windhov

Is it better to go through a loan officer or directly to the bank?

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I'm looking to obtain a mortgage loan. I am wondering would I save more money if I go directly to the bank for the loan? Or would it be better to go through a broker? I have excellent credit by the way.

Edited by windhov

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With excellent credit you have access to the best rates available to both the loan officer and the banks... Try calling up both and see what the lowest rate you can get from each would be... I'm probably going to do ours with a loan officer... One who understands our situation our credit and most importantly our lives better than a huge bank would.

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A loan officer is the stiff at the bank you talk to about a mortgage. You probably mean "Is it better to seek a mortgage directly with a lender or use a mortgage broker?" Brokers can generally get you a better deal because they shop lenders for you. However, I've done a lot work for mortgage brokers and I've never met a more shady group of people in my life. They're probably only a half-step up from JDB's on the food chain. My advice is to also seek out smaller, independent "mortgage bankers". They're kind of like a blend between the two.

But in the end, go with who can give you the best deal. You need to be shopping lenders almost as much as you're shopping houses.

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A loan officer is the stiff at the bank you talk to about a mortgage. You probably mean "Is it better to seek a mortgage directly with a lender or use a mortgage broker?"

I thought the bank is the lender? I don't mind shopping around to different lender myself, if I can cut away the middle man (mortage broker) to save money. How do you go to the lender directly?

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Usually Mortgage brokers

(They are like used car salesmen though)

http://www.streetdirectory.com/travel_guide/195524/mortgages/top_10_reasons_to_use_a_mortgage_broker_vs_a_bank_lender.html

Where you end up with the best deal, so ....

The majority of people find that better deal with mortgage brokers. About 65 percent of home loans are originated through brokers.

Also brokers have to itemize certain charges and show where "points" assessed are comming from.

(You know all about the 'point' system of your interest rate?)

Here are 5 pieces of information to demand of your mortgage broker before signing anything

1) Yield Spread Premium - This is what the broker gets paid for marking up the rate of the loan above wholesale. The more of a markup, the more they get paid. It's the same concept as a car salesman being paid more based on

The more of a markup, the more they get paid. It's the same concept as a car salesman being paid more based on how much more he's able to convince his customer to pay above sticker, only the salesmen is your broker, and the desk manager is the lender. There's nothing wrong with the broker making a living, but it's perfectly fair to negotiate this figure, to protect your own financial wellbeing.

2) Current Wholesale Rates and Par Pricing - When a broker hears "What are today's rates?" what they're really hearing is "What rate would you like to sell me today?" When you're asking about rate, make sure to be more specific. "What's today's wholesale rate for a 5 year fixed at par pricing?" It's critical to mention par pricing, as that's the actual wholesale rate before any broker markup.

3) Mortgage Loan Disclosure Statement - It's all very well to accept what your being told at face value, but as my father always said, "a verbal contract isn't worth the paper it's printed on." Brokers will be more than happy to offer the consumer a GFE (Good Faith Estimate), but GFEs leave out some valuable information, like the YSP. You're entitled to an MLDS so make sure you get one.

4) Origination Fee - Make sure to take a look at the origination fee on the MLDS. Despite anything your broker tells you, this money goes directly to the broker's coffers, and is entirely separate from the YSP Your broker's goal is to make a point in front and one in back. That's ridiculous. In total, a point is reasonable, in a ratio negotiated between the you and the broker

5) No Fees/No Closing Costs - Nothing else in life is free, why would this be? Do you think the appraiser and underwriter are going to work pro-bono? Between the notary, escrow, title and other various services you'll need, the entire cost will be close to $3000 Obviously, "No Fees" companies make money elsewhere. Elsewhere would be the YSP. Sure, the dea may look great from the front, but the broker's surely making a killing on the back end

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I'm currently in the same exact spot, dealing with both bank and broker and WILL lock something within the next five days. And I've done this twice before. IMO, if you have stellar credit and no complicated scenarios, then you'll do better straight through the bank. Otherwise, a broker will do just fine.

