Don't Accept First Mortgage Offer
WILLIS: Earth Day is one week from today and with oil and gas prices skyrocketing, we take a look at an environmentally friendly way to power your home. Allan Chernoff explains.</s>ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): When Peter Baumert decided to build a house with his family he knew he'd be breaking ground of a different kind. Baumert had an eye towards energy efficient housing.</s>PETER BAUMERT, HOMEOWNER: Rising energy costs was a big factor. Second is the environmental impact. We're looking at newer products to make my house healthier, more efficient and stronger.</s>CHERNOFF: But he's taken energy efficiency to a whole new level.</s>BAUMERT: We're looking to create Long Island's first net-zero energy-efficient home which basically means whatever electricity or utilities that the home would consume, it'll produce that much and give it back to the utility grid, so basically zeroing it out on the utility side.</s>CHERNOFF: And that could mean big savings. The Department of Energy estimates the average homeowner in the U.S. spends about $1500 a year on utility bills, though homeowners in northern states can pay far more. An energy efficient home will have a lower impact on the environment.</s>DAVID GARMAN, UNDER SECRETARY OF ENERGY: Your home, and the power that you use in your home, is probably responsible for more pollution than the cars you drive. A lot of people don't understand this. So, obviously, by using less electricity in the home or by generating some of your electricity in the home with zero emission generation sources like solar, you're actually contributing to a cleaner environment and cleaner air.</s>CHERNOFF: Construction costs can run higher than a conventionally-built house, but the energy savings can make it world while in the long run.</s>GARMAN: Energy-efficient homes are cheaper to operate and they tend to be more comfortable than less energy efficient homes. You may find yourself paying a little bit more for some of these features up front, over the life cycle of the home and or even in the first few years of ownership, you can get all of this money back in lower energy savings and sometimes, in some areas, energy efficient mortgages are available to homeowners who want to buy an energy-efficient home, so they can buy more home for the money.</s>CHERNOFF: Fannie Mae, the Federal Housing Authority, the U.S. Department of Veteran Affairs, as well as some mortgage companies offer special financing for energy-efficient homes.</s>PAT GOOLSBY, CRITERION MORTGAGE: The loan product will take into account the fact that the consumer will be saving monthly on their utility bills because of the added energy efficient measures that have been add into the home. The consumer will have lower utility and so they're able to qualify for additional mortgage money.</s>CHERNOFF: A potential added bonus...</s>GOOLSBY: A home that has energy efficient measures and has documented lower energy costs will be worth more in both the value and market ability of that home.</s>CHERNOFF: But Peter Baumert says he has a greater goal.</s>BAUMERT: Because every single day that you live in the house, it's a healthier house, it's more energy efficient, you're payback is that you're not burning the resources that everybody else is.</s>CHERNOFF: Allan Chernoff, CNN New York.</s>WILLIS: No one wants to pay more than they have to on their mortgage, but many of you could be paying too high a rate and the worst part is someone may have profited from your misfortune, Peter Viles has the story.</s>PETER VILES, CNN CORRESPONDENT (voice-over): It can be awfully confusing buying a house these days. Do you go with a fixed-rate mortgage, an adjustable, a highbred or maybe an interest only? So confusing, more than half of buyers now turn to mortgage brokers to sort through their options. But do you really understand how the mortgage broker makes his money and that ultimately it comes out of your pocket.</s>MARK PEARCE, CENTER FOR RESPONSIBLE LENDING: Unless you're a mortgage broker in the mortgage industry you don't understand it at all. It's poorly disclosed on statements with an acronym, "YSP" or something to that effect and it really amounts to thousand of dollars out of your home equity.</s>VILES: Brokers charge fees and they collect something called a Yield Spread Premium from the lender. Here's how it works. Lets say the lowest interest rate you qualify for on a $300,000 loan is 6.75 percent. If the broker places you on a loan it's 7.25 percent, he can receive a premium from the lender of $3,000. If he places you at a loan of eight percent his premium goes up to $6,000. Lenders, like New Century Financial, say reasonable premiums often serve a useful purpose by lowering up-front closing costs.</s>MARC LOEWENTHAL, NEW CENTURY FINANCIAL: It's really to assist the borrower who doesn't have enough cash to pay the broker points and fees that the broker wants to charge at the closing. Typically, when a borrower pays a Yield Spread Premium it doesn't result in a huge increase in the interest rate, it's typically a quarter to a half a point.</s>VILES: And on the question of whether homebuyers really understand that they're paying this premium, well, brokers insist they do understand.</s>JOSEPH FALK, NAT'L ASSN. OF MORTGAGE BROKERS: My experience is the borrowers do in fact understand that brokers get paid either as a part of a broker fee or an origination fee and also, in most cases, there's an additional compensation called the Yield Spread, fully disclosed to the Good Faith estimate.</s>VILES: But critics say some buyers are simply getting ripped of by brokers who are looking for a bigger premium.</s>PEARCE: In many cases, in all too many case, a Yield Spread Premium is a fancy name for a kickback, that a mortgage lender will pay to the mortgage broker for putting the borrower into a loan that is more expensive than the loan they could actually qualify for.</s>VILES (on camera): Now, the advice from the Mortgage Broker's Association, itself on this is kind of interesting. They say you should not rely solely on one mortgage broker to get a loan. They say you should shop around, go directly to banks and other lenders and get a total of four estimates before you choose one and close on the loan. Peter Viles for CNN, Los Angeles.</s>WILLIS: It is trickier than you may think. When I applied for a mortgage recently my mortgage broker charge me a Yield Spread Premium, but she never volunteered the information, in fact, hi to ask her about it after reading the fine print in my mortgage documents. I suggest you do the same and don't be intimidated, negotiate any fee that you feel is unfair. You've been putting it of long enough, Spring is here and you want to get your house in top shape, but you don't want to spend all day doing it. We're going to show you the easy way to get your Spring cleaning done, but first, the mortgage numbers.