Mortgages are not cheap. Closing costs and interest paid over time to your lending bank will make the cost of having a mortgage very pricey over the 15-30 years that you have it. When it comes time to getting your mortgage, you actually have more control over your loan costs than you think. Let’s explore ways to accomplish that without cutting corners.
When you apply for mortgage loan financing and agree to move forward with the loan, there is something called a “rate lock” or a “commitment.” Rate Locks are usually set for 15, 30, 45 or 60 days. The rate lock is a commitment; you are committing to your lender that you are going to take the interest rate and terms they have been offered. In turn, when you lock in a mortgage rate, the lender is committing to giving you those terms with zero changes. The big if in this statement is this rate lock is set for a specific timeframe, i.e. 15, 30, 45 or 60 days. The average rate lock is 30 days for most mortgages. If your loan is locked for 30 days and it does not close by day 30, the lock would have to be extended in order to maintain that rate. If the lock is extended, the cost of your mortgage can change and your loan terms can get unnecessarily expensive.
It is not uncommon for a mortgage that started with zero points to end up with pricey discount points because of a lock extension.
You can avoid this. The speed and momentum in which your mortgage loan is processed is directly related to how quickly you, as the borrower, provide your lender with documentation and requested items throughout the process. The longer it takes you to gather and supply these items, the more it can cost you. You can reference the old adage, time is money.
When you first approach your loan office and/or lender about mortgage loan financing, try to provide all of the documentation they ask for up front and before you begin. Once your loan has been underwritten and you are asked to provide additional documentation, get it back to them as soon as you can. The longer it takes for your lender to receive these items, the higher the chance that an extension will be needed. The ideal response period is 24-48 hours after the request is given. If it is going to take you more than 48 hours, or if you know you cannot get it quickly, let them know as soon as you get the request. Do not wait the 48 hours and hope that the condition will disappear. It will not.
The loan process is not always a smooth sailing ship. When items are requested by the lender to the consumer, things can get frustrating. These are some common responses made by consumers that come up during the process:
• “I have already provided that piece of documentation multiple times.”
• “Why do you need this?”
• “I am waiting on my accountant and he won’t get it back for a week.”
Consumers can often feel frustrated because the reality of today’s lending environment was not made clear by the mortgage professional at the beginning of the process. If you are the type of consumer that understands that 5+5 will always equal 10 in any situation, prepare to be disenchanted by the mortgage loan process. In the current mortgage market, 5+5 will equal 10, 11 or 0. The environment you are entering is bureaucratic and heavily reliant on compliance rules and regulation. These can often seem redundant and unnecessary but they were put in place to protect you.
If you can step back from the frustration and provide the items quickly, not only will you be ahead of the game but you will be saving yourself time and money. If you are prone to providing pushback to your lenders on requests, know that you are costing yourself in time, effort, and costs.
Ask for clarification, call your lender, get on their calendar, and bite the bullet and you will maintain control of your costs. The way to make sure you are set on the cost of your mortgage is to lock in the interest rate and terms, provide documentation within 24-48 hours, and be on call for any updates that your lender has. There will always be circumstances beyond your control, but being productive and on top of what your lender needs is the number one way to stay in control of your financial mortgage success.
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 www.sonomacountymortgages.com.