FYI- rates are absolutely fantastic right now, so don't mess around if you're ready to roll.

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I have seen some things that say dealing with the bank is difficult because the banks don't have the same disclosure rules, so figuring out what your actually paying for is difficult.

The broker has to disclose it all in a semi easy way to understand.

They will have silly things like courier fees ect and you can usually negotiate those off.

If you have friends or family with good experiences ask them who their broker is.

Best bet is to call around get lots of offers make sure your comparing apples to apples and if you want to let the others know so and so is doing this for me so if you can beat that then we can do business.

I don't think its really a good idea to ever go with anyone thereal estate agent suggests ( that's cause I always wonder if their incahoots)

http://www.realestateabc.com/loanguide/closingcosts2.htm

Edited by ditaloca

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There are places that will give rates but their always on mortgage broker websites or bank websites

If you know which type of loan you want or qualify for, like va or fha

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I have seen some things that say dealing with the bank is difficult because the banks don't have the same disclosure rules, so figuring out what your actually paying for is difficult.

Both are required to supply you with a GFE. It makes comparison shopping pretty easy.

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I'm looking to obtain a mortgage loan. I am wondering would I save more money if I go directly to the bank for the loan? Or would it be better to go through a loan officer? I have excellent credit by the way.

Here's the scoop on the difference between banks, and brokers.

First living in Colorado - you are in a very high closing cost state.

Banks have lower closing costs (I use to be a broker). If that's the case why doesn't everyone go directly to banks?

First getting approved by a bank is tougher. Their loan conditions are more stringent. After you pay for an appraisal and a problem comes up (credit, title, etc), you loan is DOA.

On the other hand when you deal through a broker - they are affiliated with several banks where they can shop around if a problem arises.

Using a broker knows where to best deals are, but ultimately it is up to you to call banks and/or brokers to get the best deal.

Last Spring my wife and I refinanced, my credit score was 797, and went went through a broker. Got 4.5% fixed 20yr zero points, low closing costs.

Good Luck.....:)

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First getting approved by a bank is tougher. Their loan conditions are more stringent. After you pay for an appraisal and a problem comes up (credit, title, etc), you loan is DOA.

That doesn't make any sense. Brokers don't have any lending conditions since they're not the ones underwriting the loan. Whether you go directly through a bank or a broker, in the end, it's a bank (or insurer) that's going to approve (or disapprove) your qualifications. Now, a broker might be able to steer you into a different product if one bank says "no", but say a bank is "tougher" is a mischaracterization.

Like any kind of broker a mortgage broker is simply a middle-man. Travel agents, temporary staffing services, and credit counseling services are also middle-men. They take a cut in exchange for doing some of the legwork for you. Some brokers provide very valuable, specialized knowledge in exchange for their commission, while others are simply greedy businesspeople who prey on customers' ignorance. Personally, I'm a hands-on kind of guy who is quite adept as using Google. Combine that with innate distrust of anyone who's trying to sell me something and I rarely call upon the services any type of broker.

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Brokers don't have any lending conditions since they're not the ones underwriting the loan..

ShortBus

Let me correct you, the brokers job is to initiate a completed 1003 loan application with a borrowers documents and the tri-merge credit report, to a prospective lender. In return that lender returns a form call "Loan Conditions", which states a borrower is preapproved if stated conditions are met. The broker has to chase(satisfy), all conditions before an Underwriter will accept loan.

After the completed appraisal (with appraisers license) and title search (which is initiated by the broker), then the physical hard copy folder is sent to the lender for final underwriting review. That's when additional conditions are brought up.

In the decade I was a L/O - I fought it out with many underwriters to get conditions waved and loans closed.

You said "Brokers don't have any lending conditions" they are the ones doing the dirty work satisfying the conditions from the underwriter....lol.

.

Edited by 2ndTimeAround

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Thanks everyone for your inputs. I decided to go directly to the banks first and see if I can get a good deal. If not then I'll try a broker.

