Key Terms You Need to Know

Knowing these words and their meanings can save you lots of money, even if you decide to go somewhere else for your loan. So please, pay attention!

Par Rate the lowest possible interest rate that you can qualify for given the type of loan you seek, your credit score and your overall financial situation.

We at One Earth Mortgage will always offer you the par rate. Many banks and mortgage brokers wont even tell you what it is.

Yield Spread Premium (YSP) the extra money that your bank or mortgage broker makes by selling you a loan at an interest rate higher than the par rate. The higher the interest rate they charge you, the more money they get, plain and simple. The Yield Spread Premium is the technical term for the Back End Profits described in the equations above.

Secondary Mortgage Market the marketplace where most lenders, including local banks, resell your loans to larger financial institutions such as Freddie Mac, GMAC or Chase Manhattan. It is important for you to understand that most lenders, including your local bank, give you a mortgage and then turn around and sell your mortgage to a larger financial institution. The price they can charge the larger banks when they sell your mortgage (and hence the back end profits they make on that loan) increases as the rate moves further away from the par rate.

How Lenders Make $$$

Regardless of where you go for a mortgage, there are two basic ways in which your lender makes money on the front end with fees you pay them at close and on the back end with the yield spread premium they receive from the larger financial institutions when they sell your loan in the secondary market. Most mortgage brokers and many banks double dip, meaning they get paid on both the front end and on the back end. This fact is captured in the first equation:

Your Lenders Revenue = Front End Fees + Back End Profits

You probably are already familiar with front end fees like underwriting fees, processing fees, and other items paid at closing. While these fees do cost you money, they are clear and easy to understand, so it is unlikely they will be inflated too much. The back end profits are different (the YSP), and they are of special importance to you for two reasons.

First, most customers dont know about or understand yield spread premiums very well, so lenders can inflate their profits by maximizing their back end gains without the customer knowing how this affects them financially. Since you are becoming an educated customer, you will be able to negotiate a better deal for yourself and avoid higher mortgage payments. Of course, you could avoid the trouble of negotiation simply by working with us at One Earth Mortgage. We promise you a fair and honest deal, and we will always offer you the Par Rate, which means no back end profits for us and large savings for you.

Second, back end gains are important because the yield spread premium can be very costly to you over the life of the loan. In contrast to front end fees, which only happen once, the yield spread premium results in a permanent increase in interest rates, which costs you money every single month for the entire life of your loan.

For example, on a $100,000 mortgage, your bank or broker might make an extra $1,000 in back end profits by marking up your interest rate by an extra half percent. This seemingly small increase in interest rate might cost you $500 the first year and >$10,000 over the life of your loan. Your lender makes an extra $1,000, but it costs you $10,000 or more. This idea is captured in the second equation:

• $1,000 Back End Profits Can Cost You >$10,000

We at One Earth Mortgage dont like the way these numbers add up for you, the customer. Thats why we have developed our fair and honest pricing policy.

Our Fair and Honest Pricing Policy

• We always offer you the par rate, which means no yield spread premiums for us and savings for you of up to $10,000 or more for each $100,000 you borrow.
• One Earth Mortgage = No Back End Profits* = Large Savings

In stead of inflating our profits on the back end, we simply charge you a fair service fee on the front end that allows us to build a successful business. You save tens of thousands of dollars or more over the life of your loan, and we make a fair living helping you finance your home and supporting the charities you care about the most. This makes us happy, and we hope it will make you happy too.

If you want to speak with us about our pricing policy or get started on a loan application, please give us a call. We look forward to serving you!

Phone: 812-333-1200
Toll Free: 888-333-1229

* Depending on your financial situation and future plans, there are some specific circumstances under which you, the customer, might be better off paying One Earth Mortgage smaller front end fees and allowing us to make some back end profits instead. If we feel this might be true for you, we will explain to you why and allow you to choose how you would like us to get paid. We will never inflate our profits through back end gains and will only receive them if you, the customer, believe it is in your best interest.

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