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When a lender permits an extended lock-in period, the borrower will usually see either a higher interest rate or more points associated with the loan. The lender does this to minimize their own exposure to market volatility; hence the borrower pays for the lender to take on this risk. For example, a 30-day rate lock commitment may cost the consumer one-half point, while a 60-day rate lock commitment could cost 1 full point. If the borrower needed an extended lock period, but did not want to pay points, the lender could make up the difference in the interest rate. In this case, typically, a 60-day lock would have a higher interest rate than a 30-day lock. In my business, our standard procedure is to lock in a rate as quickly as possible once we have received the loan application. My team and I let our clients know that while interest rates fluctuate daily, most lenders do not want to lose any business. We know that in many cases, if there is a significant rally in the market that causes interest rates to drop 0.25% or more, we can ask the lender to renegotiate the rate. Often the lender allows for a renegotiation to avoid potentially losing the loan to another lender. If we allow our clients to sit on the fence and not lock in a rate quickly, we would leave them exposed to market volatility. Then, if rates do increase, the borrower may be unable to qualify for the loan they want, which is a situation we try to avoid at all costs. By knowing our clients' needs and working intimately with them to make the right decisions, my team and I are proud to say that we have many clients who are raving fans. |
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