortgage Marketing Blogs

If you are in the process of taking out a new mortgage to purchase your home or refinance your existing mortgage, the fees you pay can make the difference between getting a great mortgage loan and paying too much. The fees on your Good Faith Estimate are often cryptic and many brokers leave the most important loan processing fees out completely. Here are several tips to help you make sense of mortgage fees and avoid paying too much for your next mortgage loan.

Your Good Faith Estimate is Just an Estimate

The most important thing to understand about the Good Faith Estimate is that it is just an estimate. Mortgage brokers frequently lowball loan processing fees to make their loan offers appear more attractive. Brokers also frequently leave their markup of your mortgage rate off the Good Faith Estimate completely. If the Good Faith Estimate is unreliable, what can you use to get a good idea of what your loan processing fees are?

The good news is that the HUD-1 will accurately reflect all of your loan processing fees and markup. The problem is that you will not typically receive this document until 24 hours prior to closing. Once you have reconciled the loan processing fees and markup on the Good Faith Estimate with your HUD-1 statement you will need to have a heart-to-heart discussion with your mortgage broker about any discrepancies you find.

Beware Mortgage Junk Fees

There are a number of junk fees on your Good Faith Estimate and HUD-1 statement that you need to be aware of. One of the most notorious junk fees is the so called “rate lock fee.” Mortgage brokers charge this fee for “locking in” your mortgage interest rate. What you need to know about rate lock fees is that lenders do not charge your mortgage broker a fee for locking your rate. This fee is entirely invented by your broker to line their pockets at your expense and is complete garbage.

Other junk fees you need to keep an eye out for include broker courier fees, application fees, and loan processing fees. Many mortgage brokers try and justify their loan processing fees by telling you that they use a “professional loan processor” to prepare your file and charge you as much as $500 for the service. What do you get for your $500? Your “professional loan processor” will print out the required documents and mail the application and disclosure statements to you for signature, and then FedEx the entire folder to the underwriter for loan approval. Total “processor” time necessary, one hour maybe two…Is this paperwork shuffling worth a $500 fee? I don’t think so…do you?

Watch Out For Yield Spread Premium

If you’re not already familiar with Yield Spread Premium it is the markup your mortgage broker adds to your mortgage interest rate to get a commission from the lender. Many brokers leave this markup of your Good Faith Estimate altogether and then cleverly disguise it on your HUD-1 statement. When questioned about Yield Spread Premium many mortgage brokers get defensive, even angry. Your mortgage broker might tell you that because the fee is not coming out of your pocket you shouldn’t worry about it.

The problem with Yield Spread Premium is not the fact the lender is paying the broker a fee, but the reason the lender is paying your broker a fee. Your broker receives this fee because you’ve agreed to pay an above market mortgage rate and for no other reason. In fact, Yield Spread Premium is the number one reason people overpay for their mortgage loans and according to the HUD Secretary is responsible for overcharging homeowners in the United States nearly sixteen billion dollars each year.

Avoiding Yield Spread Premium needs to be your number one priority when applying for a mortgage loan. If you’d like to receive more advice about taking out a mortgage without paying too much, register for the free mortgage refinancing blueprint available from this website.

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The U.S. Census Bureau and the U.S. Department of Housing and Urban Development issued their monthly joint report on August new house sales on Thursday.

The July sales rate was itself revised downward from an original estimate of 870,000 units. The stunning figure, however, was the comparison of August 2007 data with that on sales one year earlier....

According to Sudeep Reddy and Michael Corkery writing in The Wall Street Journal, "The housing market is going into a deeper chill, and consumers are starting to shiver."

Other market segments that are closely, even loosely tied to housing construction and sales are beginning to report some distress. Monday, Lowe's reduced its earnings outlook for this year and...

Frank Nothaft, Freddie Mac vice president and chief economist commented that, "Mortgage rates were largely unchanged in the previous week, with long-term rates lingering at lower levels not seen since May. The recent retreat in mortgage rates has brought in an increased volume of mortgage applications, according to the Mortgage Bankers Association, and pushed the share of applications for refinancing to the highest rate since April.

