Mortgage Loans at wholesale prices! is it possible? The answer is a definite yes. Just like any other product in the market, mortgage rates can be either retail or wholesale depending on how savvy and educated you are as a consumer. Before you start shopping for a mortgage, make sure you educate yourself about how a mortgage rate is determined and what are the costs associated with getting the lowest rate. Most Mortgage loans are sold at retail just like many products such as furniture, appliances, electronics and so forth? If you accept retail interest rates when refinancing or purchasing you could be overpaying by thousands of dollars upfront and many thousands of dollars every month for the life of the loan. You must understand the difference between retail and wholesale rates.

Mortgage Rates at Wholesale Vs Retail:

What is the difference between a wholesale mortgage rate vs. retail? Most borrowers are completely naïve and do not know that lenders and mortgage brokers mark up their interest rate for a commission, this markup is called a “Yield Spread or backend fee” within the industry. If your rate has been marked up by a Yield Spread and without your knowledge, then you have received a typical retail rate. So when you see ads in the TV, Radio or paper advertising 0 point or 0 cost loans then you can be assured that the rate associated with that loan will have a hefty Yield Spread attached to it. So in essence, you will be getting a very expensive retail loan. Lenders and mortgage brokers mark up interest rates because the wholesale lender pays them a bonus for charging you above market mortgage rates, this bonus is the Yield Spread Premium.

Example of a Yield Spread Premium when Applied to a Mortgage Loan

Let’s presume you want to refinance your home. Your balance is $200,000. Your local lender or mortgage broker tells you that you qualify for a 6.5% interest rate and charges you 1% for the origination fees or sometimes called points. What most people are not aware of is that the broker may also be getting .05 % from the wholesale lender in the form of a “Yield Spread Premium”. In another words the real wholesale 0 cost of the loan or “Par Pricing” would be 6%. The end result is that your broker pockets $2,000 from the Yield Spread Premium along with the upfront cost of 1% which is another 2,000 and you get stuck paying retail mortgage rates for the lift of the loan. This in my opinion is a complete scam and should not be tolerated. So how do you protect yourself and make sure you are getting wholesale rates every time you apply for a loan?

Get Mortgage Loans At Wholesale:

The best way to avoid overpaying or paying Yield Spread Premiums is:

• Make sure that you tell your mortgage broker that you want “Par Pricing’, which basically tells them that you know the game and will not tolerate back end fees.
  
• Review the “Good Faith Estimate’, the cost breakdown of your loan, which all brokers must send to you within 3 days of the application, this is a federal law. They have to indicate, in small print mind you, the amount of Yield Spread Premium if any is charged. Make sure it states 0
  
• Most important, make sure you shop with at least 3-4 brokers and get the best available “Par Pricing” rates from each. You can do this simply from your coach at home by going to and you will have 4 offers from different mortgage brokers all fighting for your business.
  

Happy hunting and the best of luck on your next purchase or refinance endeavor.

How to get a good mortgage and where to get it from? This is the dilemma that many buyers and borrowers think about when they start researching for a home loan. Most home buyers finance real estate when they purchase or refinance, which means almost all home buyers will need to get a real estate loan. So what are your lending choices? Where can you get a real estate loan? Which type of real estate lender is best?

Unfortunately, there is no pat answer because the best choice for you depends on your personal situation, the type of property you want to buy and how the lender’s rates compare within the lending community. You can get a loan from a variety of sources such as:

Mortgage Brokers

More than half of all the real estate loans made in the United States originate from mortgage brokers. A mortgage broker is a middle-person who brings together lenders and borrowers. Mortgage brokers each work with different lenders, sometimes 200 or more. It’s important to ask about the variety of products offered as this will vary from broker to broker.

Your choices are dependent on the broker’s number of working relationships.

• Fees are paid by the buyer or lender or both.
  
• Loans at “par” mean the buyer is not paying a fee.
  
• Yield-spread premiums (YSPs) are typically disclosed at closing and paid by the lender.
  
• Mortgage brokers can also operate as “up-front” mortgage brokers, meaning they will negotiate a fee directly with the buyer in exchange for shopping for the lowest (wholesale) interest rate & fees.
  

Mortgage Bankers

Mortgage bankers, as you may have guessed, work for a bank. They may represent more than one bank but the loans they make are bank loans, funded by the bank.

• Fees are generally not negotiable and are set by bank policy.
  
• Loan products are limited to those the bank offers.
  
• The banker may not be licensed.
  

Commercial Banks

Citigroup, Bank of America, and Wells Fargo are good examples of well known commercial banks. Commercial banks offer a wide variety of services. In fact, you probably have a bank like this in your neighborhood.

• Primary source of business is not making mortgage loans.
  
• Bank rates are competitive.
  
• Your bank may offer a discount or incentive on your loan if you maintain a checking or savings account at that institution.
  

Savings & Loan Associations

Savings and loans accept deposits from customers into savings / money market accounts and pay interest on those accounts. To prevent a relapse like the S&L crisis in the 1980s, President Bush in 1989 signed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Many savings and loans are now regulated by the Department of U. S. Treasury, Office of Thrift Supervision.

• Primary source of business is making real estate loans.
  
• Savings and loans do not make business or commercial loans but lend for construction, purchase or home improvement purposes.
  
• The process for obtaining a mortgage is a bit easier than going to a commercial bank.
  

These institutions are regularly under attack by lending competitors because credit unions do not pay federal taxes and enjoy certain taxable advantages that other lending institutions do not. They are formed by a group of individuals with a common interest such as state government and community education employees or religious groups.

• Customers must meet qualifications to be eligible for membership.
  
• Interest rates and terms are typically very attractive and competitive.
  
