Yield Spread Premium YSP
(Lehigh Acres, FL)
Ask Kate: Yield Spread Premium (YSP) - Why doesn't my mortgage broker give me a simple answer about interest rates and closing costs? Hello Kate, I'll just come out and say it. I'm more of the artist type. I know NOTHING about contracts, lol.
I've been approved for a USDA loan and now I'm trying to understand the yield spread premium (YSP) language on my contract from my broker. The contract reads in part "I also agree that the lender may pay your broker additional fees. Any additional fees paid by the lender to broker will increase the interest rate on your loan beyond what the interest rate would be if some or all of these fees were paid directly by you."
OK, so he says I have a locked rate of 5.5% and my question to him was "will that 5.5% go up because of your yield spread premium (YSP) or is the 5.5% including your fees and everything?" He says the 5.5% APR is what I'll be paying the bank. However, when I email him to get it in writing he simply calls me and that makes me nervous. This is what I emailed him---"OK so as to what we talked about on the phone. My total APR will be 5.5% and you will be getting paid out of this. Your yield spread premium (YSP) will NOT be raising my interest rate with the bank above 5.5%? Just a YES or NO? Thanks :)"
Kate, is this not a clear question? Because he won't reply back and keeps saying its "easier to explain over the phone" but I want it in writing. Am I just being overly untrusting?
Also with the USDA loan the most I can pay him is 2% of the total loan. I understand that part, I read if for myself on the USDA website. So he's charging me the 2% on my end and also getting 2.676% yield spread premium (YSP) from the bank which raises my interest. I don't have the opinion to pay him it all out of my pocket since the USDA caps me at 2%.
So I guess my 2nd question to you is- Is him charging a total of 4.6% (or more) total brokers fees normal? Or am I being ripped off?
I hope my questions are at least somewhat clear and understandable. If you can please reply ASAP as he keeps rushing me and says he needs the papers today.
Thank you soooo much for your time, Sabrina :)
Kate Answers: Yield Spread Premium (YSP) - Why doesn't my mortgage broker give me a simple answer about interest rates and closing costs?
Hi Sabrina, Your questions are on target which proves my theory that artists are number people too!
Okay, here's the deal for everyone wondering what yield spread premiums even are! This method of compensation to the mortgage broker has the potential of being detrimental to a borrower. But don't get me wrong. YSP rebates used responsibly by mortgage brokers can also be beneficial to your bottom line. So get the inside scoop here at Yield Spread Premium - Say What?
Secondly, do not feel apologetic for insisting that the details of your transaction be delivered in writing. Read why at Mortgage Broker Fees - Get 'Em In Writing
! Because if you don't get your mortgage rate lock and your mortgage closing costs in writing, your rate and fees are not guaranteed.
More on the importance of written and signed documents, if you lock mortgage rates over the phone, how do you protect yourself against hidden fees? Find my answer here at How To Lock Mortgage Rates
Now I know I've been talking a lot about mortgage rate locks and you are asking about yield spread premium (YSP) and fees. But they are two sides of the same coin. Don't miss learning how to protect your interest rate AND mortgage closing costs! Go to Nitty Gritty Mortgage Interest Rate Lock
. It's pretty nitty gritty!
To decide if your offer is a good deal for you, you'll need to compare APR, the interest rate, mortgage closing costs, yield spread premium (YSP) to the monthly house payments and loan amount. Make sure you get, in addition to all federal and state required disclosures, these three documents:
1) Truth In Lending Statement which discloses the APR
2) Good Faith Estimate which discloses the closing costs, yield spread premium, loan amount and monthly house payments
3) Mortgage Rate Lock Agreement which discloses your locked rate along with the terms of the lock
While you are waiting for your mortgage broker to provide these written documents, I hope you'll follow my links found at the bottom of this page. My articles will give you an insider's view of mortgage closing costs and interest rates. Let me know if you have further questions, of course!
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