I have been answering a number of questions regarding President Bush’s expansion of the FHA loan program with FHA Secure. I’ve decided to consolidate these questions into an FHA Frequently Asked Questions (FAQ) that will be updated frequently as the program develops.

Who is FHASecure Intended to Help?

There are currently just over two million American homeowners with Adjustable Rate Mortgages scheduled to reset over the next four years. The Federal Housing Administration estimates that that this program could help 240,000 homeowners refinance their mortgage loans. If your mortgage is scheduled to reset and you will no longer be able to afford the payments, FHASecure could help you refinance with a government insured, conventional mortgage loan.

How soon can I apply for FHASecure mortgage refinancing?

The Federal Housing Administration began accepting applications on September 5th, 2007 and the program will run through December 31st of 2008.

Do my payments have to be current before I apply?

In order to qualify for FHASecure mortgage refinancing you must pay your mortgage payments on time for six months prior to your Adjustable Rate Mortgage’s scheduled rest. This is not the only requirement, you must be employed and have sufficient income and work history to qualify. FHASecure will charge you a mortgage insurance premium amount based on your credit rating once you’re approved.

What are the requirements for FHASecure mortgage refinancing?

The basic requirements are that you have a non FHA mortgage that has already reset or is scheduled to be reset. You must show that prior to the reset you were making your mortgage payments on time for at least six-months prior to your loan’s reset. There are provisions for homeowners who have missed payments or have poor credit if they have built up enough equity in their homes to qualify. “Reset” means that your lender will be adjusting your mortgage rate and raising your mortgage payment.

Can interest-only and option Adjustable Rate Mortgages be refinanced under FHASecure?

Yes, any Adjustable Rate Mortgage as long as it is not an FHA insured loan can be refinanced with FHASecure. Fixed rate mortgages are currently not eligible for the program but could be added at a later date.

If I’m not behind on my payments can I still refinance with FHASecure?

FHASecure is intended for homeowners that are behind on their mortgage payments because of a scheduled interest rate adjustment on their loans. If you’re not behind on your mortgage payment you could still benefit from a standard FHA mortgage which could get you a lower mortgage interest rate.

What is the maximum I can borrow with an FHASecure loan?

The amount borrowed cannot exceed the conforming loan limits set by Fannie Mae. In 2007 this amount is $417,000.

Can I take out an interest only or option Adjustable Rate Mortgage with an FHASecure Loan?

No. The FHA will not insure interest only or payment option Adjustable Rate Mortgages..and they probably never will due to the risks associated with these Adjsutable Rate Mortgages.

What are FHASecure Mortgage Insurance premiums?

When you take out an FHASecure mortgage loan you will be charged a monthly mortgage insurance premium. This mortgage insurance reduces the risk for the Federal Housing Administration allowing the agency to cover homeowners with poor credit. The amount you pay for your mortgage insurance premium depends on your credit. Homeowners with poor credit will pay more than homeowners with good credit.

If you would like to read more refinancing advice, please register for our free mortgage refinancing blueprint.

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• Buy Yourself a Lower Mortgage Rate

Probably no one who has read a paper or a website in the last 60 days expected anything different, but the monthly report from the National Association of Realtors (NAR) on Tuesday confirmed that once again the sales of existing homes fell in August.

Total existing home sales which include single family homes, town homes, condos, and co-ops...

Several Executive Branch surrogates indicated late last week that the Administration was sort of willing to compromise about the role of Freddie Mac and Fannie Mae in solving the current credit crunch. But the announcements made and the methods proposed seem to this reporter to be little, late, and misdirected. The two Government Sponsored Enterprises (GSEs) - Freddie and Fannie - seemed a little confused about what was happening as well.

...Then, on Saturday, the Wall Street Journal quoted a top regulator (undoubtedly from OFHEO) who speculated that those portfolio limits could be lifted in....

Mortgage interest rates are a source of confusion for many homeowners. You’ll see rate quotes published on the Internet and advertised on television, but how do you know if those rates apply to you? There are a number of factors that influence the mortgage rate you will qualify including your credit; however, many homeowners are unaware that there is a “dark side” of mortgage rates that could cost you hundreds of dollars every month. Here are the basics you need to understand about mortgage rates and how you can avoid unnecessary markup when purchasing your home or refinancing an existing mortgage.

