Financial Services News

If you’re shopping for a new home mortgage loan, the interest rate you receive is important because it helps determine your monthly payment amount. There are a number of other factors to consider when choosing a home mortgage refinance loan; here are several tips to help ensure you get a good deal and a good mortgage rate.

Comparison shopping for a low mortgage rate will not guarantee you a good loan. At best you’ll end up with the best of the worst mortgage offers available. At worst you’ll overpay thousands of dollars every year you keep the loan. The reason for this is that nearly every mortgage quote you receive when comparison shopping includes the hidden markup known as Yield Spread Premium. If you’re not familiar with this term you’re paying too much for the mortgage you have now.

What is Yield Spread Premium? When you qualify for a home mortgage refinance loan the wholesale lender behind your mortgage approves you for a certain interest rate. You mortgage representative knows this interest rate; however, they mark it up because the lender pays them a commission for overcharging you. That’s right, for every .25% that you overpay your loan representative receives a bonus of 1.0% of your mortgage amount. This bonus is in addition to the fees you are already paying for their part in arranging your new home mortgage loan.

Homeowners who unknowingly accept a mortgage that includes this markup pay thousands of dollars every year unnecessarily. You can avoid Yield Spread Premium with your home mortgage refinance loan if you’re upfront with the loan representative while comparison shopping. Tell your mortgage representative that you will not tolerate Yield Spread Premium, that you’ll pay a reasonable origination fee and any necessary third party settlement fees. Once you find a mortgage company that agrees to these terms, and any honest company would, you are in a position to choose the best mortgage for your financial situation. You can learn more about shopping for the best home mortgage refinance loan while avoiding costly mistakes like Yield Spread Premium with our free mortgage video tutorial.

Tags: Home Mortgage Refinance Loan

The Internet is an excellent resource for comparing mortgage rates. The only problem with online rate quotes is that unless you find mortgage companies and brokers that will not charge you Yield Spread Premium, the quotes you receive have been marked up unnecessarily. Here are several tips to help you compare mortgage rate quotes without overpaying for your next mortgage.

If you are a homeowner with good credit and are not borrowing more than $415,000 to refinance your mortgage ($415,000 is the 2007 conforming loan limit set by Fannie Mae and Freddie Mac), your primary consideration for the new loan should be the interest rate and fees you pay. This means you need to find rate quotes that do not include Yield Spread Premium.

If you’re not already familiar with Yield Spread Premium, this is your loan originator’s markup of your mortgage rate for a commission. Your loan representative marks up your interest rate to get a bonus from the wholesale lender in addition to the fees you are already paying for loan origination. If you accept a mortgage that includes Yield Spread Premium you are effectively paying double for the new loan; not to mention thousands of dollars in unnecessary mortgage interest.

When comparison shopping for a new mortgage, remember that rate quotes by themselves are basically worthless. You also need to consider fees and closing costs listed on the Good Faith Estimate before making a decision. The Good Faith Estimate is an itemized list of all fees associated with a mortgage that the lender is required to provide you within three days of receiving your application. This three day rule doesn’t help you when you’re comparison shopping; however, most mortgage companies will provide you a Good Faith Estimate before you submit an application if you ask for it.

Watch out for anything on the Good Faith Estimate that resembles an application fee, broker courier fee, or lock fee. These are mortgage garbage fees you should simply refuse to pay. Tell your loan representative that you understand how Yield Spread Premium works and will not accept any loan offer that includes this markup. You can learn more about refinancing your mortgage while avoiding expensive homeowner mistakes like Yield Spread Premium with our free mortgage video tutorial.

If you’re considering using the Internet to find a new mortgage loan, the best advice you can get is to read before you click. There are a number of situations where using an online lender will get the best deal; however, it is important to read the terms and conditions before providing your information.

Many of the so called “mortgage” sites you visit on the Internet receive a computerized loan origination fee for collecting your contact information and financial details. There’s nothing wrong with sites that generate mortgage leads; however, the problem comes with lenders that pass this fee to you on your Good Faith Estimate. Lending Tree is notorious for the Computerized Loan origination fees that come out of your pocket. Take a look at the Licenses and Disclosure statement found on their website and you’ll see that they can receive as much as $1,300 for selling your information. This fee then appears on your Good Faith Estimate and you are obligated to pay it.

