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Article Directory :: Finance & Investment Articles
There are a couple significant reasons behind the current crisis in our mortgage market. One is that mortgage brokers haven't been giving borrowers enough information to make an informed decision. The bigger issue is that borrowers haven't been asking the right questions! And how are they even supposed to know what to ask? School doesn't prepare us to make decisions regarding our home mortgages (unless you're studying to become a mortgage broker), so most of us are flying blind. Luckily, articles like this one are available to make the average consumer's life a little easier.
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 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. It's fair for the broker to make money, but negotiate this figure to make sure you don't get ripped off.
2) Current Wholesale Rates and Par Pricing - When a borrower asks "What are today's rates?" the broker hears "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 are eager to offer a GFE (Good Faith Estimate), but it leaves out valuable information such as YSP. You're entitled to an MLDS, so make sure you get one.
4) Origination Fee - On the MLDS, make sure to look at the origination fee. 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. A point total is fair, in whatever ratio you and the broker negotiate.
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 title, escrow, notary and various other services you'll require, the total cost will end up around $3000. Obviously, companies that offer "No Fees" make their money elsewhere. Elsewhere would be the YSP. Sure it looks good from the front, but the broker's making a killing on the back.
Understanding these 5 key items will help you protect yourself from being taken advantage of. Be aware in advance; most brokers won't like being asked these questions, but what's more important, their friendship, or your financial wellbeing?
Rate1st.com provides a safe, simple, and efficient way for borrowers to compare rates from hundreds of lenders without compromising their personal contact information or credit. For more information on home mortgage loans visit http://www.Rate1st.com.
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