Interest Rate Lock In

by Ryan
(Minneapolis, Minnesota USA)

Ask Kate about your Interest Rate Lock In Agreement: Hi Kate, My partner and I are buying our first home. We are going through through a credit union. The loan officer has only closed on 3 homes so far and is fairly new to all of this.
Ryan continues... We locked in an interest rate of 5 percent for 45 days and signed the interest rate lock in agreement. We were supposed to close in a couple of days and got the dreaded call that closing was going to be delayed because they adjusted our mortgage rate. (Note from Kate: adjusted?!)

It went from 5 percent to 5.75 percent.

We were a little confused since we were locked into an agreement that expired a few days after the time we were supposed to close. Well the next day the loan officer called us and advised us that there is a federal adjustment to the rate now putting us at 6.75 percent!!

We got this news in a matter of 24 hours! IT MAKES NO SENSE!

I have read and reread the interest rate lock in agreement and nowhere does it state that they can change the rate on us during underwriting. What it does say, is that it is that under no circumstances can they change the mortgage rate without a written agreement from us. Which we did not do.

Our Realtor is furious and VERY confused at what is going on. I forwarded the interest rate lock in agreement and she states that we would have a lawsuit if we wanted to pursue it. I JUST WANT TO CLOSE ON MY HOME!! I really don’t care that the rate went up, because I know that we can refinance the mortgage.

I am getting the runaround with all of this and would like to know my rights. I live in Minnesota and don’t know all the laws but this document states it clearly that the rate should not have changed. PLEASE HELP!

Kate Answers: Your Interest Rate Lock In

***zz-portrait-left.shtml*** Dear Ryan, Dig out your ladder. You are going to be climbing.

Here is your homework. (Ugh, that's a small pun.)

What we can assume? Because the credit union's loan officer is green, he or she does not know how to communicate what went awry with your interest rate lock in agreement.

Or is the loan officer afraid to tell you the rate was miscalculated? Regardless, you deserve answers!

So now is the time to climb your ladder. Ask for the name and contact information of the loan officer's supervisor.

From here on, every conversation is going to be followed by an email putting the details in writing. Include names, phone numbers, email addresses, dates and subject matter.

If after a reasonable amount of time you are not making progress, ask for the next person with authority over interest rate lock in agreements. And the next. And the next.

Believe me, you stand the chance of several layers of command even in a medium size corporation.

I hear from mortgage applicants about interest rate lock in issues more than you can imagine. Read their letters followed by my answers at Ask Kate About Mortgage Rate Locks.

I have also included my guide to locking your mortgage rate at the bottom of this page including the popular article Nitty Gritty Mortgage Interest Rate Lock.

One more thing. I am happy to hear you have the support of your Realtor. And of course, Ryan, it goes without saying for legal advice, consult an attorney.

Best Wishes,


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Interest Rate Lock In Comment
by: Vikki

First of all, congratulations Ryan to you and your partner finding your new home, this can be the most exciting time of your life while on the flip side you may be in an arena that you have never been before. But hold on, there appear to be some major issues with the credit union you have decided to use.

The terminology of "locking in" a rate, is in its self explanatory. That is exactly what you do when those documents are delivered to you and are signed by all parties involved. The rate at which you lock in cannot change, for any reason without your prior written approval, period. By locking in you are assured the best possible rate and everything else involved with the closing can proceed. Usually this also removes any surprises later on.

Most people lock their rate as soon as possible. Although, there can be special situations when being unlocked may be advised, it is risky and can have many downsides, as I am sure you are aware of now. I will not go into all the different scenarios that can and do occur. By locking in, it forces the lender to commit to a certain rate, no matter what the market does. Interest rates can and do change quickly at times, based upon current news and market conditions. If the rate you were quoted by the loan officer was incorrect, this may be why they are back peddling now.

You need to stand your ground here Ryan. I agree with Kate you deserve answers and if you have to go through several people to get those answers, so be it. Based upon what you have stated in your question to Kate, there are many more questions, than you have been given answers too. You need to get those from this lender, if you in fact intend on still using them. I would even re-think that idea, unless it is a must for your loan approval.

Finally, kudos to your Realtor, a seasoned professional should know who you need to talk to in order to get the facts straight and an if a relatively new agent is involved you may want to directly discuss this situation over with the Broker, if you have not done so by now.

Best of Luck!

Interest Rate Lock In
by: Valerie Robinson

Generally when a borrower applies for a mortgage loan, the borrower has two options:

The first option is to have their mortgage loan rate locked in. The 'locked-in' is a security so the borrower's mortgage loan interest rate does not increase.

However, once the interest rate has been locked-in, the loan with the locked-in rate goes to the lender's underwriting. From there, the mortgage loan is processed and hopefully finalized with a happy and successful Settlement of all parties involved.

On the other hand, while the loan officer is seeking a suitable lender for the borrower, the ultimate success of the process is really based on the loan officer and how well he or she is familiarized with the financial needs of the borrower.

The loan officer can lock in an interest rate but should explain the process and ask the borrowers if this is what they might want. In return, the loan officer has an ethical duty to explain the entire procedure and implications.

Most locked in rates are to secure a lower rate for the borrower while that rate is readily available. For some borrowers this is an advantage. If the rate should increase, the borrowers have their lower rate locked in.

On the other hand if the rate increases, this option should have been explained by the loan officer in its entirety along with the pros and cons of having a mortgage loan rate locked in or not.

If you have not closed on the mortgage loan yet, have the loan officer or Supervisor re-check with underwriting about their policies regarding re-writing your mortgage loan with the current lender but with your desired rate, providing that the rate is a substantial decrease.

Also, you might want to check to see if there are any extra financial cost or charges as well.

Hopefully the comments are helpful with your mortgage loan processing.

Valerie P. Robinson,I.A.C.F.B.,,B.S.,B.A.,M.A.
Senior Mortgage Banker
Pan American Mortgage

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