Would you be happy paying a mortgage site $1,300 just for filling out contact forms requesting information? This is why you must read before you click. No one likes to read the user agreements and disclosure statements found on these websites; however, if you read before clicking you can save yourself a lot of money and frustration. You can learn more about refinancing your mortgage while avoiding costly mistakes with our free video tutorial.

Tags: mortgage tutorial, mortgage refinancing, mortgages for dummies, refi home loan

If you are in the process of refinancing your home loan, your mortgage company has a dirty secret they don’t want you to know. This secret is how mortgage companies overcharge homeowners for the interest rates they receive. If you learn how to recognize this markup of your mortgage interest rate you will save thousands of dollars when refinancing. Here is what your mortgage company doesn’t want you to know when refinancing your mortgage.

How do mortgage companies mark up your interest rate? This markup is called Yield Spread Premium and happens when your loan representative marks up your mortgage rate for a commission from the wholesale lender. Mortgage companies do this without telling you and rarely does this markup appear on your Good Faith Estimate.

Your mortgage company marks up the interest rate you were approved because the wholesale lender pays them a bonus of one percent of your mortgage amount for every quarter percent that they overcharge you. The difference between the mortgage interest rate you qualified and the rate you close is the Yield Spread Premium. Here’s an example of a mortgage refinancing transaction with Yield Spread Premium.

Suppose you are refinancing your California mortgage loan for $500,000. Your mortgage representative tells you that you qualify for a 7.5% interest rate and will pay 1.5% for the origination fees. What your mortgage company isn’t telling you is that you qualified for a 7% mortgage rate before Yield Spread Premium. You’re already paying the mortgage company $5,000 in origination fees; however, they are helping themselves to an additional $10,000 of your money by marking up your interest rate. The mortgage company walks away with $15,000 and you’re stuck paying an unnecessary .5% on a $500,000 mortgage loan. The high cost of California Real estate greatly magnifies the problem of Yield Spread Premium.

How can you avoid paying this ridiculous markup of your mortgage interest rate? Homeowners who learn to recognize Yield Spread Premium can negotiate to avoid paying the markup. You can learn how to avoid Yield Spread Premium and other costly mistakes with our free mortgage video tutorial.

Tags: California Mortgage Refinance, California Mortgage Loan

If you are considering a new mortgage to refinance you California home, comparison shopping can save you a lot of money if you do it correctly. Before evaluating loan offers you need to have a discussion with potential mortgage companies and brokers regarding Yield Spread Premium. The high cost of California real estate severely magnifies the problem of Yield Spread Premium and could result in overpaying thousands of dollars each year.

If you’re not already familiar with Yield Spread Premium when it comes to California mortgage loans, here’s a quick introduction. Yield Spread Premium is the markup of your mortgage interest rate by your broker for a commission. When your application to refinance your California mortgage is approved, you qualify for a specific mortgage rate from the wholesale lender that approved your loan. Your mortgage broker knows the rate you qualified; however, this person marks it up without telling you because the wholesale lender pays them a bonus for overcharging your.

That’s right, for every .25% you overpay for the loan your mortgage broker receives 1% of the loan balance in addition to the origination fees you’re already paying. Factor in the high cost of homes in California and a quarter percent becomes a lot of money. This is money you have to pay month in and month out for as long as you keep the loan.

How do you avoid Yield Spread Premium when refinancing your California mortgage? The first discussion you have with a potential mortgage broker needs to be about Yield Spread Premium. Tell your mortgage broker that you understand how it works and will not tolerate the markup with your new mortgage. Tell your mortgage broker that you will pay a reasonable fee for the origination of your California mortgage and all necessary third party settlement costs but will not accept lender paid compensation. Any honest mortgage broker would agree to these terms. Once you’ve found an honest California mortgage broker you are ready to begin comparison loan offers to find the perfect mortgage for your situation. You can learn more about refinancing your California mortgage loan by registering for our free mortgage tutorial.

