Shopping For The Right Home Loan

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Mortgage and Lending with Commercial Capital Funding

Shopping for the Right Home Loan

Are you thinking about refinancing your home loan? Are you looking for the best refinance rates available?  If so, than there are several things you should know about the rate quotes you may be finding.  A home loan refinance can quickly lower your monthly payment, allowing you to keep more spending money for yourself; however there are numerous "junk fees" and markups that can cloud that great deal you may have found.  Below are several great tips to help you find a great mortgage rate without overpaying!

Best Home Mortgage Rates

Where are the best home mortgage rates? Numerous homeowners are unable to know a good mortgage rate when they find one because they are unaware of hidden markup and fees.  What is a hidden markup?  It is a way for loan originators, banks and lending institutions to make additional money off of your loan refinance.  Essentially, your interest rate is quoted higher than the bottom line, thus raising your interest rate and allowing your loan originator to make additional money off of your dollar!  How do you bypass this hidden expense?  You must find someone who is willing and able to provide you with a mortgage without marking up your rate.  In other words, you need access to wholesale mortgage rates.  Refinancing (or even purchasing for that matter) with the right originator can save you thousands of dollars in the end.  How do you find the right originator?  Let's first discuss how to find the WRONG one!

Bank Mortgage Loans

Countless Americans think refinancing through a bank is a great deal because they cut out the middle man, thus allowing you the lowest rate, however, there are several issues with bank originated home loans.

Mortgage brokers and lenders are regulated by your State's consumer protection and predatory lending laws as well as the Real Estate Settlement Procedures Act, thus being required to disclose (nearly to the penny) all fees associated with your mortgage loan.  Banks, however, are regulated by the Federal Government and are exempt from your State's mortgage lending regulations.   Although they must abide by the Federal Truth-in-Lending laws there are many loopholes that the banks are able to get around.  Additionally, bank have lobbied the Federal Government so they only need to provide a less-than-accurate Good Faith Estimate and an Annual Percentage Rate based on this estimate.  Due to the loopholes previously mentioned, banks are not required to disclose any of their markup or profit margin on your home loan.

In addition to the lack of regulation, banks are in business just to loan money.  They make a majority of their profit by selling their mortgage loans on the secondary market. Loans with a higher market interest rate make a larger profit for a bank (known as the Service Release Premium) which is why you will never get a wholesale refinance rate from your bank.

How to Get Wholesale Refinancing Mortgage Rates

Obtaining a mortgage loan at a wholesale rate is not as hard as you may think.  You do not need to have special intel or a secret agent, you simply need to shop for the right mortgage broker!  The fact of the matter is, if you want the lowest possible refinance rate, you will need to find a mortgage broker willing to do your loan for a flat, up-front fee who will not mark up your interest rate for a fee (called Yield Spread Premium).

Do you recall how banks profit from selling their home loans to investors for a fee known as Service Release Premium? Well, mortgage brokers are able to collect a similar fee known as Yield Spread Premium.  Yield Spread Premium is a fee paid to a mortgage broker by the mortgage lender for selling a higher interest rate to a borrower.  Although it must be disclosed to you, it is often explained away as a fee that the lender pays the broker and has nothing to do with the borrower's expense.  It would be great if that were true, but unfortunately it is 100% at the borrower's expense, and that expense lasts over the life of the loan!  It is the increased interest rate that results in an increased mortgage payment that comes directly out of the pocket of the borrower.  The most important thing to know about this fee is that although  you may be saving out of pocket expenses during the origination of the loan, in the long run you are better off to just pay the mortgage broker an upfront fee for originating your loan and getting the lowest possible interest rate.  An honest mortgage broker should be able to provide you with both options and tell you the true difference in your mortgage payment with and without your Yield Spread Premium.  If that is disclosed and discussed upfront, than there is no hidden fee because your mortgage broker has revealed it to you!

If you want wholesale mortgage rates for your next home loan, make sure you tell your potential brokers that you understand Yield Spread Premium and you are not interested in a loan that includes a markup.  Offer to pay them a reasonable loan origination fee and you will be on your way to saving money on your next home loan!

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