If the rule of the jungle is survival of the fittest, the rule of the mortgage industry is success of the sharpest. To get the best value for your money, you have to outsmart, outguess, and outmaneuver your mortgage quoter. However, these three verbs are easier said than done. After all, if your mortgage quoter flourished in his or her chosen industry, then odds are, this person has outsmarted, outguessed, and outmaneuvered clients like you for years. In fact, it's even possible your broker eats fledgling negotiators like you for breakfast.
The best that you could hope for is to level the playing field. How do you do that? By letting your mortgage quoter know you are no babe in the woods. The best way to accomplish this is to let your mortgage quoter know you know all about the Yield Spread Minimum.
What Is Yield Spread Minimum?
Mortgage quoters are retail vendors for wholesale lenders. When you qualify for a loan, the wholesale lender offers your broker a written guarantee of your interest rate. Using this rate as the base, the mortgage quoter then marks it up and provides you with a separate written guarantee. Yield Spread Minimum is your broker's markup. This is where his commission comes from.
Why Do Mortgage Quoters Inflate Your Interest Rate?
The answer is simple. The wholesale lender pays them a bonus when they overcharge. Every time your mortgage quoter gets away with raising your interest rate by .25%, he gets a point from the wholesale lender. Naturally, your mortgage quoter, - in this case, your broker - would do anything to earn those points. After all, one point is equivalent to one percent of the loan amount. Depending upon the amount of your loan, your mortgage quoter stands to earn a sum ranging from respectable to obscenely high!
Can You Avoid Paying the Yield Spread Minimum?
Of course! There is a way to avoid shelling out bucks for the yield spread minimum. Ask to see the originate interest rate guarantee from your mortgage quoter. Then, tell your quoter you agree to pay the origination fee and closing costs, but not the Yield Spread Minimum. You may do this because technically, your mortgage quoter is charging you commission twice - in the origination cost and then, in the Yield Spread Minimum.
Is the Origination Fee Enough Commission?
Yes, it is. When you take out a mortgage, your mortgage quoter gets somewhere between 1 and 3 points. Because one point represents one percent of your loan amount, you bet your downpayment this is a hefty sum! Origination Fee is the commission your broker gets for setting up your loan.
The Yield Spread Minimum is a clever way for mortgage quoters to line their pockets. Unfortunately, it translates to unnecessary expense for the borrower. Protect your hard-earned money by following the rule of the paved jungle of the mortgage industry. You have to outsmart, outguess, and outmaneuver your broker.
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