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Like any kind of broker a mortgage broker is simply a middle-man. Travel agents, temporary staffing services, and credit counseling services are also middle-men. They take a cut in exchange for doing some of the legwork for you.

To add to that...banks have fees too. Whether you are paying 1% orgination to a broker or a bank is neither here nor there, your still paying it. Nobody works for free.

Some brokers provide very valuable, specialized knowledge in exchange for their commission, while others are simply greedy businesspeople who prey on customers' ignorance. Personally, I'm a hands-on kind of guy who is quite adept as using Google. Combine that with innate distrust of anyone who's trying to sell me something and I rarely call upon the services any type of broker.

Judging from this response and your initial response about brokers and loan officers being "stiffs", greedy and are only out to take advantage of people...it sounds as though you may have had a very unpleasant experience with them, which is why you've chosen to take matters into your own hands by "Googling" information. The fact of the matter is, not all brokers/loan officers are terrible. So its a little unfair to clasify us as a whole.

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Judging from this response and your initial response about brokers and loan officers being "stiffs", greedy and are only out to take advantage of people...it sounds as though you may have had a very unpleasant experience with them, which is why you've chosen to take matters into your own hands by "Googling" information. The fact of the matter is, not all brokers/loan officers are terrible. So its a little unfair to clasify us as a whole.

"Stiff", "suit", etc. It was a play on the stereotype that bankers are humorous and inflexible. And I felt that I was quite even-handed on my assessment that some brokers are worth their commission and others are not. That judgment call applies to any type of broker, mortgage or other.

I mentioned upthread that I've done a lot of work for mortgage brokers and found many of them to be unscrupulous businesspeople. That experience is what I base my assessment upon.

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"Stiff", "suit", etc. It was a play on the stereotype that bankers are humorous and inflexible. And I felt that I was quite even-handed on my assessment that some brokers are worth their commission and others are not. That judgment call applies to any type of broker, mortgage or other.

Very well. ;)

I mentioned upthread that I've done a lot of work for mortgage brokers and found many of them to be unscrupulous businesspeople. That experience is what I base my assessment upon.

I find this really unfortunate and Im sorry you had such a horrible experience. :)

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... found many of them to be unscrupulous businesspeople. That experience is what I base my assessment upon.

That is a totally true statement, I have seen my share as well....

I didn't mean to beat up up in my past statement. For every one bad broker, there are 10 good brokers that do the right thing to help out borrowers.

:):):)

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I love my broker, I seriously have him on my christmas card list, he wasn't a stiff, he did do this weird thing on form letters where he acted like buying a house is like being on a cruise, and he was the captain, and there were lots of ports of call, one port was the underwriting port, etc... it was really weird to us but we got an amazing deal, he was upfront and fair with his fee's, he even made the appraiser charge a reasonable fee, whatever...

I love him, hubby loves him, we love our broker captains hat and all!

Everyone who knows us knows we love our broker.

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I plan on getting my score/report from a bank and seeing what they can get us, and then take that to our broker and see what she can do with the bank's report/score.

I have a feeling we'll like the broker better :-)

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I think as long as you know what to look for; its not about who you get a loan from, its about what kind of deal you get!

The more people you ask the better.

As a side note remember that the cbs group all mortgage inquiries together so as to not adversely affect you score, I believe its for inquires on any "large" purchase within something like a 31 day period so ask as many as you can within the time frame.

On a second note there have been reports that credit scores are taking a drop due to economic situation and the tightening up on consumer credit...

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LOL I was chatting 'bout the lender/broker/bank subject with a co-worker on Friday. He tells me today that on Sunday the Everett WA Herald ran a story on this very subject:

http://heraldnet.com/article/20090927/BIZ/709279934/-1/HOMES

Lender, broker roles are explained

By Steve Tytler

Q Can you explain the difference between a mortgage lender and a mortgage broker? I also see some other companies that advertise that they loan money for real estate, but they are not banks.

