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Loan origination fee - Loan origination fee is a fee that you pay a mortgage loan officer to work on your loan. It is necessary for the loan officer to be paid – their family needs to eat too. The loan officer generally receives their payment in one of two ways, either through loan origination fee, or through yield spread premium. Loan origination (LO) fee is a fee that you pay them through closing costs, whereas yield spread premium (YSP) is an amount that the lender pays them. These are often referred to as ‘the front’ and ‘the back’.

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%.

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.

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.

California First Time Home Buyers - As we all know California has one of the top Real Estate markets in the nation, and growing. This unfortunately, has made it tough for first time home buyers to get in the mix. Places like Sacramento, California and some surrounding areas saw a huge increase in property values over the past 4 years. Now, it seems the market is starting to cool off, which means asking prices are coming down.

This is what you call a buyers market. Now, you the buyer, has the upperhand, meaning negotiating power. This is a great time for first time home buyers to jump in.

There are also loan programs that are designed for first time home buyers that need a home with no down payment.

Some seller's will use what is called seller's concessions. This is used as an incentive to attract buyers, for a quick sale. Seller concessions are a great thing. This is when the seller contributes money to the buyer to help with closing costs. Sometimes the buyer can even walk away with money.

Should i refinance into a Pay Option ARM - Pay option ARMS are not for every borrower but there are a few borrowers that can benefit from the Pay Option ARM mortgage programs availible today.

Self-Employed and Commissioned workers- With the flexible options in the Pay option programs these borrowers can adjust their monthly payments according to their monthly earnings.

Borrower’s with high consumer debt– By lowering their mortgage payment these borrowers are able to pay of higher interest debt faster.

When considering whether to refinance into a Pay Option ARM, always keep in mind that Pay Option ARM can create negative amortization. Negative amortization occurs when a home owner makes the minimum monthly payments, which is less than the interest incurred, and end up owing more than what the homeowner owed originally. Most Pay Option ARM programs re-adjust the payments every year so that the loan balance would not be too much more than the original loan amount.

Ask your mortgage broker to review your situation and see if you could benefit from the pay option ARM programs. If a pay option ARM is not for you there may be better programs based on your situation.

Option Arms are a good choice for:

-Increased cash flow on investment properties
-Areas with high appreciation
-Lower payments in order to invest and payoff debt
-People who have unpredictable incomes.

Pay Option ARM's are generally not meant to be programs that one stays with for long periods of time, such as 10 years or more. Pay Option ARM's can incur negative amortization which means instead of your mortgage balance going down it actually increases. Most Pay Option ARM's have a cap that will not allow the balance of your loan to increase higher than 115% of the appraised value of your home. Most also have a rate cap that states the rate can't increase any higher than 9.95%. These numbers may vary slightly so check with your mortgage broker on the exact details of your loan program.

The Pay Option ARM gives you 4 "options" to make your payment.
(1) The minimum payment.
(2) Interest only payment.
(3) 30 year fully amortizing payment.
(4) 15 year fully amortizing payment

If the house you are living in is not your last house or it is a stepping stone towards a bigger purchase down the road then a payment option arm may be a good fit for you. You save additional money each month with flexible payment options and in turn your house takes on the financial burden. So if you plan to sell your place in the next few years the payment option arm should be an option to consider.

The pay option arm is also a great tool for seasonal wokers. If you are a painter, and know that the majority of your income comes from the summer months, then you could adjust your payments to thsoe months. You would be able to pay more on your mortgage while you are making more money, and pay less dring the months that are typically slower for you. This would leave more cash in your hands during those slow months.

A Pay Option ARM is also a great tool for property investors. It gives you flexible payments that can help in months when the property is vacant, or in the event repairs are needed it can be used to offset the cost of repairs rather than using cash out of pocket.

If your household, like many in the US today, seems never to have enough cash every month and you find yourself constantly turning to credit cards or other expensive debt, this loan may be quite helpful. The Pay Option ARM can free up needed cash every month and help you avoid the other, more expensive kind of debt.

The Pay Option ARM is also a great way to pay down credit card debt, without laying out additional cash on a monthly basis. This method of managing your mortgage provides interest savings as well as it will usually provide some sizeable Taxs savings.