Heber City Real Estate and Yield Spread Premium
As a Realtor and former Loan Officer, I have noticed an area of Home Loans and Mortgages that goes unnoticed by the consumer, that of Yield Spread Premium. Most borrowers believe that their Loan Officer makes his profit with the Loan Origination Fee. But most don’t understand that the Loan Officer can make up to 4 percent more, on most loans, with the Yield Spread Premium.
What is Yield Spread Premium?
Yield Spread Premium, or YSP, is the fee paid by the Lender to the broker in exchange for a higher interest rate, or an above wholesale rate. The borrower may qualify for a certain rate, but the broker can charge this fee and give the borrower a slightly higher rate to make more commission. YSP was originally intended as a way for the borrowers to avoid having to pay any money up front. Today it is seen primarily as just another fee the borrower gets stuck with. The YSP is disclosed by law on the Good Faith Estimate. Usually the YSP is stated as between 0 and 4 percent, at the bottom in fine print.
What can Borrowers Do?
The best way to understand YSP is to discuss the topic with your Mortgage Loan Officer. Make sure he/she explains the difference between Loan Origination and YSP, and continues to keep you informed up to and including closing.
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