AThere are many different players in the mortgage industry, ranging from wealthy individuals loaning out their own money to nationwide corporations loaning billions of dollars each month.

In the “old days,” the mortgage market was far less complicated. When you wanted money to buy a home, you simply went to your local bank, they loaned you the money and you paid it back. Today, mortgages are a commodity. They are bought and sold like stocks and bonds. Your mortgage interest rate is more dependent on the bond traders on Wall Street than the bankers on Main Street. Prior to the mortgage meltdown of the past few years, mortgage brokers had overtaken banks as the primary source of mortgage loans in this country. But many mortgage brokers went out of business when the subprime mortgage market collapsed and banks have regained some market share over the last couple of years.

So what’s the difference between a bank, a mortgage banker and a mortgage broker?

A bank is a federal or state regulated institution with deposits insured by the federal government. Some banks make mortgage loans through their local branches, while others own separate subsidiary mortgage companies. A few banks still keep their mortgages in their own investment portfolio, which means that you can still make your mortgage payment at the local branch just like in the old days. But the vast majority of banks sell their mortgages in the “secondary market” through agencies such as Fannie Mae (Federal National Mortgage Association) or Freddie Mac (Federal Home Loan Mortgage Corporation). The secondary market works much like and stock and bond markets, where mortgage loans are bundled into certificates and sold to investors.

Mortgage bankers are not savings institutions like a traditional bank. They are large companies that make mortgages by loaning money from their multi-million dollar credit lines. The mortgages are then quickly packaged and sold in the secondary market so that the mortgage banker can free up their credit line to make more new loans.

Mortgage brokers are independent companies that offer access to a wide range of loan products offered by banks and mortgage bankers. Brokers essentially act as a retail branch for the lenders they represent. Brokers get their money at wholesale rates which are unavailable to the general public, then they add their profit margin and offer loans to the public. By eliminating the overhead expense of maintaining a vast web of retail branches, large national mortgage bankers are able to deliver home loans through mortgage brokers much more efficiently and less expensively than commercial banks, which is why mortgage brokers have taken such a big slice of the home loan pie.

So which is better — a bank, a mortgage banker or a mortgage broker? As a mortgage broker myself, I’m prejudiced in favor of brokers because we have a wider range of loan products from which to choose than do banks or mortgage bankers. But the fact is, most borrowers can be well served by any of the three types of mortgage lenders.

Selecting the right loan officer is much more important than selecting the right mortgage company. There are lousy loan officers at great banks and mortgage companies just as there are great loan officers at lousy lenders. The mortgage industry is a “people business” built on trust. When you meet a loan officer, ask yourself if he or she seems knowledgeable about the loan products and the application approval process? Does he or she take time to answer all your questions, or do you feel like you are being rushed and “sold” a loan? Do you feel confident that he or she will deliver on his or her promises? More often than not, mortgage difficulties are the result of ignorance and incompetence rather than outright fraud and deception.

It’s a good idea to compare interest rates to make sure you are getting a competitive quote, but beware of falling for “bait and switch” artists. Some unscrupulous loan officers deliberately under quote the market to get you to commit to working with them — then they spring their real rates on you when it’s too late to back out of the loan. Use your common sense. “If it sounds too good to be true, it probably is.”

Mail questions to Steve Tytler, The Herald, P.O. Box, Everett, WA 98206, or e-mail him at economy@heraldnet.com.

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LOL... perfect timing!

Now all you need to do is find that cute puppy a house with a nice backyard so she can be cute in her very own backyard!

Here's another interesting article I received via email forwarded to me a few days ago... (the link in email didn't work but ill try to find one that does)...

Who to get a loan from? Brokers not banks.

