Sometimes the broker's YSP can be used to credit their customers at the closing. If you do not have enough money to come to closing with, your broker, in some instances, can credit the money to you.

YSP means your broker is getting compensation outside of the origination they are charging you.

The mortgage business, like other businesses, works on a margin. That is, goods are purchased at a cost and sold for a price that is higher than the cost. In the mortgage business, brokers essentially are paid a margin, called YSP, by the lender. Often, this is the only compensation the broker makes. A broker may elect to "sell" you a mortgage with no margin or profit which provides a lower interest rate. In that case, the broker will charge you origination points in order to earn a profit on the transaction.

YSP may also increase when a prepayment penalty is added to the loan. It can sometimes be a strategic benefit to ask your loan professional if this is the case. You may want to add a prepayment penalty to your loan and ask that the up front fees be reduced.

When your broker makes a yield spread premium on your loan he/she is normally chaging you a slightly higher interest rate in return for compensation from the lender. Some lenders offer to provide mortgage brokers yield spread premium incentives for providing them with a complete and perfect loan package all at once and some will provide yield spread premiums for using a certain method of underwriting, such as automated instead of manual.

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.