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Save money on your next mortgage
Before I started my company, I was a mortgage banker. Here are some tips to help you understand the mortgage process and save hundreds and thousands in interest. One of the first things you should understand is that ALL banks are getting their money and rates from the same place. There is no magical place of lower rates. Sorry, but there isn't. All banks are getting their money from the government lending agencies (Fannie Mae and Freddie Mac). When they get the money from the government...they get it at a "par rate" This is the lowest rate you can get a loan without buying the rate down. THIS DOES NOT MEAN YOU WILL NOT HAVE POINTS/ORIGINATION FEE. If the bank is borrowing the money at 6%...they will not finance your loan at 6% with no origination...that is akin to doing the loan for free. In this scenario, you would either pay an origination (generally 1.5% of the loan amount) OR you will pay a higher interest rate. See, banks either get paid on the origination or in the yield-spread (difference between par rate and your rate). Here is how you can save money...
Ask what the par rate is...
Compare this rate to your rate.
Ask what the yield spread is... The yield spread is also a percentage... If the yield spread you are paying is more than 2... Your banker is getting paid nicely!! Actually, when you do a full amortization of any loan...it is almost always best to go with the par rate and pay the origination fee. You will save more money in interest this way. |
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The copyright for this content entitled "Save money on your next mortgage" has been specified by the contributor as:
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This intel was contributed by kevcraw
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May, 2012
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