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If you are using a mortgage broker, you need to get acquainted with a Good Faith Estimate. It details what the expected fees will be. There is one line that you really need to understand that few people discuss, it’s usually referred to Yield Spread Premium (YSP). It’s what the bank pays your broker. Let’s say you are paying a 1% origination on a $400,000 loan. You think you are paying them $4,000 for the loan which seems fair. But the bank is paying the broker another $2,500 in YSP. Brokers will tell you that you aren’t paying it, but you are. The bank is charging you a higher interest rate to enable them to pay the broker. So instead of 5.00% maybe you were charged 5.25%, a big difference over time. 1% is plenty for a decent sized loan, so add the two together and make sure it’s not more than that.
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