mortgage insider author photo

Here is the question…and it is a good one!

“My mortgage broker had locked me in at 6.43% with a .25 point buy down at a cost of $875.00. Her yield spread was .98%.

Then a week later the market fluctuated and she was able to lock me in at 6% with no buy down and her yield spread increased to 1.98%!! Does that mean my actual percentage rate would have been 5.5% or lower? Both loans were 30 year fixed with no early payment penalty or could there be something different with the terms of the loan.

Thanks,
Eric”

Okay…first, you don’t know what you were locked at or even if you were locked at all. And the reason I know is …brokers don’t unlock or relock clients once they are locked.

There is an old adage in the industry….”a lock is a lock”…

To make sure a “lock is a lock” you need to get it in writing. How to do that is outlined in, “Rate Lock: Get It in Writing“.

So that brings me back to your question…

You were told you were locked and then “a week later the market fluctuated”…isn’t that what a lock is supposed to eliminate…market risk?

You are being lied to about what a lock is and when you are truly locked. You were never locked under those first terms you mentioned. Those were just quotes or terms designed to “get you in the door”. The real terms were to come later.

(Click the link to read an article I wrote on how loan officer sucker clients in using Good Faith Estimates with terms they never intend on closing with.)

And come they did…making the loan officer a 1.98% YSP. As you suspected, the only way yield spread premium is created is by jacking up the rate (and subsequent monthly payment increase you will be paying for the life of the loan) so your loan officer can pocket her 1.98% commission from your higher rate.

To answer your question….”yes”…the rate would have been lower if there was no YSP. Your mortgage rate would be about a .25% in rate lower for every 1% in YSP. So your estimate of 5.5% without YSP coming down from 6% with about 2% YSP is spot on.

The bigger problem you have here is not having a workable mortgage shopping technique. I can tell because you are most likely working with a “loan officer” and not the mortgage broker-owner. Or, if this is the owner, she is not giving you the best deal because she has determined you can’t tell the difference. She never bet on you finding our website!

We teach in our system just who to talk to, who never to talk to, and give you a script on what to say so slipping in YSP is never an option the mortgage seller would attempt…to learn more read, The Mortgage Advantage.

Thanks for the question,

Good Luck!

Author: The Mortgage Insider

Previous Post:« Why are my insurance repair checks made out to my mortgage lender?

Next Post:» Money Merge Account – Is it true it can payoff my mortgage in 7-10 years?

Tagged with: • • •

"Our Online Quote Service Is A Guaranteed Way To Compare Mortgage Offers Quickly." - Rob K. Blake, The Mortgage Insider ...Click Here!