Answer: The decision to lock your rate can depend on several factors.
It is important to understand what actually takes place when your broker or lender locks a rate. A broker typically has the ability to lock a loan with a lender prior to having a loan approved. Once a rate has been locked the lender will provide a lock confirmation that includes the details of the loan. Lenders typically allow you to lock rates for 15 days, 30 days, 60 days, 90 days, and even longer. Longer lock periods may require an upfront lock fee to secure the rate. Lenders charge for this service since they must go out and hedge the market to secure that funds will be available when the loan closes. Your broker or loan officer is your best source for deciding the best time to lock a loan. Typically, it is best to lock the loan if you are satisfied with the terms and payments. Small rate reductions will only have moderate payment benefits. Choosing to float your rate and finding out that your rate has increased can add stress to the transaction. Make sure your broker explains to you the time frame for completing the transaction. If you lock your rate for 15 days then the process needs to go quickly to complete everything prior to the lock expiring. If you anticipate delays gathering your documents or arranging for someone to allow an appraiser access to the property you may be better served to lock the rate for 30 days. If your rate lock expires prior completing the loan process, you will be required to pay additional fees to secure the rate. Some lenders will allow short term extensions at no cost. It is extremely important that your broker communicate with you to ensure the process is complete prior to any rate lock expiring.
Looking for additional information:
Prosperity Financial 877-589-9950
http://www.myprosperityfinancial.com/
Showing posts with label rates. Show all posts
Showing posts with label rates. Show all posts
Friday, December 28, 2007
Question: Rates Have Dropped, But I Locked My Rate... What Are My Options?
Answer: You should speak to your broker or lender and have them evaulate the circumstances.
Your broker should have locked the rate at the lender that was providing the best rate at the time you requested the lock. This puts your your broker is a tough spot. The reason they were able to secure the original rate was a relationship with a lender. When the broker locks a loan, the lender secures the funds and counts on the loan closing. If the broker chooses to take the loan to a different lender or investor to secure a lower rate the relationship with the primary lender is strained. Most brokers resist moving the loan to another lender unless the reduction in rate is significant. Keep in mind that there was a reason they locked the loan with the initial lender and the reason was most likely that they provided the best rate. Even with a slight reduction in rate, the initial lender probably still has a more competitive rate than the broker's second or third choice for an investor. The evening news likes to report on the average mortgage rates and it makes for a good story but usually does little more than show the trend of the market. Your broker or lender should be able to discuss with you the current environment surrounding your particular market and help you decide the best time to lock your rate.
Looking for additional information:
Prosperity Financial 877-589-9950
http://www.myprosperityfinancial.com/
Your broker should have locked the rate at the lender that was providing the best rate at the time you requested the lock. This puts your your broker is a tough spot. The reason they were able to secure the original rate was a relationship with a lender. When the broker locks a loan, the lender secures the funds and counts on the loan closing. If the broker chooses to take the loan to a different lender or investor to secure a lower rate the relationship with the primary lender is strained. Most brokers resist moving the loan to another lender unless the reduction in rate is significant. Keep in mind that there was a reason they locked the loan with the initial lender and the reason was most likely that they provided the best rate. Even with a slight reduction in rate, the initial lender probably still has a more competitive rate than the broker's second or third choice for an investor. The evening news likes to report on the average mortgage rates and it makes for a good story but usually does little more than show the trend of the market. Your broker or lender should be able to discuss with you the current environment surrounding your particular market and help you decide the best time to lock your rate.
Looking for additional information:
Prosperity Financial 877-589-9950
http://www.myprosperityfinancial.com/
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