• Many credit unions do not sell their mortgage loans on the secondary market.
  

Private Individual

Anybody with money in the bank can make a real estate loan to you as long as they comply with federal and state regulations regarding such items as interest rates, fees and charges, and provide legally required disclosures.

• The seller can carry back common financing instruments such as a mortgage, trust deed or land contract.
  
• No
  appraisal or title policy may be required, but you should still obtain an appraisal and title protection.
  
• Owner financing works best on properties that are free and clear because an existing loan will most likely contain an alienation clause.
  

Stock Brokerages & Online Lenders

You might be astonished to learn that the company handling your IRAs or mutual funds or online savings also makes mortgage loans. A few easily recognizable names are INGDirect, Charles Schwab, and Ditech.

• If you need to shake hands with your loan officer in person, an online lender might not be for you.
  
• Internet lenders seem to work best for sophisticated borrowers with great FICO scores who know exactly what they want.
  
• Contact only reputable and known companies with secure sites, and stay away from fly-by-night operators.
  

This article was written by Elizabeth Weingtraub.

Getting a good mortgage rate and terms at a reasonable cost can be tricky for the untrained consumer. I have been involved in the financing of real estate on two fronts, first as an appraiser who has appraised for lenders on over one 1000 mortgage loans and second as an investor who has applied for and refinanced over 100 loans in the past 15 years, so let me share some tips on how to get a good mortgage at the lowest possible cost.

1. Know your credit report. One of the first things to do before considering a home purchase is to get a current copy of your credit report, and scrutinize it for errors. If you’re applying for a no-documentation loan, for example, the credit report can be the most important piece of information available to your lender. Errors can be completely erased, along with out-of-date information that might weaken your credit score, but it takes time. Begin working on this project well in advance of applying for any mortgage loan. This way, reporting agencies have time to update your data.

2. Shop around. Get quotes from 3 lenders. You may be able to save yourself hundreds or even thousands of dollars by avoiding mortgages with high rates and/or high fees.

3. Always check the 10 year bond rate. All mortgage rates are connected to the 10 year bond rate. This rate can be found at any finance or stock website, such as Yahoo Finance, Google Finance, Ameritrade, Fidelity and many more. For example, if your mortgage broker quotes you 6% on a 30 year fixed today and tomorrow the 10 year bond rate dropps by .025 basis points you can be sure that the rate of 6% which you received yesterday has also dropped. But your mortgage broker or lender will not call you. Why should they? They make more money in selling you the higher 6% rate. You will have to call yourself and notify your broker that the 10 year bond rate has dropped and you expect your 6% rate to also drop accordingly to probably 5.75%-5.875%. Trust me once you make this kind of call, your mortgage broker will know that you are on top of the game.

4. Try to avoid and eliminate the middle men, “mortgage brokers, loan broker” and go directly to direct lenders or banks. Private loan brokers rarely are able to compete with direct lenders or banks on rates and they often charge excessive 3^rd party closing costs or “junk fees’, such as excessive processing fees, application fees, warehousing fees, documentation preparation fees and so forth. By going to a direct lender or a bank you can almost be certain that the closing costs related to your loan are always valid and no junk fees are applied.

5. Always haggle. A mortgage is just another consumer product. A few clever words can get a sweeter deal. Make your demands know upfront. Let them know that you would like to have your processing fees, which usually is about $330-$500 waived. Know your markets interest rate and try to pay the least amount of points. Try to pay less than 1 point on loan between $200,000-$1,000,000. On loans greater than 200,000 it is not uncommon to pay .075% points with no rebate at the back end. What is a rebate you ask? Mortgage brokers get an upfront fee called “points or

Origination Fee” which is a percentage of your loan, but what most do not know is that mortgage brokers also get a back end fee, called a “rebate or yield spread” which is their markup over the par rate that they get from the source investor or lender, Assuming a 2 point markup, for example, the broker would quote 1 points on an 6.5% loan. If the current lender based par rate is 6% then you just paid the mortgage broker 1.5% total for your loan. The borrower pays for the rebate over time through the higher interest rate. By law in most states, such as California the mortgage broker must disclose the back end rebate fee to the consumer on the closing paperwork sent to the borrower, so check to see how much rebate or Yield Spread the broker is charging. The ideal situation would be 0 rebate and just negotiate on upfront points, this way you are certain you will receive the best available rate at the most reasonable cost, nothing is hidden or unknown.

6. Make sure your selected loan does not have a pre-payment penalty. Many people get what they consider a great loan and are not even aware that they have a prepayment penalty of 3-5 years. They find out when they try to refinance or sell off their existing loan that they would need to pay 6 months interest or more as a prepayment penalty. Lenders and Mortgage brokers also benefit in giving you a pre-payment penalty since they have you tied down with their loan product for 2-5 years not to mention higher compensation for them in a form of rebates if they can persuade you to get a loan with a pre-payment penalty. Do not fall for it. Never get a loan with a prepayment penalty.

7. Have the lender or broker write down all the costs associated with the loan, they usually are obligated by law to send you a “Good Faith Estimate” within 3 days of the initial loan application. All your fees have to be listed on the Good Faith Estimate, ask if the lender or broker will waive or reduce one or more of its fees or agree to a lower rate or fewer points. You’ll want to make sure that the lender or broker is not agreeing to lower one fee while raising another or to lower the rate while raising points. There’s no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere.

Remember when buying or refinancing Real Estate, shop around to compare costs and terms, and to negotiate for the best deal. Your local newspaper and the Internet are good places to start shopping for a loan. You can usually find information both on interest rates and on points for several lenders. Since rates and points can change daily, you’ll want to check your newspaper often when shopping for a home loan. But the newspaper does not list the fees, so be sure to ask the lenders about them.