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Are you considering taking out a new mortgage to refinance you existing loan and want the lowest possible mortgage rate? Did you know that wholesale mortgage are available to the average homeowner who knows how to get them and can save thousands of dollars? Here are several tips to show you how rates are quoted so that you can take advantage of wholesale mortgage rates.

Banks vs. Mortgage Brokers

There are basically two types of rate quotes out there today. There are mortgage rates quoted by banks that fund loans with their own money and rates quoted by mortgage brokers reselling loans from wholesale lenders. Both types of mortgage rates are considered “retail” mortgage rates because they include markup. Banks mark up their mortgage rates to make a profit when selling their loans to investors and mortgage brokers mark up their rate quotes to get a bonus from the lender for closing loans with above market mortgage rates.

Take out a mortgage from either one of these and you’ll pay too much just to give someone a profit. If retail mortgage rates are inflated to give someone a commission, how do you refinance your home loan without paying too much? The first thing you need to do when shopping for a mortgage is avoid your bank completely. Your bank will never negotiate with you over mortgage rates or fees because they don’t need to; banks aren’t even required by law to disclose their markup or profit margins on your loan thanks to a loophole in the Real Estate Settlement Procedures Act. With this in mind why would you give your business to someone that doesn’t have to play by the rules?

Understanding Yield Spread Premium

Now that you’ve ruled out banks for your next mortgage you need to understand how wholesale mortgage rates work. These rates are offered by wholesale lenders that do not deal with the public directly; you might think you can avoid the broker by contacting a wholesale lender yourself…the only problem is that every wholesale lender has a retail division that deals with the public. Only mortgage brokers have access to wholesale mortgage rates.

Now that you know that mortgage brokers are the only way to get wholesale mortgage rates, how can you find one that won’t rip you off? While it’s true that mortgage brokers have earned a reputation for being sleazy sales types there are honest people working in the industry…you just have to find them and learn how brokers make their money.

How Mortgage Brokers Are Paid

Brokers receive compensation from two sources in a typical mortgage transaction. When taking out a mortgage you are usually required to pay an origination fee for the broker’s services. Many brokers charge a “loan processing fee” on top of their origination fee; however, this processing fee is a garbage fee you should not agree to pay. What is a reasonable fee for loan origination? One point, or one percent of your loan amount is reasonable and fair compensation for your mortgage brokers services.

The second way that mortgage brokers receive compensation is from a commission paid by the lender. Commissions are usually paid for selling something…so you might be surprised what exactly your broker sells to earn this commission…it’s a higher mortgage rate. That’s right…your mortgage broker receives a commission from the lender for closing loans with above market mortgage rates. This commission is called Yield Spread Premium and according to the Secretary of Housing and Urban Development is responsible for homeowners in the United Sates overpaying billions of dollars for their home loans every year.

You Can Avoid Yield Spread Premium

Understanding that the rate quotes you receive include commission based markup is the first step to avoiding it. Your mortgage broker receives one percent of your loan amount for every quarter percent that you agree to overpay…tell your potential mortgage brokers that you understand how Yield Spread Premium works and you’ll be in a much better place to negotiate for a wholesale mortgage rate.

You can get started by contacting local mortgage brokers in your telephone book and tell them that you will pay a reasonable fee for loan origination but will not accept a mortgage that includes lender paid compensation or Yield Spread Premium. When negotiating with mortgage brokers you may be more likely to be successful negotiating with mortgage brokers that are self employed; representatives at a large brokerage firm may not have the authority or willingness to negotiate over Yield Spread Premium.

You can learn more about mortgage rates and refinancing your home with a wholesale loan by registering for a free video tutorial. Register today while these videos are still a free offer and you’ll learn how to avoid the retail markup and garbage fees that you hear about in the news.

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Less than 48 hours after it was specifically named as a target of a state investigation of major bond rating agencies and insurers, MBIA announced a record quarterly loss after writing down $3.5 billion.

