Mortgage Lock-in

By
Real Estate Broker/Owner with Morningside Homes, LLC 720-231-5200 DRE# ER300941

 

A mortgage lock-in is a lender's agreement to hold a specific interest rate for a stated period for a loan at the prevailing market interest rate.  This provides the borrower some protection against the interest rates going up during the lock period.

If you think the rates are going down, the advantage would be to "float" and take advantage of the lower rate.  If you think the rates are going up, you could lock when you apply or when the application is approved.  Some buyers are marginally qualified at the current rate and if the rates go up, it could keep them from buying the price home they want or must make a larger down payment.

The lender will require the borrower to pay a fee for the lock-in.  It could be a flat dollar amount or a percentage of the loan to be made.  Usually, the longer the rate lock period, the higher the fee will be. 

The agreement should include the terms you've locked in such as the mortgage rate, points and other costs, the lock's effective and expiration dates, the cost of the lock itself, and any options that may be available.  As with any contract, it should be in writing to avoid misunderstanding.

The risk in a lock-in is that if the rates go down, you won't be able to take advantage of it unless there is a "float down" clause in the agreement.  If so, you must advise the lender that you want to take advantage of it.  You may incur additional costs to rewrite the lock-in.

Locks can be anywhere from 15 to 60 days.  Your lender can advise you how long it should take to get it approved and close the loan.  If it doesn't close on time, the lender may extend the lock for free, charge an additional fee or a percentage of the loan.

Mortgage brokers act as middlemen for the lender and borrower.  It is important to know who is locking the rate because generally, a mortgage broker cannot write the lock but has to obtain it from the lender.

For more information, see the Federal Reserve Board's Consumer Guide to Mortgage Lock-Ins.

Posted by

Buy or Sell with Patty Clark              Denver/Aurora Co. and surrounding areas 

Chris and Patty

    Helping Families Move with Care

  If you would like to be sent properties on a daily or weekly  basis just call or email me and let me know your wants and  needs. A match will be made with a home you love and with  monthly payments you can afford. I specialize in first time                       home buyers and sellers who are ready to make a move.

                                                    

 

Morningside Homes, LLC
patty@morningsidehomes.com

www.morningsidehomes.com
Cell: 720-231-5200                       CRS,GRI,WCR,SFR,CNE, MRE

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Lending / Financial
Tags:
interest rate
mortgage financing
lenders
whats your home worth
home buying aurora
denver aurora realtor
first time home buyers arapahoe country

Spam prevention
Show All Comments
Rainer
164,514
Anne Corbin
Long and Foster - Lake Anna - Spotsylvania, VA
Serving Lake Anna & Central Virginia

So, do you have to lock in or can you just use the rate in place on day of closing?

Jan 14, 2020 05:00 PM #1
Rainmaker
721,833
Jeff Masich-Scottsdale AZ Associate Broker,MBA,GRI
HomeSmart Real Estate - Scottsdale, AZ
Arizona Homes and Land Group/ Buy or Sell

Thankfully rates are low and fairly steady for now. There a times to lock in though. Thanks for the update on this important subject Patty Clark. Jeff

Jan 14, 2020 05:11 PM #2
Rainmaker
484,531
Patty Clark
Morningside Homes, LLC 720-231-5200 - Denver, CO
Helping Families Move with Care

At some point the rate needs to be locked before closing. Remember the Closing Disclosure has to be sent to the buyer 3 days before closing with all of the loan terms.

Jan 14, 2020 05:12 PM #3
Rainmaker
1,669,147
Jeremy K. Frost
Keller Williams Realty - Dripping Springs, TX
Associate Broker, CNE, CRS, ePro, PSA

Thank you for keeping us posted and up to date. Best of luck with this one!

Jan 15, 2020 10:06 AM #4
Rainmaker
484,531
Patty Clark
Morningside Homes, LLC 720-231-5200 - Denver, CO
Helping Families Move with Care

You are welcome.  This business is a daily challenge.

Jan 15, 2020 03:30 PM #5
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
484,531

Patty Clark

Helping Families Move with Care
Ask me a question
*
*
*
*
Spam prevention

Additional Information