Locking-In Your Interest Rate
For Your Mortgage Financing
What You Should Know ...
One of the most confusing aspects of the mortgage financing process comes when it's time to "lock-in" an interest rate on a loan.
Purely trying to explain the "hows, whens, and whys" of enacting a "lock-in" of a rate ... especially while talking over the phone or communicating via technology ... can confuse the heck out of most clients. Nevermind when you start to add multiple mortgage programs comparisons ... or several different mortgage lenders into the mix.
I presently have a potential client that is struggling through this portion of her initial financing inquiries right now. She's narrowed her mortgage lender choice down to myself and one other lender. It's my opinion, that she is getting a bit of a shell-game played on her by this other lender she is talking to.
Time will tell, but the lower interest rate she says she is being quoted by them, just doesn't seem to hold water to me. And they are rather evasive when asked about whether that rate is truly "locked-in" for her.
But her plight, which is not an unusual one, brings the dilemma surrounding "lock-in", and the confusion it causes, into light once again. So I thought perhaps addressing this confusing step of the mortgage process here might be of some help.
Let's answer some of the questions I hear most often ... and provide some basic steps to help you get the information you need regarding "locking-in" interest rates ...
First ... What exactly IS the process of "locking-in" an interest rate?
"Locking-In" is the making of an agreement (confirmed in writing) between the Borrowers and the Lender's Representative (Loan Officer) as to the interest rate and mortgage type and term of loan, and a subsequent guarantee of that rate for a specific period of time. The "lock" is typically done at the time a formal loan application is taken and/or another agreed upon time between the application and a week before closing.
Second ... What exactly does this "lock-in" process accomplish for a mortgage client?
"Locking-In" secures a current interest rate for the duration of the lock period, typically as long as the closing date. It protects the Borrower in the event of "changing" markets and "changing" interest rates.
Third ... How long does a "locked-in" interest rate typically last?
As a rule, rate locks are available for 30, 45, and 60 days. Variances can be obtained for longer term locks.
Fourth ... Why does this process sometimes get so darn confusing?
Not every bank, not every loan officer, deals with the discussions on rates, rate locks, fees, and points in the same manner, leading to differences that can become overwhelming for the borrowers. And each bank varies in fees that they charge, contributing to further confusion of borrowers.
Fifth ... If I am speaking to multiple mortgage lenders regarding interest rates, closing costs, and "lock times", what information do I need to acquire from each to accurately do my comparison?
Most importantly, compare apples to apples. Make sure that the "lock-in" periods you are comparing are the same, that each mortgage lender has the same information (i.e. credit report, down payment ability, employment information, purpose of the loan, etc). To ensure that each mortgage lender is understanding your situation fully, compare Good Faith Estimates prior to "locking-in" with anyone.
Sixth ... Is there a "Lock-In" fee?
There can be ... so ask this upfront. Every mortgage lender varies on this policy, but typically there is no "lock-in" fee. "Lock-In" fees are typically associated with longer "lock-in" terms.
I also recommend strongly, that you do what you did in school. Take notes! Write things down for future reference and recall. Trying to remember all the information you are given without taking this measure will be almost impossible.
And I want to add one more important piece of information for you here ...
In today's mortgage financing, it's virtually impossible to compare the mortgage scenario and background of one client to another's. Mortgages ... and the quoting of interest rates and mortgage program options ... have become increasingly detailed and personal to each client.
Like winter's snowflakes, you will not find two financial scenarios 100% alike. So comparing your experiences and the information you have received to another's is a waste of time and will only serve to add to your confusion.
I cannot stress enough just how much a client's personal financial details contribute to the outcome of their mortgage financing, their closing costs, and the interest rate they will receive. You may get a ballpark idea of each from plugging information into an online mortgage calculator ... but then again, you may not. Mortgage financing is much like a recipe. Working with all the right ingredients in the exact amount needed makes a huge difference to the outcome.
In the present financial climate, it takes an experienced and knowledgeable mortgage professional to correctly work with all the variables related to your personal financial situation. Only someone that has the needed expertise and experience can discover and arrive at the beneficial mortgage options that lie before you ... and then "lock" you in.
Also remember that it takes dedication, attention, and work on the client's part too.
I hope that the information provided here on interest rate "lock-in" will assist those presently pursuing mortgage financing. Should you need further information or explanation regarding this part of the mortgage process, please do not hesitate to contact me. I'll be glad to assist you further and in every way I can.
* Looking for further information or answers to your mortgage and credit questions? Contact me! I'll put my 35 years of mortgage experience and expertise to work on your behalf.
I can be found through any of the following means:
Direct: 815.277.4036 Cell/Text: 708.921.6331
Email: gene@chicagobancorp.com Website: www.genemundt.com
Skype: 630.219.1316
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