Essentials Of Locking In Your Loan

Essentials Of Locking In Your Loan



Essentials Of Locking in​ Your Loan
With interest rates unpredictably volatile,​ the​ good faith estimate you​ receive when looking for a​ mortgage may not be the​ actual interest rate you​ end up with at​ the​ time of​ closing .​
Interest rates can change every day,​ so to​ combat this,​ borrowers have the​ option of​ locking in​ the​ interest rate and points for a​ set amount of​ time to​ ensure their stability.
There are many ways to​ lock in​ a​ loan,​ depending on​ your lender,​ but the​ most important thing,​ no matter how it​ is​ done,​ is​ to​ get it​ in​ writing .​
a​ verbal agreement will not cut it,​ and if​ the​ lender refuses a​ written contract,​ change lenders .​
The commitment should specify the​ number of​ points as​ well as​ the​ locked interest rate and the​ period of​ time before it​ expires,​ usually 30 days .​
This privilege usually requires you​ to​ pay a​ slight interest rate premium .​
The lender will also require some show of​ commitment on​ your part in​ the​ form of​ an​ application fee,​ appraisal,​ or​ credit report.
Don’t try to​ guess where interest rates are going when deciding whether or​ not to​ lock a​ loan .​
If you​ wouldn’t be able to​ qualify or​ afford the​ loan with a​ slight increased amount,​ locking the​ interest rate is​ a​ good idea .​
If you​ can withstand a​ certain amount of​ risk and are confident the​ loan provider will offer the​ true market price,​ consider delaying it .​
The price is​ lower for shorter lock periods than longer ones .​
Locking in​ the​ interest rate when rates go up is​ obviously beneficial to​ the​ borrower,​ but when rates go down,​ you​ still have a​ few options .​
Some locks have a​ float-down feature,​ which protects the​ borrower only if​ the​ rates rise .​
If they drop,​ the​ current interest rate can be used .​
The cost for this is​ usually a​ little more .​
For example,​ if​ a​ lender charges one point to​ lock the​ interest for 60 days,​ a​ 60-day float-down may cost 1.5 points.
Even if​ you​ do not have a​ float-down feature on​ your lock and the​ interest rate drops by half a​ percent,​ you​ should still call you​ mortgage broker or​ lender and ask if​ they will work with you​ .​
If you​ have a​ week or​ so until closing,​ they may not budge because they know it​ would take too much time to​ try to​ negotiate a​ new loan .​
If there are a​ few weeks left until closing,​ they may compromise on​ the​ rate so as​ not to​ lose your business to​ a​ different lender.
You can also walk away,​ though you​ will probably lose the​ application fee or​ money you​ have already paid .​
Deliberately slowing the​ process down so the​ lock expires to​ get the​ lower,​ current rate,​ will not always work .​
Some contracts will take the​ higher of​ the​ two rates in​ that case .​
Sometimes locks expire before the​ loan closes .​
If you​ feel the​ lender is​ intentionally waiting for the​ lock to​ expire,​ you​ can complain to​ its regulatory authority,​ although it​ is​ difficult to​ prove who is​ at​ fault .​
Make sure that you​ submit all of​ your documents on​ time and are available for questions so you​ don’t hold up the​ process .​
If the​ expiration date is​ nearing,​ stay on​ top of​ the​ broker or​ lender to​ try to​ push it​ through for closing.




You Might Also Like:




No comments:

Powered by Blogger.