With all the talk of interest rate cuts refinancing has become a hot topic for many homeowners. Here are the answers to several common questions regarding the current rate cuts and deciding if taking out a new mortgage is right for your situation.

When Does It Make Sense to Refinance a Mortgage?

Question: Is it true that you should not refinance unless your new mortgage rate is two percent lower than your existing rate?

Question: When should I apply to refinance my mortgage? Do the fees and hassles of refinancing outweigh the financial benefits?

Question: I am thinking about selling my house but could really use the lower rate now. If I refinance now and then decide to sell my home will I be hurting my chances of qualifying for another loan?

Answers:

Forget those rules that say you should never refinance unless your new mortgage rate is “this” much lower than your old rate; it’s best to decide if mortgage refinancing makes sense for you by evaluating the loan on a cost vs. savings basis. You can do this by calculating your break even point by dividing all of your fees and closing costs by the monthly savings from your new loan. Suppose for example that your new home loan has a payment $200 less than your old mortgage. If it cost you $3,500 to take out the new loan divide $3,500 by $200 and you’ll see that your break even point comes after 18 months. This is when you being to realize a savings from the new, lower mortgage payment.

If you plan on keeping your home long enough to reach this break even point and realize a savings, refinancing probably makes sense in your situation and will save you money. If you plan on selling before your break even point you could be losing money by refinancing. How can you evaluate your potential savings from refinancing? You’ll need to shop for rate quotes; however, the rate quotes you receive online or from a mortgage broker include commission based markup. If you want the absolute lowest mortgage rate possible you’ll need to get a wholesale rate. (more on wholesale rates later)

Which Term Length?

If you refinance with a 30 year mortgage you’ll be starting your loan amortization from scratch. What is amortization? It simply describes the process of repaying a mortgage loan over time. Mortgages are front loaded with interest so in the early years the majority of your payment is applied to interest and you build equity in your home at a very slow rate. This could be considered a disadvantage to refinancing, especially if you tap into your equity in the process. Another option is to choose a shorter term like 15 years. Your payments will be higher but you’ll build equity in your home at a faster rate and pay less to the lender in finance charges.

Refinancing now won’t hurt your chances of qualifying for another mortgage several months or a year from now if you sell your home. You just won’t be able to recoup all of the expenses you pay when taking out the new mortgage. Also, make sure your existing loan does not include a prepayment penalty, or if it does that you include this fee in your cost vs. savings analysis.

Is it too early to refinance my mortgage?

If you just purchased your home within the last year and have an interest rate 6 percent or higher, is refinancing worth it? There are no rules saying that you have to wait a certain amount of time before refinancing; you only need to calculate your break even point and make sure that you factor in the prepayment penalty if you have one.

What About Wholesale Mortgage Rates?

The mortgage industry has a dirty little secret that you need to be aware of. All rate quotes you receive online or from your broker include commission based markup. The problem with this markup is that you’re already paying the broker an origination fee for their services; in addition to this fee the broker marks up your mortgage rate for a commission without fully disclosing what they’re doing. The commission your broker receives for marking up your mortgage rate is called Yield Spread Premium and according to the Secretary of Housing and Urban development is the reason American homeowners will overpay nearly sixteen billion dollars for their home loans this year.

The good news for you today is that you can avoid Yield Spread Premium and refinance your home with a wholesale mortgage rate. Register for our free video tutorial and you’ll learn how to recognize Yield Spread Premium, negotiate to avoid paying it, and avoid lender junk fees when refinancing. Sign up today and get in while these videos are still a free offer.

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Wells Fargo Mortgage is a division of Wells Fargo Bank, one of the largest banks created following a merger with Norwest bank and is currently the second largest mortgage lender behind Countrywide home loans. Are you considering refinancing with Wells Fargo Mortgage or do you already have a mortgage from Wells Fargo? Here are several tips you need to know about bank originated mortgage loans to avoid paying too much for your home loan.

