How to set the cost of your own mortgage loan

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. Here is an idea of how you can 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 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 that 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 with 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 due to 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 questions 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.