3 Things To Ask Your Lender When Locking a Loan
When getting a mortgage, one of the steps in the process is to "lock your rate" which is a
simple agreement between you and the mortgage lender that your rate is “locked in” and won’t change between
the time you lock it and the expiration date of the lock.
Common lock periods for lenders include 10 days, 15 days, 25 days, 30 days, 60 days and 90 days — although each
lender has different increments for which you can lock your rate.
Common sense tells you that if you are early in the process of getting a loan and the lender says that it takes
on average 20 days to get a loan done, you would want to lock your rate in for 30 days and not 10.
If only it were that easy.
The process of getting a mortgage has always had some element of the unknown when it comes to planning exactly
when you can close the loan. Things in the process “come up” and as a result, the closing date can be pushed off.
Common issues that can delay a loan are delays in underwriting due to lender workloads and appraisal issues that
result in a longer time required for the appraisal to be done (or re-done in some cases).
Regardless of what actually causes delays in the process, here are 3 important questions you
can ask your loan officer before you lock your loan:
1. How do I know for sure my loan is locked?
Thanks to the new Good faith Estimate it is easier than it used to be to know for sure that your rate is
locked and how long it is locked. When you get your first Good Faith Estimate (GFE) from your loan officer, it
will outline what to expect regarding how long the interest rate is good for, how long you have to close and how
long before closing you must lock your rate.
Your rate is not locked in when you get your first Good Faith Estimate.
Should you decide to go to with a particular lender, when it comes time to lock, you will be issued a document
called a Mortgage Rate Lock Disclosure along with an updated Good Faith Estimate and Truth in Lending
document, Some lenders also require an additional document or two at the time of lock. You will be required to sign
these documents acknowledging that you are aware that your rate is locked, for what period it is locked and the
type of loan program.
Once you have signed all of these documents and returned them to the lender, your loan officer will then lock
your rate. Once your loan officer indicates that your loan has been locked, it is always a good idea to
request a Lock Confirmation – just to be safe. The Lock Confirmation document is something that your
lender may generally have as an internal document, but they shouldn’t have a problem giving you a copy, if
requested.
2. Can I get lock extension if needed?
Each lender will have their own guidelines as to who pays for a lock extension. Thanks to the new loan officer
compensation rules, there are only two possibilities as to who pays for a lock extension — the borrower, or the
lender. The loan officer is no longer allowed to pay for a lock extension out of their commission.
The most common answer I see as to “who pays” if a rate extension is needed is that it depends on why the delay
happened in the process. If a lender is at fault for unforeseen delays that cause a rate lock extension to be
required, I commonly see the lender pick up the extension. If a borrower is at fault for not getting requested
items in a timely manner, I have seen the lender require that the borrower pay for the rate lock extension.
3. What happens if rates drop? Can I get a lower rate?
Policies about what happens if rates actually drop between the lock date and the close date also vary between
lenders. Believe it or not, some lenders offer a “float down” in rate — meaning if rates went down, you can
actually get a lower rate. But, the most common policy among lenders is that if rates went down during the lock
period, you are still obligated to close the loan (assuming that you close with that particular lender) at the
agreed-upon lock rate.
Perhaps the most important thing to know when locking a loan is to have the conversation with your loan officer
about these three important things up front.
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