Tags: California Mortgage Refinance, California Mortgage Broker

NovaStar Financial is currently the subject of a class action lawsuit for charging its borrowers Yield Spread Premium without disclosing the markup. Yield Spread Premium rewards loan originators for arranging mortgage loans at an above market interest rate.

Here’s an example of how Yield Spread Premium works. Suppose you qualified for a 6% mortgage rate from the wholesale lender that approved your mortgage. Your mortgage broker tells you that you qualified for a 6.25% mortgage rate and you accept the loan. Because the mortgage broker sold you a loan at 6.25% the wholesale lender pays them a bonus of 1% of your mortgage amount. The difference between the rate you qualified and the rate you closed is Yield Spread Premium.

The higher the broker marks up your mortgage interest rate, the more money they receive from the wholesale lender. Wholesaler lenders benefit from Yield Spread Premium because they are able to sell your mortgage for more money on the secondary market. Do mortgage brokers abuse Yield Spread Premium at your expense?

Ask the homeowners behind the NovaStar Financial class action lawsuit. The lawsuit alleges NovaStar Financial took advantage of homeowners in Washington State. These homeowners were charged higher mortgage rates that included Yield Spread Premium without the lender disclosing the markup. An internal memo from NovaStar Financial submitted as part of the lawsuit encourages brokers to close without disclosing Yield Spread Premium. The fact that this lawsuit was granted class action status is great victory for Washington homeowners; however, NovaStar Financial isn’t the only dirty mortgage lender out there. Nearly every mortgage lender in the United States is guilty of rewarding loan originators for overcharging homeowners with Yield Spread Premium.

Tags: NovaStar Financial, Yield Spread Premium

If you are in the process of refinancing your mortgage it is important to ensure your existing mortgage does not have a penalty for early repayment. Mortgage lenders include prepayment penalties in their loan contracts to discourage homeowners from refinancing their loans. If you are unsure of whether or not your existing loan includes a prepayment penalty check your loan contract or call your lender. If your existing loan includes a prepayment penalty, find out when the penalty expires and how much you will have to pay before it expires.

If you’re in the process of shopping for a new mortgage and have good credit, there is no reason to accept a mortgage that includes this prepayment penalty. Always ask your loan representative if the mortgage includes the penalty as many unscrupulous representatives will try and slip one past you. Some representatives receive a bonus when you accept this penalty; always ask if your mortgage includes the penalty, if the answer is yes then ask why the lender feels they need to include one.

If you have poor credit there may be no way around a mortgage that includes a prepayment penalty. You might be able to negotiate with your lender to pay a point or a quarter percent higher mortgage rate in exchange for dropping the prepayment penalty; however, most bad credit mortgage loans include this penalty. If you are accepting a mortgage that includes a prepayment penalty because of your credit, you need to have a penalty that expires before you plan on refinancing the loan.

The goal for most homeowners with bad credit mortgages is to refinance after two years of making on-time payments. After 24 months you have usually built up sufficient credit to qualify for a traditional mortgage with a competitive mortgage rate. When you’re eligible for a conventional mortgage you won’t want the added expense of a prepayment penalty preventing your from a better mortgage loan. You can learn more about your mortgage refinancing options with our free, six-part video tutorial.

Tags: Prepayment Penalties and Mortgage

If you are considering refinancing your California home loan, there are a number of costly pitfalls you need to be aware of. The high cost of homes in California is bad enough without every Tom, Dick, and Harry with a mortgage license helping themselves to your money; however, that’s exactly how mortgage loans work. Yield Spread Premium is the retail markup of your California mortgage rate and will result in your paying thousands of dollars in unnecessary finance charges.

Your mortgage representative marks up the interest rate you qualified when refinancing your California mortgage because the wholesale lender pays them a bonus for overcharging you. That’s right, for every quarter point you unknowingly agree to overpay, the loan representative receives a bonus of one percent of your loan amount. Factor in the high cost of real estate and Yield Spread Premium is the single largest scandal facing the California homeowner; however, this unnecessary markup of your mortgage interest rate is perfectly legal.