Factors That Influence Your Mortgage Rate

When you qualify for a mortgage loan there are a number of factors that determine the interest rate you are approved. Some of these factors including the economy, supply-and-demand, and wholesale mortgage rates are outside of your control. Other factors include your credit score, property type, whether or not you live in the home, how much equity you have, and how much of a commission your loan originator is trying to build into your mortgage loan.

Know Your Credit History

Your credit score is an extremely important part of your mortgage rate. Credit scores are based on the contents of your credit history and 35% of your score is based on your history of making on time payments. Before you begin shopping for mortgage rates it is extremely important to request a copy of your credit report from each credit agency and carefully review your records for errors. If you find mistakes in your credit reports you will need to dispute the mistake with each credit agency and allow enough time for the correction to be reflected in your credit score.

Paying for your credit reports is not necessary as Congress recently passed a law requiring Equifax, Experian, and Trans Union to provide you a free copy of your credit history once per year. If you want a credit score you will have to pay for your credit score; however, it is not necessary to pay for a credit score as you can receive this from your lender if you want to know your score. Concentrate your efforts on checking your credit history for errors and paying all of your bills on time rather than worrying about what your exact credit score is.

If you have negative information in your credit history such as a write-off or judgment, you can improve your credit score by settling with that creditor. You may be able to pay as little as 30 or 40 cents on the dollar to have this negative information removed; try negotiating with the company responsible for the negative information to pay and have this removed before shopping for mortgage rates.

Mortgage Rate Markup

The dark side of mortgage rates is an unfamiliar subject for most homeowners; so much that the Secretary of Housing and Urban Development recently stated that this markup will cost American homeowners nearly sixteen billion dollars this year alone. This markup of your mortgage rate is called Yield Spread Premium and avoiding it needs to be your number one priority when shopping for mortgage rates.

What is Yield Spread Premium?

The markup you pay on the wholesale or “par” rate that you qualify is called Yield Spread Premium. Your mortgage broker marks up your mortgage rate because the wholesale lender pays them a bonus for overcharging you. For every quarter percent you agree to overpay on the mortgage your broker receives a commission of one percent of the loan amount. This is paid in addition to the origination fees you’re already paying for the broker’s services; Yield Spread Premium allows many brokers to double, even triple their commission on your loan.

Why is Yield Spread Premium Bad?

Mortgage brokers are greedy people…sorry to say it, but it’s true. Many mortgage brokers become defensive, even angry when questioned about Yield Spread Premium. Your broker might tell you: “Don’t worry about the fee; if the lender’s paying it, it’s not coming out of your pocket.” The problem with this argument is not the fact that the commission is being paid, but the reason your lender is paying this fee. Yield Spread Premium is paid because you are accepting a mortgage loan with an above market interest rate. This means you will pay more unnecessarily for your financing every month that you keep this loan.

You Can Get Lower Mortgage Rates

Avoiding Yield Spread Premium allows you to take advantage of wholesale mortgage rates. You’ll need to find a mortgage broker willing to work for an origination fee without charging Yield Spread Premium and this is not a small task. You can start by telling prospective mortgage brokers that you understand Yield Spread Premium and will not accept any mortgage that includes the markup. It is usually best to negotiate with a mortgage broker that is self-employed as mortgage brokers working for a large firm may not have the authority to broker the type of mortgage you’re looking for.

Bank Mortgage Rates Are Not The Answer

You might think that by taking out a mortgage form your bank you’ll avoid all the mortgage rate problems with Yield Spread Premium. While it’s true that banks and other mortgage companies that fund loans with their own money don’t charge Yield Spread Premium, you’ll still get a marked up mortgage rate. Banks charge their customers Service Release Premium in order to profit when your mortgage is sold to investors on the secondary market. Your bank is also exempt from the Real Estate Settlement Procedures Act and is not required to tell you how much they’ve marked up mortgage rates or what their profit margin is on your loan. Why would you want a mortgage from a lender that is not required to play by the rules?

If you’d like more advice about finding the lowest mortgage rates while avoiding expensive pitfalls register for a free mortgage refinancing blueprint. You’ll get a six-part refinancing video series free with no obligation.