Where to Get a Mortgage Loan Before we get into where to find the perfect mortgage loan should talk about where not to get a home loan

1. Stay away from your bank. Banks are exempt from the Real Estate Settlement Procedures Act and are not required to discl any of their markup or profit margins to you. If you take ou home loan from your bank you’ll never know how much you overpaid because the bank is simply not required to tell you Ignorance is bliss right? Only if you like throwing your money away…

2. Stay away from faceless Internet Mortgage lenders. We’ve all seen the commercials on TV; however, spend a few minutes reading the fine print from the Lending Trees of the world and you’ll quickly discover just how bad their junk fees are

3. Avoid mortgage brokers that charge Yield Spread Premium and other junk fees. I’ll get into Yield Spread Premium in a moment as this is the hidden junk that causes most people to overpay

So where is the best place to get a mortgage loan?

The best home loan around isn’t going to be from a place, it’s from a person That’s right, getting the best deal for your mortgage isn’t about shopping around for the best loan offer… it’s all about shopping for the right person to arrange your home loan

Who Is the Right Person to Arrange Your Mortgage?

The right person isn’t a mortgage banker or the hotshot broker in the yellow pages with a company hummer. These people will be unwilling or unable to negotiate the type of mortgage deal that will get you the lowest possible mortgage rate.

What you’ll need to find is a small-time, self-employed mortgage broker willing to work for a flat fee without marking up your mortgage rate for an“extra” commission.

What is this extra commission that drives up most people’s mortgage payments unnecessarily wasting thousands of dollars? In the mortgage business the fee created when your mortgage rate is called “Yield Spread Premium.”

When you are shopping for a new mortgage loan there are a number of questions that will help you find the best mortgage loan. Here is a list of questions that will help you comparison shop for the best loan when refinancing your mortgage.

1 What is the Actual Interest Rate?

his question is not as obvious as it sounds. Many mortgage lenders disguise the interest rates in their loan offers with introductory interest rates that are significantly lower than the actual interest rate. A good starting point when comparing loan offers is the Annual Percentage Rate (APR); however, use the Good Faith Estimate to compare interest rates, fees, and closing costs whenever possible.

2 Will the Interest Rate Change, and How Often? If you have an Adjustable Rate Mortgage it is important to know how often the lender will adjust interest. Find out what index your Adjustable Rate Mortgage interest rate is tied to and what the lender’s markup will be.

3 Do I Have to Pay Points? Mortgage lenders may require you to pay points in order to qualify for the loan. One point is one percent of the principal balance you pay at closing. Your lender may also charge origination points as a processing fee for working on your mortgage application.

4 What are the Closing Costs? Many homeowners make the mistake of no comparing closing costs when shopping for a mortgage loan. If you neglect to comparison shop for closing costs you could overpay

thousands of dollars when you close on the mortgage. Use the Good Faith Estimate from each lender to compare closing costs and do not be afraid to haggle with the lender for more competitive closing costs.

5 How Long Will the Mortgage Lender Guarantee the Interest Rate? If the lender will lock-in your interest rate and points this is done for a fixed period of time. You will need to close on the mortgage before the lock period expires or the lender can raise your interes rate. Lock periods are typically 30-60 days; however, interest rate lock periods can vary by mortgage lender. Make sure you get this guarantee in writing before committing to a mortgage lender.

6 What Documentation is Required? You need to know the answer to this question in order to organize your effort before applying. You need to close on the new mortgage in a timely manner; failing to produce the necessary documentation could delay your closing on the mortgage. If you fail to close before the interest rate lock expires you could lose your ideal interest rate.

6 Is There a Prepayment Penalty? Mortgage lenders charge prepayment penalties when you refinance or sell your home. If you have good credit there is no reason to accept a mortgage offer that comes with a prepayment penalty. If your lender insists on this penalty in the loan contrac take your business to another lender.

7 How Long Will Closing Take? Mortgage refinancing can be a time consuming process. It is important to close on the new mortgage before the lender’s guarantee expires. If you are unable to close the lender could change your loan terms or charge you a higher interest rate.

MUST GET THE ABOVE 7 QUESTIONS ANSWERED NO MATTER WHAT!

