Real Estate
October 18, 2019
link to facebook link to twitter
More Stories
Seven common mortgage mistakes What to expect in today’s loan process? How to use rental income to qualify for a mortgage How to plan the optimal time to buy a rental property The loan process and what not to do Why waiting for mortgage rates to get better is a losing proposition How child support and alimony can affect your ability to get a mortgage What to look for when getting a mortgage on a manufactured home Why getting a 30-year fixed-rate mortgage is a smart financial move How to lower your cash to close when buying a home What you need to know about securing a VA mortgage How mortgage lender credits work Five quirky refinance scenarios that work Two mortgage loan programs get a better interest rate The #1 mistake consumers make when getting a mortgage… Things that affect your first-time buyer mortgage options Be wary about paying off this type of mortgage Best benefit for your first-time home buyer Why the VA mortgage is the best home loan A bank statement program might help get a mortgage Read the fine print Cash-out refinance or home equity Should you refinance with today’s mortgage rates? Should you buy and build or buy a single family home? Don’t make mistakes when getting a mortgage refinance Home value when refinancing Should you go FHA or conventional for purchasing your first home? Mortgage rate sounds too good to be true Finances matter when buying a home FHA requirement might hurt buying chances How to get a mortgage without providing tax returns The new way to get a mortgage with 1 year income tax returns Four common home buying mistakes to avoid How to create wealth with your income and finances Should you buy a house with monthly mortgage insurance? 2019 conforming loan limits rise FHA loan limits for 2019 increase Working two jobs makes now easier to get a mortgage How much of your mortgage income should be going towards an auto loan? How much are closing costs when you purchase a house? Self-employed income Common questions on financed mortgaged insurance loans A loan program you may be eligible for based on your credit score Can you use roommate income to get a mortgage? Pulling credit may not make sense Cash to payment formula when buying a home Lender knows how to purchase business? Be careful getting a mortgage if you have a bankruptcy How expensive your mortgage will be due to bad credit? A non-traditional program for self-employed mortgage borrowers What you need to know about the mortgage 4506-t document Two mortgage process problems you will want to avoid How the mortgage process gets ugly if you have a difficult picture Could the 30-year fixed mortgage get to 3 percent? Purchase price should not be most important factor Three reasons you should not buy a home Three quirky issues that will hurt your mortgage Why your mortgage payment keeps changing The credit score it takes to get a mortgage How 1031 tax-deferred exchanges work Six to avoid when purchasing a home Mortgage inquiry makes your credit score drop? Transfer property to family and be protected under Prop 13

A factor that can drive your mortgage cost up

By: Scott Sheldon
October 5, 2018

Purchasing or refinancing a home requires a certain degree of time, commitment and paperwork. Here is one factor that can make your mortgage more expensive …

The simple answer is time. Time is not on your side when it comes to an escrow. The mortgage process is a very bureaucratic and compliant process and borrowers today are paying for the sins of borrower’s past in terms of compliance and processes. One of those factors that come into play is locking in your mortgage rate. A rate lock essentially means the lender is setting aside $500,000 or however much you are borrowing under set terms. If you can’t deliver on those terms or if you’re unable to provide paperwork or for whatever reason your mortgage cost can change and rise in the form of rate lock extension.

Rate lock extensions can become pricey especially if you must take more than one lock extension. So, for example if you know at the beginning of the process that your file is a little bit more unique and or technical it would be advisable that you lock in your mortgage rate for perhaps 45 days even though that might cost longer than a 30-day rate lock.

Extending the rate lock is something that the lender usually passes on to the borrower, sometimes they will cover it depending on the circumstances. Let’s say you’re getting a 5 percent loan at no points on a 30-day rate lock.

For whatever reason you’re not able to get that loan done in 30 days and the lender charges you an extension on your loan- let’s just say it’s $500 for comparison sake that means now you’re paying an extra $500 in fees for the same interest rate because the loan was not able to be funded in the original time frame committed.

The reason why rate locks are not free is because the lender takes a certain degree of risk locking in your interest rate. For example, if you’re locked at 5 percent using our example above and rates go to 5.5 percent, the value of your loan in the secondary market is not as lucrative for the investor because they would have better use of their money earning 5.5 percent on their investment than 5 percent. As a byproduct of that risk the lender assesses a rate lock extension cost to preserve that original money committed.

The moral of the story is get the paperwork to the lender as quick as possible even if it seems over the top. Over the course of your escrow time frame you need to think of yourself as an on-call professional much like doctors where they get called in on their own time to do things that might otherwise be inconvenient for the greater good.

If you go into the process with that expectation knowing that when the lender needs something you get to them in 24 to 48 hours, not only will your loan close on time, but you’ll keep your costs down without any changes which otherwise might occur as a byproduct of not being able to get documentation into the lender in a timely manner.

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at