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If you’re concerned about your mortgage payment amount when the lender resets your Adjustable Rate Mortgage, there are several ways to protect yourself from payment shock. What is payment shock? Imagine waking up one day to a statement from your mortgage lender showing that your payment amount has gone up $650 and you can no longer afford the payments. For many homeowners living paycheck to paycheck this would be a financial disaster that would result in losing their homes. Here are several tips to help protect you from payment shock with your Adjustable Rate Mortgage.

When used correctly Adjustable Rate Mortgages can save you a lot of money. There are risks mainly that your lender will reset the loan and you will no longer be able to afford your payments. What happens when your introductory period ends is that the lender adjusts your interest rate to the index your loan is tied to plus margin. The margin is the markup your lender adds to make a profit. If your Adjustable Rate Mortgage started with a lower “teaser” rate, you could see your payment go up dramatically in a short period of time.

Hybrid Adjustable Rate Mortgages are especially vulnerable to payment shock because of their extended fixed rate period. This fixed introductory period can last as long as five to seven years and many homeowners forget their payments will be adjusted until the bill arrives. Some hybrids adjust every six to twelve months after the initial reset which could wreak havoc on your monthly budget. If your hybrid is due to reset you might consider refinancing before your payment goes up.

Here’s an example to illustrate how people get into trouble with the teaser mortgage rates you see advertised with Adjustable Rate Mortgages. Suppose you refinanced you mortgage using a $200,000 Adjustable Rate Mortgage for 30 years with a 4.0% teaser rate. The fully indexed rate in your loan contract is 6.0%. During the first year under the teaser rate your monthly payment would be $955. When your introductory period ends and the lender resets your mortgage to the contract rate of 6.0% your payment will jump to $1,193. This is assumes the index rate stays below the contract rate; what would happen if your index rate jumped to 7.0 percent? If the index that your mortgage is tied to rises just one percentage point your monthly payment would jump to $1,321. That’s almost $370 higher!

Beware Option Adjustable Rate Mortgages

There are a number of risks associated with the so called “payment option” mortgage if you’ve been making the minimum payment. The minimum payment amount does not cover all of the interest due for a given month; this unpaid interest is added to your loan balance. After a period of time specified in your loan contract, typically five years, or when you reach 125% of your original loan balance due to negative amortization, the lender will recast your loan. When this happens your mortgage is converted to a standard Adjustable Rate Mortgage amortized for the time remaining in your term length…your payments will go up sharply, doubly so if interest rates have risen.

If you have an Adjustable Rate Mortgage on your home it is extremely important to find out when your loan is scheduled to reset. Here are several steps you can take to protect yourself from payment shock when this reset happens:

Refinance Your Mortgage

Refinance with a fixed rate loan before your loan resets; your monthly payment amount may go up with a fixed mortgage rate; however, you will be protected from future interest rate hikes. Make sure your mortgage does not have a prepayment penalty and determine if the fees you will pay for the new loan make refinancing worthwhile. Refinancing is a good option for homeowners that plan to keep their homes for a long time.

Save for a Rainy Day

If you can make a large payment to your mortgage principal when your loan resets, this will lessen the effect of the higher mortgage rate. Make sure that your loan contract does not include a prepayment penalty that prevents your from making large principal payments.

Avoid Optional Minimum Payments

If you’ve been making the minimum payment on an option mortgage, start making a fully amortized payment. This will reduce your loan balance before the lender recasts your mortgage. If that’s not an option due to budget restraints try and make the interest only payment to prevent negative amortization on your loan.

You can learn more about your mortgage options including costly pitfalls to avoid by registering for this free Mortgage Refinancing Blueprint.

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• Is Interest-Only Mortgage Refinancing Right For You?


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• Pitfalls of Interest Only Loans When Refinancing

It seemed to smack a bit of desperation at the time, but in hindsight it appears to look more like marketing genius.

Hovnanian Enterprises, Inc., one of the nation's largest homebuilders, threw open the doors of literally thousands of its newly built homes or those that were under construction last weekend and, in what media has described as a fire sale, offered deep discounts, sometimes in the six figure range, to buyers ready to make a deal.

Well, whatever it was, it apparently worked...