How can you avoid paying Yield Spread Premium when refinancing your California home loan? It’s simpler than you think; once you understand how mortgage companies and brokers make their money you can negotiate to pay less. Start by telling your mortgage broker that you understand Yield Spread Premium and will not tolerate it with your California home loan. Tell them that you will pay a reasonable origination fee for their services and all necessary third party settlement charges, but will not tolerate any form of lender paid compensation for a higher mortgage rate.

You can learn more about refinancing your California home loan while avoiding costly mistakes such as computerized loan origination fees with our free mortgage tutorial.

Tags: California Home Loan Refinance

Refinancing a California mortgage loan can be an intimidating process for many homeowners. Comparison shopping will help you find a variety of loan offers to meet your needs; however, if you want to avoid overpaying for your next California mortgage you need to understand how mortgage companies make their money and speak their lingo. Loan representatives and brokers are paid by commission; the more expensive your loan, the higher their commission.

The California mortgage loan that nets your loan representative the highest commission is probably the worst loan for your situation. This is why it’s important to understand your mortgage needs before you being shopping for a new loan. How do California homeowners overpay for when refinancing their mortgage loans? A little known markup called Yield Spread Premium will account for nearly $16 billion dollars in unnecessary mortgage interest this year, a large portion paid by California homeowners.

What is Yield Spread Premium? The interest rate you qualify is set by a wholesale mortgage lender when your application is approved. This mortgage rate is marked up by your loan representative because that wholesale lender pays them a bonus for overcharging you. That’s right, for every quarter percent that you agree to pay above the mortgage rate you were approved your loan representative receives a bonus of one percent of your loan amount. This bonus is paid in addition to the sizeable origination fees you’re already paying for their services.

The high price of California real estate means you’re already paying a large fee for mortgage origination; often in excess of one percent of your loan amount. If you agree to pay Yield Spread Premium your loan representative gets paid double for their work and you pay thousands of dollars every year unnecessarily. Fortunately, you can avoid the high cost of Yield Spread Premium when refinancing your California mortgage loan. To learn more register for our free mortgage tutorial “Five Things You Need to Know When Refinancing Your California Mortgage.”

Tags: california mortgage refinance

If you are considering refinancing your home loan with a mortgage broker, you might want to reconsider. Mortgage brokers can be an excellent resource when refinancing; however, if you’re not careful you could find yourself overpaying thousands of dollars. Here are several reasons that you might reconsider refinancing your home loan with a mortgage broker.

I. Mortgage Brokers Are Paid by Commission

Mortgage brokers make a living by commission and the loan that nets them the largest commission is probably not the best loan for you. If you don’t fully understand the loan you are getting you could find yourself with a risky interest-only or option Adjustable Rate Mortgage that you can’t afford.

II. Mortgage Yield Spread Premium

In addition to pocketing the origination fees you pay when refinancing your loan, the mortgage broker marks up your mortgage interest rate to receive a bonus from the wholesale lender behind your loan. That’s right, for every .25% you agree to pay above the mortgage rate you qualified, your mortgage broker pockets a bonus of 1% of your loan amount. Your broker does this without telling you, and the markup is buried deep in your mortgage’s disclosure statement. This markup of your mortgage interest rate is called Yield Spread Premium and if you pay it you’ll overpay thousands of dollars for your new mortgage loan.

III. Used Car Salesman Mentality

Because mortgage brokers are paid by commission and incentivized by Yield Spread Premium, most are more interested in pulling down a six-figure salary than they are helping you find a decent mortgage. I’m not saying that every mortgage broker out there would swindle your Grandparents out of their Social Security check; however, many of them would. There are no criminal background checks required before getting a mortgage broker’s license and nearly anyone can past a test to become one. If you absolutely have to work with a mortgage broker when refinancing, for example if you have bad credit, you’ll have to watch your broker like a hawk to avoid overpaying.