Rate Locks & Good Faith Estimates.. What's the diff? Top 5 Questions

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Mortgage and Lending NMLS#914312

 

Rate Locks & Good Faith Estimates

 

Top 5 Questions:

 

1. What guarantee do you offer with rates provided on your written rate quote?

 

A rate quote is NOT a guarantee of a mortgage rate until the loan is "LOCKED." A quote is a reflection of the rate "At that moment" the loan officer prepared the quote. Mortgage rates can change throughout the day... It's actually possible that the rate quote may have changed moments after the rate was provided... for better or worse.

 

"Rates are a moving target, and without a lock–it’s just a quote"

 

2. Does my Good Faith Estimate mean my rate is locked?

 

Your Good Faith Estimate shows how long the quoted rate on the GFE is available. The rate may be locked or “floating” (not locked).  Locking the rate early, protects you in a rising interest rate environment. Floating (if done by a Loan Officer who has correct data, tracking the market) can work out to your advantage, if rates are declining during the closing process.

 

3. How long is my loan lock period?

 

Loans are locked based upon how many days may be needed to close the transaction. Loan lock times vary, based upon the needs of the borrower.  

 

The typical time period for a purchase, is a 30 to 45 day lock. If a longer lock period is needed, the cost would be higher.

 

EXAMPLE:  Here is what the difference in fee may  look like based on various lock times,  assuming the 30 day lock is par (comparing the other locks to 30 days):

 

§  15 day lock = 0.125 better over the 30 day price

 

§  30 day lock = Par

 

§  45 day lock = 0.05 cost over the 30 day price

 

§  60 day lock = 0.150 cost over the 30 day price

 

§  70 day lock = 0.270 cost over the 30 day price

 

§  90 day lock = 0.400 cost over the 30 day price (may have to pay additional upfront lock fee for this long of a term)

 

4. Can I lock my rate and closing costs before I find my new home?

 

Usually  the buyer has a signed purchase and sale agreement before a lock can be issued.   Most locks require a property address along with the borrowers full legal name, social security number, program type, purchase price/loan amount and credit scores along with the length of time required to close the transaction.

 

5. What happens if I don't close the loan before the LOCK expires?

 

If your loan doesn't close before the lock expiration, the lender will have to extend the lock for a Fee. Lock extensions vary from lender to lender. If the market improved from when the loan was locked, there may not be a cost.

 

Remember, a Good Faith Estimate is not a guarantee of interest rate or closing costs.    Make sure you receive a Lock Commitment from your lender and ask them to guarantee their closing costs.  Keep in mind, there are other situations that can cause your rate to change from the lock and/or good faith estimate.

 

Examples:

 

§  Appraised value – LTV (higher or lower than estimated)

 

§  Change in employment

 

§  Credit scores not what estimated prior to quote.

 

§  Closing time extended beyond the lock period.

 

If you would like me to prepare a rate quote for you, please give me a call 949.600.0944 or send me an email: jackie@mylenderjackie.com

 

I am happy to help!

 

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Comments (1)

Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Jackie - Great information on rate locks and how that differs from the GFE. I am sure this is something many consumers do not fully understand.

Jun 10, 2015 07:05 AM