Getting a mortgage can be a costly endeavor if you don’t plan accordingly. Deadlines, qualifying, and paperwork are some of the things you’re going to be dealing with over the course of your escrow. Here’s what you need to know regarding loan costs…
Fees can change in part for a slew of reasons, but for our purposes here are the main reasons:
Timing is critical-when your lender asks for bank statements, pay stubs or any other form of supporting documentation for your mortgage application, get this documentation in quickly i.e. 24-48 hours. Failure to do so can result in having to take a rate lock extension. An interest rate lock is good for a certain period of time typically for 30 days or in some cases as long as 45 days. The money is set for a specific period of time. Essentially, a rate lock is putting a hold on the money you’re looking to borrow for a certain period of time under certain terms i.e. a certain interest rate under a certain program.
As the market moves the value of this rate lock to the end investor can be more or less valuable at the end of your escrow. For example let’s say you lock in a 30 year fixed rate mortgage at 3.625% at no points on $500,000 loan. At the end of 30 days because of the delay in the process (more on this in a moment) it is determined you’ll need another 10 days to close escrow. Meanwhile, interest rates changed and while you are locked at 3.625, rates are now at 3.875% on a 30 year fixed on that same $500,000 loan. As rates rose since your lock in date the value of your loan is less desirable to the end investor as it would be more financially advantageous for them to lock in a new loan with a higher interest rate. The lender would either re-lock your loan at worst-case market pricing or would allow you to extend your loan driving your loan fees higher.
External delays-external factors can also cause delays in your escrow. These external factors may include other parties not performing such as the seller of the property failing to quickly sign required seller docs or home appraisal delays. These are delays though not your fault can still cause you to have to pay more money on extending your interest rate lock. Best to plan accordingly. This means when buying a house ordering appraisal upfront as soon as possible in order mitigate delays down the line. When refinancing this means ordering the appraisal up front at loan application or planning for a 45 day escrow time frame.
Appraisal Fee Changes-residential real estate appraisers have total and complete authority on the value of your property. Most mortgage companies have a set standard appraisal fee approximately $500. Despite most mortgage companies having a set standard appraisal fee the appraiser has the right to change what they want to charge to perform the appraisal. For example if they had a heavy workload, they require more money to complete the order or deny the order resulting in the lender having to find a new appraiser. If you’re under the gun for an escrow you may have to bite the bullet and pay the additional fee to have the appraisal done quickly or within the time frame stated in your purchase contract.
Miscellaneous items- Other factors that change your loan fees are appraisals not coming in at the desired value changing the loan-to-value on your loan subsequently changing fees and/or the rate you otherwise were expecting based on a different valuation of your home. Additionally, if the property is missing a CO2 detector which in some states is law like California the appraiser must to go back out to the property to sign off on the appraisal resulting in an additional charge.
The best way to mitigate additional fees that can come up in the loan process is clear responsive communication with your lender. It is up to your lender to make sure they are setting right expectations with you by communicating not what you want to hear, but what you need to hear.
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