Elusive Mortgage Rate Lock Guarantee

by Maxine in Virginia and more

Ask Kate about the elusive mortgage rate lock guarantee: You can bet your bottom-dollar as soon as interest rates begin to climb, lock-ins get dicey. In the case of home buyer Maxine, the increase in rates makes the lender's lack of guarantee more painful. Other times, there is just no excuse for lender behavior! Continue reading to learn how to avoid these mistakes when locking your mortgage rate.


Q 1: Keeping Mortgage Rate Lock after House Contract Terminates

By Maxine in Virginia

Dear Kate, My husband and I locked in a great interest rate for a VA loan for the purchase of a new home. Our offer was contingent on a successful inspection. Subsequently, the house inspection revealed a few problems so major that we have decided to terminate the contract.

The rate we had locked in was to last until our closing, the date if which is still nearly 60 days away.

Our lender tells us that even if we make an offer on another house and have a ratified contract in the near term, and close within the 50 day window, that we will not be able to keep the interest rate we had locked in.

He explained that an interest rate is tied to a specific property. Is this true and do we have any room to contend or negotiate that? The rates have gone up considerably in just one week.

Thanks so much! Maxine

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Keeping Mortgage Rate Lock after House Contract Terminates

Hi Maxine,

How I wish I could tell you it isn't so.

But yes, in general, actually almost always, a locked interest rate runs with the property address.

Not to say there have never been exceptions to the fact. During the glory days of Countrywide Funding, the lock 'n shop home buyer policy of locking in a rate that included a free float down annihilated their lending competition. Home buyers could lock in without much forethought, shop for homes, and if the market improved, even float down to a lower rate.

(But I'd be remiss if I didn't point out the demise of Countrywide before Bank of America purchased them in 2008.)

As much as I know this hurts to lose such a low interest rate, perhaps there is a lesson to learn here. It is a must to read and understand lenders' individual policies before locking in a rate.

I have a list of questions to ask a lender before locking in and will add your scenario today. You can see the current list here: Questions to Ask Before Locking Your Interest Rate.

I think you will also want to read about Rita's lock experience. Read what happened to this first time home buyer at Mortgage Rate Lock Advice for First Time Home Buyer.

Best wishes finding another house and locking in an equally beneficial rate,

Ask Kate

Q 2: Mortgage Rep Not Locking in Rate

Hi Kate. I am refinancing my home and was given the Truth In Lending Letter and Good Faith Estimate after my credit pull, etc. and now the lender is stating that they never locked in the quoted rate and still aren't until it is time for closing!

(I know it can change due to home value, credit, etc.)

Now she is saying the rate has gone up .50 or more yet still has not locked as she is 'monitoring' the market for best rate, which have all gone up since having started the process with her.

I was told what my rate could/would be dependent on above mentioned factors yet it still has not been locked? Is this permissible?

I chose them because of the rate they quoted and now they're not holding up any end of their somewhat guarantees. Could you give me so insight to my rights in this situation? Thank you.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Mortgage Rep Not Locking in Rate

It is not up to the mortgage originator's discretion to monitor the market after you told her to lock in your rate. While rates are climbing, she can 'monitor' them until the cows come home and it won't get you a better rate.

But you should know a Truth in Lending statement with the annual percentage rate (APR) as well as a Good Faith Estimate does not mean your quoted interest rate has been locked.

A locked rate should always be followed by a written mortgage rate lock disclosure. When you think about it, how else can the terms of your lock be confirmed? Here is how to get a written copy, even when locking your rate over the phone.

You should know, while many excellent and conscientious lenders exist, some are untrained and inexperienced. A few are dishonest. Read Mortgage Closing Costs and Rate Lock Policies to see why I say this.

This is why I also say to never pick a lender based on an interest rate quote, a practice that begs for trouble. See Broken Mortgage Rate Lock Agreement and Good Faith Estimate of Closing Costs.

That being said, you need to stick up for yourself and see what can be done to salvage a decent rate. Start with your banking representative, next the supervisor, then his or her manager, and so on until you exhaust the company resources.

The last resort is filing a complaint with your state's attorney general which you can locate with an online search for your state's official government website.

Best wishes for the lowest rate possible,

Ask Kate


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