MORTGAGE RATE LOCK
This lock is very important for ensuring that a person is receiving the interest rate that is quoted by the mortgagor or any bank. In case of purchasing the real estate or refinancing the mortgage process, locking the mortgage rate is needed. This locking process may be done before or during the loan process. The timing of this process is all dependent on the preference. When a person wants to compare the lenders he is presented with a document that contains the mortgage rate quote from all the lenders. But this document of quotes is not enough. It is important that these rates are secured and locked by the bank. When the mortgage rate is locked, it means that interest rate is guaranteed. It is also important that loan must qualify under the conditions of lenders and bank and also follows the guidelines until the expiration date. Not only specific interest rate is guaranteed but also specific terms are guaranteed.
Many lenders aside the lock interest rate also want the certain sum of money. This sum of money is not considered a fee for lock rate but it is a deposit at a time of locking the mortgage rate. This is mainly happening in a case of loan application for the house. This provides a lender an indirect mean of assuring that a person would not go to any other lender. This condition causes a loss to this lender. This is a reason, it is necessary to ask for a deposit at the time of locking the mortgage rate for assurance.
Period of Mortgage rate Lock:
We have a choice of the mortgage rate lock time period. These are:
- 15 days period
- 30 days period
- 45 days period
- 60 days period
While locking the mortgage rate, it is very important to decide the time period of this lock. This period ranges from 7 days-90 days. The most common time period ranges from 15 calendar days to 45 calendar days. This time period of 15-45 days is an average time period for closing a transaction of house loan. Longer lock period causes a loss to the lender as guaranteeing a constant rate over a long period of time is very difficult. Long lock time period also worsens the prices. Based on lock period, mortgage rate may or may not be different. The cost at the time of closing a transaction is also different for the different lock time periods. For example, the closing cost for 45 days locks period is greater as compared to the closing cost for 15 days lock period. It is important to choose an appropriate time period if a person wants that lock period does not expire before the period of a loan. Choosing an appropriate time is also important in saving a person from additional fees.
- Mortgage rate can also be locked before the submission of the loan to underwriters. This called “pre-lock”.
- Mortgage rate cannot be changed once they are locked.