You should realize that the loan officer rarely gets to keep the full amount that they are paid through LO fee and YSP. The amount is split with the company they work for. They may get to keep as low as 50%.

You may have an option of getting the higher interest rate if you do not want to pay any fee, including the origination fee, up front. The loan counselor is able to structure the deal so that you don't have any fees on front, and lets them roll into a slightly higher interest rate.

Since loan origination fee is part of closing costs, it is tax deductible. Depending on whether the transaction is a property purchase or a refinance, loan origination fee is deductible entirely for the year it is incurred or equally throughout the loan term. Always consult a tax accountant before taking any such deductions.

While banks normally don't disclose a Yield Spread Premium or YSP, they will receive a similiar type of compensation on top of an origination fee that they may charge. The compensation they receive is referred to as an SRP or Service Release Premium. They recieve this compensation when selling your loan on the secondary market. More often than not, a bank will recieve a greater compensation on a loan in the form of an SRP over a mortgage broker's YSP.

Many times the loan origination fee is used to cover the overhead associated with generating the loan. Be sure to ask your mortgage professional if your origination fee is a set percentage or if it varies from customer to customer.

Yield spread premium vs. loan origination fee - What is the difference between Yield Spread Premium (YSP) and loan origination fee? Both are ways that loan officers earn their commission. However, they aren’t the same thing.

Yield Spread Premium is paid by the lender to the mortgage company at closing. It is not a fee that is charged to you. Although it does have an impact on your interest rate, you should not be alarmed just because you see the Yield Spread Premium on your HUD-1 closing statement. Every company makes their money somewhere, mortgage brokers make it through Yield Spread Premium and Loan Origination Fees. If you're comparing two loans to each other, the best way to compare your loan to see if you're getting the best deal is to compare the APR (Annual Percentage Rate) of each loan. This is the interest rate of your loan with the closing costs factored in and amortized over the life of the loan. Just as with interest rates, lower is better. The APR will be disclosed on your Truth In Lending Disclosure.

Yeild Spread Premium is a percentage based fee paid to the mortgage broker based on the whole sale rate they give you for the loan. It should be disclosed to you on your Good Faith Estimate, and will show up on your settlement sheet (HUD-1) as a Paid Outside of Closing (POC) fee from the lender to the broker.

In order to reduce your closing costs, you can ask your mortgage professional to eliminate your origination fee in exchange for a slightly higher interest rate and Yield Spread Premium. Many morgage professionals will grant that request.