Why do we pretend that a “Loan Estimate” is actually a promise? It isn’t. Most lenders use that initial three-page document as a way to get your foot in the door. They know the numbers will probably change before you actually get to the closing table. Sadly.
When the numbers shift…
Unexplained math errors. Lenders often use a “floating” estimate for things they can’t predict with absolute certainty. This includes things like daily interest charges and initial interest payments for your insurance. Boring.
Advance planning ahead. You need to ask for a Closing Disclosure at least three business days before you sign. This gives you enough time to catch any weird additions that shouldn’t be there. Fast.
Comparing the documents. Lay the original estimate next to the final disclosure and check every single line. If the numbers in the “Zero Tolerance” category changed, the bank has to pay. Cash.
Federal law protects. You are not just a victim of the banking system when you have the facts. Most people just sign whatever is put in front of them without asking any questions. Sad.
Those pesky junk fees…
Administrative profit centers. Every one of those fees are designed to pad the bottom line for the mortgage company. They might call it a technology fee or a compliance fee to make it sound official. Seriously?
A whole ‘nother level. If you see a fee for courier services in a digital world, you are being robbed. I once had a client who paid fifty dollars for a FedEx that was never sent. Scammed.
Processing and underwriting. These are the big ones that you can actually negotiate if the market is slow. Tell the loan officer that you are looking at another bank with lower costs. Bluff.
Doc prep charges. This is just the cost of the bank printing out the papers you are signing. You should look for things like processing, underwriting and document preparation on your itemized list. Greed.
Third-party surprises occur…
Appraisals and surveys. The bank doesn’t actually control what the local appraiser charges for a holiday weekend. If you live in a rural area, the cost of a survey can jump overnight. Spooky.
Title insurance issues. You are required to buy a policy that protects the lender but not necessarily yourself. This is one of the biggest costs in the entire transaction besides the down payment. Pricey.
(Aside: I once saw a title report that was forty pages long because of an old farm boundary dispute, and the bill was absolutely astronomical.)
Recording fees. These are the costs paid to the local county government to file your new deed. You can’t really negotiate these because the government doesn’t care about your feelings or wallet. Fixed.
Appraisals, credit reports, and surveys. The bank will charge you for every time they have to pull your credit score. Usually, this is about fifty to one hundred dollars per person on the loan. High.
Lock-in fees hidden…
The price of time. If the bank drags their feet, you might be the one who pays for the delay. My boss told me… wait, I probably shouldn’t mention his specific policies on this blog. Secrets.
Back to the drawing board. You can ask the lender to pay for the rate lock extension if they caused it. Most of the time they will say no unless you have a very loud voice. Scream.
Lock-in period. Most locks are for thirty or forty-five days from the date of the initial application. If the appraisal is slow or the underwriter is on vacation, you lose time. Ugh!
Extension costs. These can be as high as five hundred dollars for every week that you need. That is money that could have gone toward your new furniture or a lawnmower. Lost.
Negotiating the final…
The power of leverage. You have more strength in the conversation than the bank wants you to believe. Tell them you will walk away from the deal if they don’t fix the errors. Win.
Redundant duplicated charges. Look for any line item that appears twice under different names on the final forms. Lenders count on you being too tired to read the fine print at the end. Wrong.
Aggregated adjustments. Sometimes the bank will actually owe you a small credit to balance out the escrow account. Make sure they apply this credit to your principal balance instead of just pocketing it. Smart.
Final walkthrough. Check your math one last time before you put the pen to the actual paper. You are the boss of your own money until the moment you sign. Truth.
~~It is a total scam.~~ Actually, it’s just business, but that doesn’t mean you have to take it lying down.
Handwritten-style note: Check the “Page 3” comparisons very carefully! If the “Total Costs” increased by more than 10% from the estimate, they might owe you a refund at the table.