Wells Fargo mortgage has earned a reputation similar to Countrywide as a predatory lender. They hook their customers with a free checking account and then sock it to with ridiculous fees and overpriced mortgage and investment accounts. Consumer watch groups like ACORN are constantly charging Wells Fargo with predatory lending especially with their home loans targeted to people with poor credit and home equity loan offerings.

Wells Fargo has even had their home office picketed on several occasions by consumer activists. As a former Wells Fargo Customer I can tell you that I recently switched my checking account to Bank of America and have never been happier. For checking and savings accounts you can’t beat B of A’s free accounts. But what about mortgage loans?

What’s Wrong With Bank Originated Mortgage Loans?

There’s plenty wrong with bank mortgage loans that your banker isn’t telling you. The biggest issue you need to be aware of is called Service Release Premium. Simply put this bank premium is the difference between the mortgage rate you could have had and the one the bank gives you. There are two types of mortgage rates out there today…wholesale rates offered by wholesale lenders and mortgage rates that have been marked up by banks and other mortgage companies for profit.

Another important distinction about banks…they aren’t legally required to play by the same rulebook as other mortgage companies and brokers. Banks are exempt from a very important law that protects homeowners from predatory lending practices called the Real Estate Settlement Procedures Act (RESPA). The Banking Lobby spent millions of dollars bribing your elected officials (after all, that’s how Washington works now) to have the disclosure laws changed so that banks are not required to disclose their profit margin or markup on your loan. Mortgage brokers are now required to disclose their markup known as Yield Spread Premium on the Good Faith Estimate and HUD-1 Statement; however, banks are not required to comply with the same law.

With this in mind why would you even consider taking out a mortgage from a company that doesn’t have to play the rules? It’s not just Wells Fargo that uses this unfair practice to exploit homeowners; it’s every bank and credit union out there. Banks do this because they make the majority of their profit by selling their mortgage loans to investors. The bank knows that loans with above market interest rates bring them the most profits and this is how they run their businesses.

If you’re not yet convinced that bank originated mortgage loans are not the way to go, try comparing true wholesale rates offered by an honest mortgage broker to the rate sheets offered by your bank and you’ll see that Wells Fargo Mortgage is not the way to go when refinancing your home loan. If you’d like to learn more about refinancing your mortgage with a wholesale rate and finding an honest broker to help you, register for our free video tutorial.

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You can’t turn on the television these days without hearing about how low mortgage rates are. Following a series of interest rate cuts by the Federal Reserve, mortgage rates are at their lowest levels since 2004… but how do you know if a new mortgage is right for your situation? Taking out a new mortgage loan costs money and here are several tips to help you decide if refinancing is right for your situation.

Determine Your Break Even Point

You may have heard an old wives tale known as the “Two Percent Rule” of mortgage refinancing. This “rule” states that you should not refinance your mortgage unless the new mortgage rate is exactly two percent lower than what you’re already paying. This rule is complete rubbish! The decision whether or not it makes sense to refinance is actually quite simple in most cases and can be answered with a single question.

“How Long Before I Save Money?”

The answer to this question is also fairly simple to calculate. Take the amount of money you save with a lower mortgage payment and divide your closing costs and fees by this savings. This will tell you how many months it will take to realize a savings from the new home loan; if this length of time is acceptable to you than it probably makes sense to refinance in your situation.

Here’s an example to illustrate the decision to refinance your mortgage. Suppose for instance taking out a new home loan lowers your mortgage from $1100 to $900. This is monthly savings of $200 and your closing costs, fees, and points total $4,000. Divide $4,000 by the $200 you’re saving and it will take you 20 months to recoup the expense of refinancing your mortgage.

Beware Markup & Junk Fees

Once you’ve decided to go forward with a new mortgage it’s important to do your homework and learn how mortgage rates are quoted if you want the lowest possible interest rate. Homeowners who do this are able to refinance with wholesale mortgage rates without paying unnecessary fees. You can learn more about wholesale mortgage rates by registering for a free video tutorial; register today while these videos are still a free offer.

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