Owning a home gives a person an important investment that can increase over time. However, no one expects a person to buy a home outright. Instead, this is where a mortgage or home loan comes into play. Over time, one may want to refinance this loan to find more favorable mortgage rates and terms. This is where a wholesale mortgage loan can prove useful. These loans are given to larger lenders or to independent financial groups. Knowing how a mortgage broker is compensated ensures that a person understands when they are asked to pay too much on a refinance option. By knowing about loan originators, one can learn the behind the scenes information about refinance options.
The Ins and Outs of Lenders
Mortgage loans are products just like goods in a store. They are bought and sold, with the seller or lender trying to get more than they paid. The middleman is usually the mortgage broker or the staff member at a bank or credit union trying to get an individual to invest in a loan. Thus, it is important to do one’s research to find out what the going rate for a loan is. This ensures one does not pay a broker too much money in fees.
The 1 Percent Rule
To find the lowest wholesale refinance mortgage rates, one needs to reach out to a broker. However, one should remember that a retail mortgage comes with strings attached to it. This number includes the loan’s markup and the interest rate plus any associated fees. Brokers often receive compensation by charging the origination fee of a home loan which is usually a piece or percentage of the mortgage. A general rule for finding a great refinance mortgage is to only pay 1percent on a loan. The homeowner should always remember that he or she is the customer. Thus, if a broker refuses the one percent rule, the customer should walk away.
The Yield Spread Premium
Brokers also make money by marking up a loan’s interest rate. This increase is called the Yield Spread Premium. A homeowner needs to always ask about this amount. Most often this happens because a broker explains this fee or amount in vague terms. Instead, it is important to look for when looking for refinance mortgage rates and terms. This Premium is only a good thing when it is used to pay for the homeowner’s closing cost fees. Otherwise, one should be wary of this.
Work with Wholesale Mortgages
The point is to find a mortgage broker who will work with the one percent rule. Brokers that are a part of the Upfront Mortgage Brokers Association agree to this and to pursue the business with honesty. Individuals need to show brokers that they understand the Yield Spread Premium and need to explain their finance needs. Once the right professional has been found, the Good Faith Estimate and the HUD-1 will list whether or not the Premium is included. People should compare these documents to ensure that rates are as they should be.
A wholesale mortgage is one that cuts down the markup often involved with mortgage rates. Thus, one will pay less commission on this loan, will have more favorable loan rates, and can pay this item off more quickly than past loans. This is why knowing the ins and outs of the wholesale mortgage world can prove beneficial.
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