Surprise, Need Another
Thousand Dollars...

This may sound absurd, but it happens. It may not always be a thousand dollars, but any increase in fees at the last minute is aggravating.

Lenders are legally able to show you an attractive Good Faith Estimate and change the terms at the end. Sometimes lenders can increase your interest rate to absorb the increased fees or vice versa. Either way, you will either pay more up front or more per month. So how can you avoid this problem?

There are several possible reasons why mortgage lenders will ask for additional money or raise your interest rate. It could be because the market is changing, because third party fees may change, or because the lender wants more profit.

The Market May Change

Financial markets change daily and sometimes even hourly. A slight shift in the market can change your entire good faith estimate considerably. Remember, it was just an estimate of what you will actually pay.

Changing market conditions are not your mortgage lenders fault. Lenders cannot control the market if it changes between the time you apply and the time you actually finalize your loan. If changing market conditions is the cause of changed terms, it is often futile to shop other lenders since the market affects all lenders.

Locking Your Rate So how can you freeze the market to your benefit? The way to outsmart rising interest rates is to lock your rate. Throughout the process, it is wise for you to ask your real estate professionals what the market is doing. This way you can lock your rate if they are expected to increase.

Lenders can often lock your rate with no charge. The caveat is that they cannot unlock it if rates fall. Locking your rate is a way of hedging your bets. Sometimes the borrower wins and sometimes the lender wins.

Whether to lock an interest rate is an important personal decision. If you barely qualified, a higher interest rate could disqualify you to buy a certain home. Locking your rate is a complex decision so be sure to contact Josh if you need more information.

Lender May Seek Higher Profits

Another reason terms can change is that the lender may want more profit. Again, it is important to remember that lenders cannot control every fee, but they should be able to accurately estimate your costs.

Some lenders are interested in luring your business away from the competition. They sometimes do this by estimating unrealistically low interest rates and fees. They know in the end, they can charge the going rate. Some lenders even charge higher than the going rate when it is too late for you to back out.

The unfortunate thing is that most people end up signing in spite of the higher fees, because the penalties of cancellation are too high. After the borrower signs, the lenders may do it again to another borrower.

Charging a higher interest rate or higher fees can increase a mortgage lender's profit. Charging higher fees obviously increases their profit. A higher interest rate increases a lender's profit because secondary lenders pay according to interest rate. Higher interest rates mean higher loan value on the secondary market.

So what can you do to protect yourself from these little and big surprises? Choose the right lender. Here are some things to look for in a mortgage lender:

• Competency Make sure your mortgage lender already knows what the underwriter will want to see. This will avoid some additional red tape and surprises in the end. Often, an "In House" mortgage underwriter can avoid surprises.
• Reputation A reputable mortgage lender will be more likely to treat you well. They will want your repeat and referral business more than the initial profits. Seek testimonials from the mortgage lender's past clients.
• Research It may pay to check with the Better Business Bureau (BBB) or your state Attorney General. Again, look for client testimonials.
• Cooperation It is imperative that your lender work cooperatively with your Realtor, Escrow Officer, and other professionals.
• Honesty Always be up front and honest with all of your real estate professionals. They can only help you according to the information you provide.
• Ask Questions No question is stupid. This is one of the biggest decisions of your life and you need to understand what you are getting into.
• Know Your Rights If you would like to gain a better understanding of your rights in the real estate process, contact Josh.

Third Party Fees May Change

Finally, third party fees may change. Lenders purchase a number of services to process your loan. In the end, you will pay for those fees. Lenders cannot usually control these fees. Some third party services include:

• Obtaining a Credit Report
• Title Services
• Appraisal Services

If these fees legitimately change, then the lender cannot be blamed. Usually such changes are minor anyway.