Archive for March, 2008
HUD Secretary to Resign
March 31st, 2008
Reuters is reporting that the Secretary of Housing and Urban Development will announce his resignation Monday morning. Secretary Alphonso Jackson is expected to step down effective April 18. His resignation reportedly comes after accusations that he improperly handled the awarding of federal contracts within the department.
Massive Financial Regulatory Changes Proposed by Paulson
March 31st, 2008
Treasury Secretary Henry Paulson will confirm on Monday widely circulating weekend rumors that the Bush Administration is seeking a sweeping overhaul of financial regulatory systems in the country.
Senator McCain Vows no Politics with Housing Crisis
March 28th, 2008
Senator John McCain was the second candidate to outline his solutions to the housing and credit situation. He restated the history leading up to the current situation and placed the blame for the crisis on:
No Fee Mortgage Loans Don’t Exist
March 27th, 2008
If you’re considering a “no cost” or “no fee” mortgage loan for your home loan there are several things you need to know about these loans to avoid paying too much. Whenever lenders talk about “no fee” mortgage loans they are always trading off a higher in exchange for lender fees paid at closing. Here are several tips to help you avoid falling for the “no closing cost” lie with your home mortgage loan.
What are no cost mortgage loans? No closing costs loans are simply a gimmick to get your business. There will always be third party closing costs that cannot be waived…if your lender is “waiving” these costs they may be paying them for you; however, they will mark up your to cover the cost.
When you take out a mortgage the person arranging your loan typically slips .50 to .75 percent markup of your interest rate to get a commission. If you take out a no cost mortgage you will have this markup plus as much as a full point markup from the lender. This higher mortgage interest rate can result in paying hundreds of dollars extra each month that you keep the loan. This is true of both the mortgage lenders and banks you see offering “no closing cost mortgages” as well as the “flat fee” loans.
Suppose you take out a $350,000 mortgage to purchase your home. The mortgage rate you qualify for paying your closing costs is 6%; however you elect to take a 6.75% mortgage to avoid paying closing costs. Your monthly mortgage payment at 6.75% on a 30 year fixed rate loan will be $2,270 per month. If you paid the closing costs upfront your monthly payment at 6% would have only been $2098. That’s an extra $2,064 you’ll pay every year you keep the loan.
In five years this “no fee” mortgage has cost you a whopping $10,320…money you’d still have in your pocket had you elected to pay your closing costs up front. You can learn more about saving money on you home loan while avoiding unnecessary markup of your mortgage rate and garbage fees with my free video tutorial.
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Mortgage Rates Lower on CPI, Retail Sales Data
March 26th, 2008
Long term mortgage rates fell dramatically during the week ended March 20 according to the Primary Mortgage Market Survey released by Freddie Mac.
Activity in the applications area was way up. Volume increased 48.1 percent on a...
Home Prices Continue 5-Month Decline According to New Report
March 25th, 2008
The Standard & Poor's S&P/Case-Shiller Home Price Indices (HPI) for January which were released on Tuesday are reporting further bad news on the home value front.
The HPI which tracks, in two different indices, 10 and 20 metropolitan statistical areas (MSAs) across the United States, reported that...
Some Good News Regarding Home Sales Comes in NAR Report
March 24th, 2008
In what may be the first fluttering of a recovery in the housing market, sales of existing homes last month actually increased from January levels according to the National Association of Realtors (NAR.)
NAR's chief economist Lawrence Yun said the increase is encouraging. "We're not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing," he said.
Price for Bear Stearns Likely to Rise
March 24th, 2008
Those investors who insisted on buying or holding on to their Bear Stearns stock, keeping prices at near three times the $2 per share being offered by J.P. Morgan Chase appear to have been on to something.
Mortgage Rates Predictions
March 24th, 2008
Home s 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 predict; 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 s 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 trying to predict when mortgage rates will bottom out 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 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 registering for my free home mortgage video tutorial…and don’t let anyone pull the wool over your eyes making meaningless mortgage rates predictions.
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How to Get the Lowest Mortgage Rates
March 23rd, 2008
Most people think that to find the lowest s you have to find the best mortgage lender and this just simply isn’t the case. The person arranging your loan has more to do with your than you think…choose the wrong person for the job and you’ll overpay thousands of dollars every year you keep the loan.
What I’m talking about here has nothing to do with your credit or qualifying ratios; it’s all about the markup of your mortgage rate for a commission. Here are the basics you need to know before refinancing your home loan to get the best mortgage rates.
Understanding Mortgage Rate Quotes
Most of the rate quotes you see online are simply garbage. In order to accurately quote you a mortgage rate your mortgage broker needs sixteen pieces of your personal financial information. If you get quotes without providing the intimate details of your finances the person you’re dealing with has no intention of honoring that rate. Assuming that you have provided this information the quotes you receive are not the mortgage rates you qualify, they have been marked up to get a commission from the lender behind your loan.
What is Commission Based Markup?
Most brokers charge an origination fee to you for their services. This fee is disclosed on your Good Faith Estimate and HUD-1 settlement statement. What your broker isn’t telling you is that they get paid by the lender also for marking up your mortgage rate. This markup is what makes mortgage loans “retail” products. Just like buying a car where the dealership markups up your car for profit the mortgage broker marks up your loan to make a buck. This is considered dishonest by many because you’re already paying an origination fee for their work and this markup can cost you thousands of dollars every year.
Yield Spread Premium
The technical term for the fee paid by the lender is Yield Spread Premium. Basically the way it works is the lender pays your broker .25 percent of your home loan for every quarter percent they overcharge you. You might think that a quarter percent isn’t much but in a moment I’ll show you what this markup does to your mortgage payments. Yield Spread Premium is rarely disclosed on the Good Faith Estimate and can be hard to recognize on your HUD-1 statement. The best way to avoid this unnecessary markup is to be upfront with your mortgage broker about your intentions for the loan.
Here is an example to illustrate the markup of your mortgage rate by the broker. Suppose you are refinancing your home for $250,000 and the broker quotes you a rate of 6.75 percent with an origination fee of 1.5%. You’ll pay the broker $3,750 at closing for this fee. Assuming that you take out a 30 year home loan with a fixed mortgage rate your monthly payments for this loan will be $1,622. What your mortgage broker isn’t telling you is that you actually qualified for a 6% mortgage rate and they’ve marked it up for the Yield Spread Premium. If you had actually gotten the mortgage rate you deserve in this example your monthly payment would be $1,498. This is a difference of $1,488 every year you keep this loan…money you’ll pay for no good reason!
Refinance With Wholesale Rates
Homeowners who learn to recognize Yield Spread Premium can find mortgage brokers willing to work without the markup. It is possible to refinance your home paying only a one percent origination fee saving thousands of dollars every year. You can learn more about doing this yourself by registering for my free home loan refinancing video tutorial.
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