We’ve been talking a lot lately about refinancing and the bloggers at RefiAdvisor Mortgage Blog suggests some basics if you are looking into refinancing your current mortgage:

"If you are in the market to refinance your mortgage loan, doing your
homework and researching mortgage offers will help you avoid many of
the mistakes other people make with their mortgage loans. Doing your
homework means learning mortgage terminology and how mortgage companies
and brokers make their money."

The first major thing to keep in mind when considering a refinance option is how to avoid the Yield Spread Premium. You have probably never heard of this and that is because most mortgage companies do not ever discuss this with their clients. Essentially the Yield Spread Premium is the amount that mortgage originators mark up your mortgage interest rate to get a higher commission from the wholesale mortgage lender. RefiAdvisor explains how this works:

"the wholesale lender qualifies you for a specific mortgage rate and
provides that rate to your Mortgage Company or broker. Your loan
originator marks up the interest rate because the wholesale lender pays
them a bonus of one percent of your loan amount for every .25% you
agree to overpay."

For some reason the term "hidden cost" is coming to my mind and I don’t think many lenders are sharing this information with their clients nor will it be easy to find this information in the disclosure agreements. RefiAdvisor has some suggestions on how to spot and avoid paying Yield Spread Premiums.

"Tell your loan representative that you pay a reasonable origination fee
for their services but will not pay any markup of your mortgage rate by
their company. A reasonable origination fee is 1.5% of the mortgage
amount."

By checking the weekly yield on Fannie Mae’s website you should be able to tell the current mortgage rate and whether or not your lender did in fact agree to your terms. Compare what Fannie Mae says with the rate sheet from the wholesale mortgage lender and you will be able to determine whether or not it matches up to your Good Faith Estimate. If not, go back to your lender and explain again what you want. If he/she is not willing to meet your terms chances are another lender will!