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Are Your Buyers Being Fleeced? Special Report

By
Mortgage and Lending with John Davis, Home Loans by U, Inc.

Special Report - 5 Ways Mortgage Brokers Cost You More

Higher Interest Rates/ Higher Costs over Time (LOOK AT EXAMPLE PLEASE)

The mortgage broker charges you a higher interest rate than what you qualify for. This difference lines the broker's pocket while costing you thousands of dollars over the life of your loan.

This is because the bank charges one rate at wholesale prices (PAR RATE), but the mortgage broker sells you a higher rate at retail prices so they can receive a commission on your rate directly from the lender.

Even if lender interest rates go down, the mortgage broker does not necessarily pass on the savings to you. The broker sees it as an opportunity to make more profit. He or she simply pockets the difference or in some cases if the rate goes higher passes the cost on to you.

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Here's how mortgage brokers make you pay more. In traditional mortgage broking houses, this is what typically happens:

The mortgage broker receives daily "Rate Sheets" from various banks and lenders. These charts give information about how much interest each bank is charging to borrow its money that day.

The amount that the bank charges is called the "Par Rate." This is basically the wholesale rate only available to brokers.

The mortgage broker chooses a Wholesale Rate and the target sale rate for the customer.

The broker adds more to the par rate and offers this higher rate to the customer. This difference, called the "Yield Spread," is the broker's profit. It is a commission that the bank pays to the broker for selling the loan program and rate. The rate increase depends on how much the broker wants to make on the back of your loan.

The customer receives an interest rate at retail price, NOT WHOLESALE.

For example:

The bank sends out a Rate Sheet. This rate sheet will tell broker that the PAR RATE today is 5.625%. This rate pays no commission at all. The broker then decides what rate they think they can sell you. They then move the rate higher, in some cases points higher, to make commission on your loan amount.

The difference between what the bank charges and what the broker sells to you in interest rates may seem small. But over the life of the loan, it can add up to thousands of dollars out of your pocket.

For example, on a $300,000 loan, here is what it will cost you over time:

6.25% vs. 5.625%

 

YEARS PAYMENT SAVINGS INTEREST SAVINGS TOTAL SAVINGS MONTHLY AVG. SAVINGS

3 YEARS

$4,326.48 $5,632.85 $9,959.33 $276.64

5 YEARS

$7,210.80

$9,384.99 $16,595.79 $276.58

15 YEARS

$21,632.40

$27,384.98 $49,017.38 $272.31

30 YEARS

$43,264.80

$43,267.48 $86,532.28 $240.74

The broker will tell you that the yield spread is simply a bank compensation that does not affect you as a borrower. But in fact, it does. You pay that commission and rate over the life of the loan.

At HomeLoansbyU.com, We do not charge interest rates at retail prices and you do not pay thousands of extra dollars over time. You get rock-bottom; wholesale interest rates straight from the lender.

Motivated by Commissions

The vast majority of mortgage brokers are paid by commission only. They need to sell you as expensive a loan package as possible in order to make high returns for themselves and the company.

The loans are then padded with unnecessary fees and inflated rates, which fatten the wallets of mortgage brokers and the companies they work for. Their primary goal is to make as a high a profit as possible. They are not motivated to serve you. They are motivated by commission.

At HomeLoansbyU.com, our staff is paid a salary, NOT COMMISSION. There for not motivated by commissions. They are motivated by finding you the best program and rate possible.

High Origination Fees

Mortgage brokers charge you "origination fees" to secure home loan. These fees can range from half to two "points, which is a percentage of the entire loan amount. The typical fee is one point, or one percent, of a loan.

For example, on a $300,000 loan, one point is one percent, or $3,000. The mortgage broker tells the buyer that "everyone charges origination fees." That's not true. This money is commission and totally unnecessary to pay.

At HomeLoansbyU.com, we do not charge origination fees. You are charged a flat fee of $1495 for the entire loan.

Lack of Training

Most mortgage brokers lack training. Many states do not require brokers to have a great deal of formal training, professional licenses, or code of ethics.

Yet mortgage brokers are helping home buyers like you to make one of the biggest financial decisions of your lives. Brokers can sell you loans and rates that do not help your financial portfolio over time, only enhance their commissions.

The wrong loan can cost you thousands of dollars at closing and over the life of your loan - if not your home itself.

At HomeLoansbyU.com, our staff members are experienced, knowledgeable and trained on all loan programs. We get you the best deal for your situation.

Surprise Closings

Imagine that you are a young couple or first-time homebuyer. Or maybe you are refinancing your existing home.

If you are a first-time buyer, you are about to make one of the biggest purchases of your life.

After months of searching for a house, doing due diligence, qualifying for a loan, and getting the loan approval, you are sitting at the closing table, ready to sign mortgage papers.

But you find out that the interest rate is no longer 5.75 percent, as the mortgage broker first told you. It is now 6.75 percent. This means your payment is a lot higher than you anticipated and out of your budget. You also come to find that your closing cost are now over $12,000 and you were told it would be $10,500.

What do you do? Walk away?

Or let's say you are refinancing an existing house. You are going to pull out $55,000 in cash from the equity. You've been counting on that check pay down credit card debt and maybe take a long deserved family vacation.

You are at the closing table and find that the interest rate and monthly payment is now higher than what the broker originally promised, and because of origination and other fees you are only getting a check for $48,000.

What do you do? Walk away?

Well, statistics show that 7 out of 10 homebuyers will stay and sign the documents. They have been hijacked, and in most cases feel victim to greed. But they are too tired to walk away.

The broker makes more money. The homeowner pays more for the life of the loan.

At HomeLoansbyU.com, you do not have surprise s at closings. The rates and fees are explained to you from the beginning will be exactly what you pay at the closing. You feel informed, calm and assured.

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