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Are you in a process of refinancing your loan? If you are, then read on because I guarantee this article will widen your horizon about hidden charges that loan companies rip off from your pockets!

What you DON’T know:

Most mortgages are sold in Retail prices. Are you wondering why it is called retail? Well, in plain business, when you manufacture in bulk, there will be people who would wish to sell your products in retail; expecting commission by doing so. Now when a company allows people to re-sell their products in retail, then they are required to grant them incentives as payment for their service; that’s exactly how mortgage premiums are higher when you don’t know anything about these companies dirty game!

Ending up paying for a third party’s commission is absolutely necessary. All you need to know is how to play the game and give them a dose of their own medicine! Knowing about the benefits of a wholesale mortgage will save you from overspending over unnecessary added rate!

What to DO:

In order to have assurance that you will not be paying any unnecessary payment for a loan that is meant to assist you in you in your needs, you must avoid banks completely. This is because banks will give you a higher rate to profit from you as they sell your loan request to investors that are willing to provide you with the loan you need. Now, when banks give your request to a secondary market, the bank will receive a mark up that is called a Service Release Premium as payment for making you acquire a loan from them.

Aside from avoiding banks, you should avoid mortgage companies and brokers that add a yield spread premium in rate quotes they present. This is because like the service release premium, yield spread premium is also an additional rate that you are required to pay for the entire period you will hold on with the loan. This additional rate will be given to the lending company and the broker behind the loan; worse part is, they will make up reasons to convince that what you’ve paid for is your actual loan cost and the evidence of the trickery will be buried in your loan paperwork without you having a single idea about it.

The Bad News:

There are banks and loan companies that will suck money from you like leeches if you will let them.

The Good News:

If you are aware about yield spread premiums and service release premiums then you can avoid these unnecessary charges from being taken from you! There is a wholesale mortgage option that you can avail of. Wholesale mortgage is cheaper than most marketed loans because there is no commission that you will be paying in addition.

When you are scouting companies, make sure you tell them that you know about yield spread premiums and you do not want to have a mortgage with this additional rate. Believe me, any decent company worth having business with will give you a better deal.

Are you tired of looking at all of those rent to own home listings in the paper?  Looking for a bigger more posh home?  Well, if so, you may need a  jumbo loan.  In a brief definition, a jumbo loan is a huge loan that is being applied for to purchase a residential real estate. Because of the steady cost increase of the real estates in the United States, more and more people finds it really difficult to purchase their own homes under the threshold. Since it is difficult if not impossible for most people to have cash on hand to purchase their real estate they need a jumbo loan to give solution to their problem.

Jumbo loan is a loan with an amount above the industry-standard definition of conventional conforming loan. It means that this loan that does not conform to the usual guidelines of pseudo-government loan organizations (Fannie Mae and Freddie Mac) in charge for buying and reselling good-credit and offering low mortgage loans. The corporation’s purpose is to securitize and purchase mortgages in order to guarantee that funds are constantly available to the institutions that lend money for real estates. The Office of Federal Housing Enterprise Oversight (OFHEO) yearly sets the confinements for the loan sizes that may be securitized by these agencies which mean every loan amount given to individuals are different because it will be based on their payment abilities.

But as the natural rule says “Nothing is purely good and nothing is purely evil”, Jumbo loans may bring more credit jeopardy than those offered by Fannie or Freddie because their principal amount size leads to a little bit higher interest rates. It normally requires the debtor to have a superior credit record because these loans are understood to be larger and more valuable. Fannie or Freddie usually don’t bear the risk for these loans, hence you will be covered by institutions that carry further credit risk. Since you have the capacity to purchase a larger than the regular loan, therefore it is expected that you have a good credit standing as well. Moreover, given the fact that you are borrowing money with a higher amount, you should attest your credibility and ability that you can pay the loan back at interest on time.

For an average consumer, this may not be very advisable because of its high interest rates and monthly premiums, but even so, a jumbo loan is an excellent way to acquire larger amount of funds especially for those prospective homeowners for them to borrow sufficient money to buy a home.
When you engage in this service, you should be ready to pay more down payment at a higher rate and pricing premium than you would have to for a standard loan. So think twice before signing and make sure you have the ability to pay it off on time or else financial conflicts are likely to arise.