Credit Score Diaries: Journey to an 850 Credit Score

Monday, April 10, 2006

What the Lenders Won't Tell You: How To Negotiate Your Home Loan

Mortgage Brokers Should be Working for YOU

Most people do not know that the interest rate you are quoted by your loan broker is probably not the lowest rate for which you qualify. As a result, you may pay up to $30,000 or more on your home loan than you should. This doesn't have to happen to you, and it won't if you educate yourself about how mortgage brokers and lenders do business.

Mortgage brokers should be working for you, helping you to find and obtain the best possible loan rate for you and your situation. Unfortunately, many brokers are out there to make as much money for themselves and the lenders as is possible--all at your expense. Borrowers often do not know that there are incentives provided by lenders and paid to loan brokers for quoting higher rates, prepayment penalties, and fees. Often the interest rate you are quoted by your broker may not be the lowest rate for which you qualify. 

It Doesn't Matter What Your Credit Score Looks Like

Regardless of your credit score, you can get the best rate on your loan if you know how to negotiate. You just need to know what the brokers and lenders know about their business, the terms they use, and some of the legal guidelines they have to follow. Read on for a few examples of terms mortgage professionals use and how a borrower may use this information, regardless of their credit score, to get the best loan possible at the rates they deserve.

Know the Terms Brokers and Lenders Use the Best Rate Possible

The lender's best rate is the absolute lowest rate that can be obtained on that day to borrowers, usually borrowers applying with a high credit score. That rate is the rate that is most favorable to the borrower. This is the rate that lenders quote to brokers. It does not mean, however, that this is the rate that brokers will quote to borrowers. Brokers often state a slightly higher rate to borrowers. The rate they quote is usually enough to get the brokers a bonus from the lenders but not so high that borrowers will question the rate or see it as too high if they have been checking rates online.

There are incentives from lenders to brokers to quote you a higher rate. Brokers get bonuses from lenders based on the difference between these rates, the lowest rate and the higher rate quoted by the broker, called the “Yield Spread Premium.” You can learn how to negotiate away unnecessary high rates and fees if you know the terms mortgage professionals use.

Why Bad Loans Happen to People with Good Credit Scores and Vice Versa

People with lower credit scores can get better loan rates than some people with higher credit scores. This happens because many people with high credit scores have little knowledge about how the mortgage business works. If you don't educate yourself about mortgages and the legal terms mortgage professionals use, you may have to pay up to $30,000 or more over the life of your mortgage. The more information you learn about how to negotiate with the mortgage industry, the better rate you will be able to get, the fewer unnecessary fees you will pay and, the more money you will be able to save...regardless of your credit score.

This is an excerpt of the e-book "What the Lenders Won't Tell You: How To Negotiate Your Home Loan." Want more info? Go to http://www.thebestever.net/homeloans

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