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WHAT IS A LOCKED RATE?

While purchasing or refinancing a home each client has the option of whether to lock the rate or float!? When a rate is locked it is an agreement between the client and investor that the investor will not raise your rate regardless of how high they go and it is also the client agreeing to accept the rate regardless of how low they may go.

In this volatile market everyone wants to get the best deal possible. Many will go ahead and lock because of fear the rate will increase, but when rates decrease they want the lower amount. There are some investors which will lock with a float down option but their rates are usually not competitive with best pricing. It is very important to have a loan officer that understands the market, knows what pushes mortgage bonds and guides you with sound advice.

Do you really want the rate you are considering locking?

Posted by Valerie Springer Mortgage Loan Officer Expert in Financing Purchase & Refin on 12/15/2008 03:42 PM

Comments (5)

Locked Interest Rates in the ActiveRain Channel

mortgage interest rates

5 Comments on WHAT IS A LOCKED RATE?

DEC

I have had several clients lately while the rates have been jumpy lock in good rates and then the rates have dropped even lower and the buyers have gone back to the loan officer to try to get an even lower rate. One even threatened to go to a new loan officer to get the lower rate if the current loan officer didn't drop their rate. The client got the lower rate, but the loan officer had to pay to have it dropped. Is it typical that the lender has to eat that cost? I hate it for the loan officer.

Locking is something people rarely mentioned but now, it is one of the first questions.

DEC

Sandy: If the loan officer does not want to lose their client they may have to use their money to buy the rate down. A lock is a lock and a commitment from both parties. However, in today's market with all the volatility, they can just up and go to another lender that does not already have a lock in place and get the better rate. Many people have worked hard on the loan and if this happens no-one is paid. A little bit is better than nothing but no one wants to work for free. Thank you for commenting.

Randall: Yes today locking is very important to the client, and if they lock and find rates improve, they may find another lender. Not all, some are very loyal and understand it is a game of hardball for us as well. We can look at the data and use all of our knowledge and then something crazy can happen and it goes in either direction. Thank you for your comment.

Hi Valerie,

Thanks for the comment on MY blog! I would take this a step further, and even say, THAT IS ONE OF THE ADVANTAGES (and there are many),that a MORTGAGE LENDER has over a bank! If rates drop enough to the point of me losing the customer, I can flip it to another funder!

If that happens at a bank, they have to give up THEIR OWN money to buy it down! Nonsense!~ :)

Also, not enough people ASK for a COPY of the lock in agreement! That is too bad! Too often unscrupulous (did I spell that right), people LIE to people, not lock them, and then they PLAY the market! Argghhhh! Yikes!:(

Thanks again!

Darin

DEC

I've been fortunate in that I've never bought a property in such a volatile economy where things are up and down almost on an hourly basis.

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