There's nothing worse when applying for a home loan, getting a great rate and then losing that great because it's gone past the lock period and now rates have increased. Is there any chance at getting those great rates back again? Even though there is no solid procedure on how lenders can lock in a rate they do need to inform you about how you can lock a rate and what can happen if the rate expires before closing.
Rates can change dramatically from the time you apply to when you actually close and if the home is a short sale or foreclosure it can actually take much longer to close and rates can certainly adjust greatly during that time. Most of the time your application will include a Mortgage Rate Lock Policy. This will include several different extensions and provisions that come along with your rate lock.
You can ask for an extension. Your agent should be able to tell you when the property is set to close and even if it is within a few days of the closing date, the rate lock should be out a week or two beyond the projected closing date to cover the rate until it's fully closed and recorded.
If you notice your lender or mortgage broker is taking their sweet time with the loan and things are not progressing and you can clearly tell that its the lender's fault, you should be able to extend the rate lock without any fees. Also, if there are natural underwriting delays or problems on your end, this cannot warrant a free extension.
One thing to note, if you purposely let your lock expire in the hopes of a lower rate and rates do fall below your locked rate, don't always expect to get that lower rate. Lenders will always honor the higher of the formally locked rate. However, if you have a great mortgage officer, they could work the numbers in your favor but don't automatically expect it.
If any part of your loan is held up due to lender neglected such as title work, forgotten appraisal order or didn't lock in the rate when asked, this can be a clear case of lender error. You can't always get an extension because of third-party errors but you might be able to get an extension for free if the lender themselves have failed to do their job on time.
The shorter the lock, the less the fee, but most rate locks are about 30 to 45 days. Lenders can provide locks in as little as 10 days but only in special occasions. Many borrowers like to wait as long as possible for a lower rate before locking it in but lenders will want you to lock your rate and when loan papers are ready to be prepared. However, lenders will not lock in your loan without your instruction and if rates are higher than what was on your initial approval, the application may need to be resubmitted with a higher rate and this could cause a delay.
In general, your loan application must be completed in full before your lender can lock in a rate. Borrowers can no longer lock a rate and then shop for a better rate somewhere else and then find a property. The best way to go about this is to simply walking your rate when you first apply if rates are decent enough. If you're ready to purchase the home, let's get going on it and do what needs to be done to get the loan closed in a timely manner.
For more information about rate locks, lenders and mortgage applications feel free to give me a call at any time.
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