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MORTGAGE BROKERS ARE LIKE USED CAR SALESMEN, SHADY BABY! BE CAREFUL! COMPARE GOOD FAITH AND HUD1.

TIPS ON WHAT TO LOOK FOR;

Shopping for a mortgage on the Internet is a great way to avoid dirty mortgage lenders.* You can easily compare rates, fees, and closing costs from a variety of lenders online.* Disclosure is an important aspect of choosing a mortgage lender If the mortgage lender refuses to fully disclose all aspects of the mortgage, or delays providing you this information they may be hiding something from you.** Mortgage lenders are required by law to disclose all aspects of fees, interest rates, and closing costs.

Dirty mortgage lenders often scam homeowners by withholding information about the lock period they are guaranteeing your interest rate.* The mortgage lender only guarantees the interes for a period of time called the “lock period.”* This lock period is intended to give you time to close on the mortgage and keep your guaranteed interest rate.* By withholding the duration of the lock period the dirty mortgage lender is hoping you will not have time to close on the loan before the lock period runs out!

Never Sign Blank Documents!

If your mortgage lender or broker asks you to sign incomplete documents, this should raise a warning flag.* By signing blank documents the lender or broker can fill in anything they like, and you have already agreed to it.* Blank or incomplete mortgage documents are a sure sign that you are dealing with a dirty broker or mortgage lender. If you sign blank documents you are asking to be taken advantage of!

Pushy sales tactics

if your mortgage broker or lender is pushing you with pressure sales, find a new lender.* If you feel the lender is trying to sell you with slick sales tactics you may be agreeing to something that is not in your best interest; you could even lose your home.

What About Mortgage Junk Fees?

Just because you find a mortgage broker willing to work for a one percent origination fee doesn’t mean you shouldn’t be concerned about junk fees. There are a number of junk fees that mortgage brokers slip into their loans just to boost their fees. You should carefully review your HUD-1 statement for junk fees prior to closing. Don’t rely on the Good Faith Estimate you receive as this document is little more than marketing propaganda used to lure homeowners into overpriced mortgage loans.

When it comes to fees your HUD-1 Settlement Statement is the final word!

If you find anything on your HUD-1 that resembles a mortgage broker courier fee or rate lock fee you should question consider taking your home loan somewhere else. These fees, especially rate lock fees are pure junk used by dishonest mortgage brokers to boost their profit at your expense. If you are working with a broker that charges a rate lock fee you can be certain you’re dealing with a dishonest mortgage broker that cannot be trusted… period!

Ysp yield spread premium = broker markups

Mortgage broker points 1 point = 1% of loan total

Gets points from bank by raising apr for each .25% the mortgage broker gets a 1% bonus from bank.

Example 200,000.00 loan you qualify for 6.0% but mortgage broker says he will do it for 6.75%, the broker gets a origination fee of 1% = 2000.00 dollars

But then by overcharging you he also gets 3 points (bank gives 1 point for each .25% over apr) which means he gets 6000.00 from bank for over charging you. You pay higher interest rate for entire life of loan bank makes more money because of higher interest rate.

Srp service release premium = bank markup

RESPA

Don't use a bank or a "broker bank" ever they are not subject to respa laws and therefore don't have to show you how they marked up your loan percentage rate.

Broker banks are bad and will masquerade as mortgage brokers, but are not regulated by respa

To know if it is a broker or broker bank ask one question

DO YOU CLOSE ON THE LOAN IN YOUR OWN NAME?

If if answer is yes its a bank

If it is no then it will close in the wholesale lenders name and your dealing with a broker!

Ways brokers and mortgage companies "hide" ysp/srp points, they call them

Overages

Broker rebates

Lender paid fees

Lender paid compensation

AVOID MARKUP!

CREDIT SCORE is only used to qualify for loans but does not determine apr%. Negotiate even if you have bad credit!

It doesn’t matter if your credit score is 650 or 750, once you’re approved your credit score has nothing to do with the mortgage rate you receive. Even if you can't get a traditional home loan use same technique to get good rates.

