by David Reed
Your interest rate lock. It was a good one and now it’s gone past the lock period and rates have gone up. What can you do to get that coveted interest rate back on your loan approval? There are options, but there is no universal requirement all mortgage lenders must follow regarding interest rate lock procedures. They are however required to tell you how and when a rate can be locked and what can happen if your rate lock expires before your closing takes place. Regardless of what rates were when you first applied, unless you tell the lender to lock, you’re in a “floating pattern.” Lenders take interest rate locks just as seriously as borrowers do. There’s a document you need to pay attention to once your loan application is accepted called a Mortgage Rate Lock Policy or some such moniker. In somewhat clear language, the document explains the lender’s internal rate lock procedure. Here’s what you need to look out for:
Extensions. If you see your closing won’t take place before you rate lock expires, you can get an extension. Some lenders offer a free extension for anywhere from two to five days. Beyond that, you’ll have to pay a fee for an extension. Oh, and if you let your rate expire because market rates have fallen below your locked rate, don’t expect to get the lower rate. Lenders will honor the higher of the formerly locked rate or market.
Finger Pointing. Your lender taking its sweet time? Is time dragging on while you sweat out your rate lock period? If a delay is due to the lender’s fault, you should expect to have your rate lock extended at no charge. But it’s important to ferret out the problem. Is the lender simply overloaded with loan applications and processing time is taking longer than usual? That might not be enough to get a free extension if processing times were given to you upfront or the loan officer said there are underwriting delays.
Did the lender forget to order your appraisal? Title work? Forget to lock your rate when asked? That’s a clear case of lender error. You win. But don’t expect an extension due to delays from third parties – including you. If your lender asked for further documentation or an explanation regarding your application and it took a week for you to get back, the lender may not feel that sorry for you.
Last Minute Locks. The shorter the lock period, the lower the cost. Most lenders provide initial lock periods as little as 10 days. A 30 day lock is a tad more expensive than a 10 day for example. That said, some borrowers like to gamble a bit and wait as long as possible before locking in a rate. Yet lenders will require a lock when your loan papers are ready to be prepared and they’ll need a few days sometimes to complete that process. Lenders won’t lock a rate without your instruction. Further, if rates are higher than what’s on your initial approval, your application will need to be resubmitted with the higher rate. Not that big of a deal but still a delay.
Okay, You’re Locked. While lenders may have slight differences how they treat locks don’t expect any lender to lock in your rate without a completed loan application on file along with a subject property listed. 20-plus years ago some lenders offered a “lock and shop” option where you could submit an application then find a property later. Some even allowed borrowers to pick up the phone and lock without any application on file. Not today. It’s a serious deal. Don’t blow it.