Home > Mortgages > 3 Ways the Cost of Your Mortgage Can Go Up Before You Close

Comments 0 Comments

Getting a mortgage can be a costly endeavor from the onset. You’ve got to worry about getting together a down payment, securing an affordable interest rate and covering closing costs, among other things. What you may not realize is that the total costs of your mortgage can wind up rising before you close on the loan, especially if you don’t plan accordingly. Fees associated with a home loan can change for a slew of reasons, but here are the most common ones to look out for.

1. You Take Your Time Supplying Documentation

When your lenders asks for bank statements, pay stubs or any other form of supporting documentation for your mortgage application, it’s in your best interest to get this paperwork to them as quickly as possible. In fact, aim to do so within the following 24-to-48 hours. Failure to provide documentation in a timely fashion can result in having to take a rate-lock extension, which could drive up the total cost of your loan.

See, an interest-rate lock is only good for a certain period of time, typically for 30 days or, in some cases, as long as 45 days. Essentially, a rate lock locks in the rate you’re going to pay over the life of your mortgage for a certain period of time under certain terms. But, as the market moves, the value of this rate lock to the end investor can go up or down.

As an example, let’s say you lock in a 30-year fixed-rate mortgage at 3.625% with no points on $500,000 loan. As the rate-lock’s 30-day window expires, it is determined you’ll need another 10 days to close. Meanwhile, interest rates changed and are now at 3.875% on a 30-year fixed-rate mortgage on that same $500,000 loan. Since rates rose and your lock-in date has passed, it is now more financially advantageous for the end investor to lock in a new loan with a higher interest rate. Depending on the situation, the lender would either re-lock your loan at worst-case market pricing or would allow you to extend your loan, potentially driving your loan fees higher.

2. You’re Derailed By External Factors

External factors can also cause delays in escrow. These can include the seller of the property failing to quickly sign required documentation or home appraisal delays. These delays aren’t your fault, but can still cause you to have to pay more money when extending your interest rate lock. Best to plan accordingly. This means ordering an appraisal upfront when buying a home in order mitigate delays down the line. When refinancing, it’s a good idea to order the appraisal at loan application or to plan for a 45-day escrow timeframe.

3. The Appraisal Doesn’t Go as Planned

Residential real estate appraisers have total and complete authority on the value of your property. Most mortgage companies have a set standard appraisal fee. However, the appraiser has the right to change what they want to charge for the appraisal. For example, if the appraiser has a heavy workload, they may require more money to complete the order. They also may deny the order, resulting in the lender having to find a new appraiser. If you’re on a tight closing deadline, you may have to pay the additional fee to have the appraisal done quickly or within the timeframe stated in your purchase contract.

If your appraisal does not come in at the desired value, changing the loan-to-value ratio on your mortgage, you may also subsequently face higher fees and/or rates than you were expecting based on the prior valuation of the home. Additionally, if the property is missing a carbon dioxide detector, which in some states is required by law, the appraiser must to go back out to the property to sign off on the appraisal following installation, resulting in an additional charge.

The best way to mitigate additional fees is to stay in constant communication with your lender. You can also generally lower the cost of your mortgage by improving your credit, since a good credit score will help you qualify for the best interest rates. You can see where your credit stands by viewing two of your credit scores, updated every 14 days, for free on Credit.com.

Image: monkeybusinessimages

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team