It might surprise you to learn that the person responsible for determining your mortgage interest rate and ultimately whether or not you get a good deal or overpay is none other than your old friend the mortgage broker. You see, mortgage brokers work from daily lender rate sheets. These mortgage rate sheets quote interes rates for the same loans, with and without points. Keep in mind that a point is a fee you’ll pay to qualify for a specific mortgage rate and not all mortgage rates require paying points. In fact some mortgage rate quotes actually create points for the broker which is something you’ll want to avoid when refinancing Remember that one point is 1.0% of your loan amount and the sweet spot that you’re looking for with your new mortgage is an interest rate that does not require cash out of your pocket or creates an “extra” commission for the person arranging your home loan.

What About Mortgage Origination Points? Origination points are a fee paid to the person arranging your home loan. This “loan originator” could be a mortgage broker company, or banker. Like discount points this is a fee you’ll pay at closing and one point equals one percent of your loan amount How much is a reasonable fee to pay for mortgage origination? One percent is reasonable, provided the person arranging your home loan has not also marked up your mortgage rate to get a commission from the lender.

Many originators use a hidden commission known as Yield Spread Premium to boost their profits at your expense, often withou telling or fully explaining what they’re doing. It’s not uncommon for shady mortgage brokers to charge you as much as two or three percent for loan origination in addition to inflating your mortgage rate for a bonus from the lender. Keep in mind that any markup of your mortgage rate by the broker drives up your monthly payment unnecessarily. Want to avoid overpaying for your next mortgage loan? Learn how to recognize and avoid the markup of your interest rate for Yield Spread Premium!

SWEET SPOT

Because the person you choose to arrange your mortgage is paid by commission you can bet the home loan that gets them the biggest commission is not going to be the right home loan for your situation. So how does this commission I’m talking about affect your mortgage rate? Remember that I told you that lender rate sheets quote mortgage rates that either require or create points? The sweet spot in the middle is the mortgage rate that neither costs nor creates points for the broker. When you pay points in exchange for a lower mortgage rate the fee you’re paying is called a “discount point.” Conversely, when you unknowingly accept a higher than necessary mortgage rate when refinancing, points are created for the broker in the form of an unnecessary commission

This isn’t to say that the mortgage broker should not be paid for their work; on the contrary, this is what the loan origination fee is for. The problem is that many mortgage brokers feel they are entitled not only to your origination fee, but also to Yield Spread Premium on the loan driving up your mortgage payment unnecessarily. (By the way you shouldn’t pay more than one percent for the loan origination fee.)

Mortgage Broker? At this point you might be saying to yourself “I already knew that mortgage brokers are shady… I’ll just avoid all this crap and refinance with my bank.” It makes sense right? Banks are direct lenders… refinance with a direct lender and you not only cut out the middleman but their commission also. The problem is that no only does your bank and every other “direct lender” under the sun take the same markup of your mortgage rate but thanks to a convenient loophole in disclosure laws your bank is not required to disclose their markup or profit margin on your loan.

Banks simply do not give their customers par mortgage rates… ever. You cannot avoid working with a mortgage broker if you want the lowest possible rate and payment, bad credit or not.

What Are Par Mortgage Rates? A par mortgage rate is simply one that does not cost you money nor create a commission for the person arranging you loan. Tha means you don’t have to pay points to get the mortgage rate and there is no Yield Spread Premium created for the broker. (More on Yield Spread Premium later) Some mortgage brokers will tell you that you have to pay points to get a par rate; If you for this your hard earned cash will go right into your brokers pocket.

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MORTGAGE FEES FOR DISCOUNT POINTS!

Because mortgage discount points are a form of prepaid interest the points you pay at closing could be a tax deduction. Be carefu when shopping for mortgage that your mortgage broker isn’ staring out with an inflated mortgage rate. If you’re a victim of this type of scam, you’re not paying discount points. Real discoun points are paid to the lender, not the originator.

