Mortgage Lending Questions for Newbie!?
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3rd Question
Yield Spread Premiums are NOT junk fees. They are a legitimate part of the broker鈥檚 income. (What part of anyone鈥檚 income is JUNK?)
Yield Spreads are a % paid to, or received from, a broker delivering a loan at a said interest rate. (Example: At 6.25%, the broker would receive compensation from the lender. At 5.75%, the broker would be paying compensation to the lender.) The yield spread is owned by the borrower but captured by the broker to offset what the buyer would be paying in broker fees. For instance, if at 6.25% the broker is charging you 1% origination fee and capturing 1% yield spread, you could have that loan at 5.875% and pay the broker 2% origination. Either way it is the same money to the broker.
Why does the broker collect a yield spread and not a lender? Well the lender does as well, they just are not required by Federal Law to disclose it as the Broker is. Think about it. Their rates are virtually the same, so where did the yield spread go on the lender deal? Answer: they captured it and forget to tell you about it.
Assuming you qualify overall, the 620 score should not cost you anything in rate with your 20% down.
A little education such as a 1st Time Home Buyer鈥檚 class would be a GOOD idea for you!
Mortgage Lending Questions for Newbie!?unisberk.... by far had the best answer in explaining how ysp is not a junk fee. it is what gets paid to the lender for choosing that particular bank. the broker will typically find what bank is going to give you the lowest interest rate for your particular loan scenario, and then pick who will pay them the best for that rate so that they can also help keep your fee's down that way.
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