Discount point fees is it worth it? Prolly not!

Suppose for instance you were going to pay one discount point to lower your mortgage rate from 6.0% to 5.75%. On a $250,000 mortgage one discount point would be $2,500 that you would pay at closing in exchange for this lower mortgage rate. The only situation where paying discount points make sense is if you plan on keeping your home for the long term. Even then, as low as mortgage rates are in today’s market the amount of time it wil take you to recoup the expense of paying points may outweigh the benefit a slightly lower mortgage rate.

You can figure this out for yourself by spending a few minutes with a simple mortgage calculator. In the previous example your mortgage payment at 6.0% on a $250,000, 30 year fixed rate mortgage would be $1,498 per month. The same loan with a mortgage rate of 5.75% has a monthly payment of $1,458 per month. That’s a savings of $40 per month meaning it will take you 63 months, that’s just over five years to recoup your expenses before you realize any savings. Is it worth it? What happens if you refinance or sell your home before the five years are up? Your $2,500 is down the drain…

Points are a fee paid at closing to acquire a lower interest rate. A point is typically 1% of the loan amount. For example, 1 point on a $100,000 mortgage is $1000. The more points you prepay, the better your interest rate will be. Paying points is similar to a down payment; you are paying this fee so your monthly mortgage payment will be smaller and you’ll pay less interest over the life of the mortgage. The longer you stay in your home the more you’l benefit from paying points Like any other good thing there is a negative twist to points on a mortgage. Negative points, sometimes cleverly disguised as “rebates” are payments to you from lender. For this “rebate” you pay a higher interest rate. You can use this cash at closing to pay your closing costs. If you’re cash poor this could be an attractive offer; however, you will end up paying back a great deal more in interest payments over the life of the loan. Obviously the longer you stay in this mortgage loan the more you will pay for the rebate Generally speaking, if you plan on staying in your home for at least 5 years, pre paying points on your mortgage is a sound investment. Stay away from negative points as they will hurt you in the long run unless you will sell or refinance within three years. Different lenders will offer you different deals based on the same number of points paid. Be sure and shop around from a variety of mortgage lenders to ensure you get the best deal for your prepayment dollar.

Another option to consider when choosing a mortgage lender is whether or not they will waive escrow on your loan. Many lenders require that the property taxes and homeowners insurance premiums are paid in escrow. Escrow is a third party that makes these payments for you at a premium paid by you. Not paying this premium can be an advantage if you are able to make these payments yourself. Many escrow companies are notoriously unreliable; this can cause a real nightmare for the homeowner. If you have a down payment or prepay sufficient points you may be able to talk your lender into waiving their escrow account requirements.

The final option we’ll discuss here is

the pre-payment penalty

This prepayment penalty is a clause in your mortgage contract that gives the lender the right to charge you a fee if you pay the mortgage off before the end of the loan’s term. These penalties usually only apply to the first five years of the mortgage loan however, it could discourage you from refinancing if a better mortgage deal comes along. If you’re using a sub-prime lender for credit reasons you'll most likely be stuck with this penalty.

If you finance your mortgage with a traditional mortgage lender this is an option you can take to the bargaining table. If you’re not interested in taking this option with your loan you may be able to barter for a lower interest rate by accepting the pre-payment clause Remember, bartering for options on your mortgage is completely

negotiable. It pays to be a shrewd consumer; this is true whether you’re shopping for a refrigerator or a home mortgage loan!

An escrow account is set up for you to deposit of money into, used by one party for payment to another for a particular event or condition. Most of the time escrow accounts serve to ensure property taxes and insurance premiums are paid on time. In some cases the escrow amount will be rolled into your monthly mortgage payment. The escrow company will hold this money for you in a separate account and use it to pay the mortgage, taxes and insurance on your behalf. If you utilize more creative means of financing to secure your mortgage you may be required to make your payments via escrow. The exception would be if you have excellent credit or satisfy the lender requirements you may be able to handle property tax and insurance payments on your own.

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