How does a mortgage interest rate lock work? Your mortgage rate lock should help de-stress the day of closing. No chewing off fingernails worrying about current mortgage rates spiking out of control.
No one had fingernails left in "the good old days" after closing a refinance or home buying transaction.
Homeowners were told their monthly house payments for the next thirty years would not be determined until their transaction was within 48 hours of closing.
Borrowers turned more savvy and demanded better treatment from big lending institutions.
After all, the homeowner IS the customer, right?
So lenders obliged by guaranteeing in advance what mortgage rate would be responsible for a life time of mortgage payments. At least that was how it was supposed to work.
Since then, the government has been a busy beaver trying to prevent all kinds of mischief attempting to sandbag the process of locking mortgage rates. For instance, you've heard of people who couldn't sign their loan documents because the interest rate on the final paperwork was 1% higher than promised.
In spite of attempts to standardize the process of guaranteeing a mortgage interest rate, the whole subject remains, pardon the pun... locked up!
But in general, here is what you CAN expect. A good faith estimate is issued to mortgage applicants, usually within three days of applying, disclosing a snapshot of THAT day's interest rate and mortgage closing costs.
Contrast the good faith estimate to the mortgage rate lock agreement issued after you lock in your rate. And by the way, request one in writing if you do not automatically receive it.
Based on the day a rate lock is executed, mortgage interest rate lock agreements reflect the specific:
Even still, changes in loan amounts, mortgage programs or closing dates can adversely affect a lock agreement. So any material alterations before you close should prompt you to ask your loan representative if your interest rate lock will be affected.
Tip: Check here for current mortgage rates and trends because there is no need to scour the internet when up-to-date information is easily found here.
How good is a mortgage rate lock guarantee? In the end, you have to read your lender's paperwork. But don't forget, get it in writing!
Update: If you think the revised Real Estate Settlement Procedures Act of 2010 resolved interest rate lock-in and closing cost issues, go to Broken Mortgage Rate Lock Agreement and Good Faith Estimate of Closing Costs to read Roger's story.
What happens when rates plummet after a mortgage interest rate lock? Emotions spark, that's what! You can read what other Readers have written about interest rate lock agreements. You be the judge!
Timing Mortgage Rate Lock - How can I time locking in the lowest rate?
Breaking Locks - To break a mortgage interest rate lock or not...
Upfront Mortgage Rate Lock Talk - Should consumers do what is beneficial for their financial circumstances if it means breaking a lock?
Mortgage Rate Lock Ethics And Penalties - Is it ethical or unethical to switch mortgage brokers when interst rates change?
Refinancing And Mortgage Rate Lock - I would feel bad about breaking the mortgage interest rate lock but I would not have much of an alternative.
Lowest Mortgage Rate Lock - If I could get a better mortgage rate lock elsewhere I would definitely switch.
Switch Mortgage Rate Lock or Not - What goes around comes around so breaking a lock is liable to come back and bite you.
How To Lock A Mortgage Rate - I have seen the rates go up and down and wonder when could I lock in a rate?
September 2015: Fannie Mae and Freddie Mac Improve Loan Modifications.
September 2015: New Foreclosure Time Frames in 33 States.
June 2015: California Owes Millions to Struggling Borrowers.
June 2015: The Mortgage Forgiveness Debt Relief Act Update.
May 2015: HAMP and HARP Program Extensions.
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My Interest Rate Lock Guarantee - Help for timing your rate lock.
The best solution to avoiding hidden fees is to ask the right questions before you lock mortgage rates.
Get mortgage broker fees in writing or your rate lock is meaningless!
How good is a mortgage interest rate lock guarantee?
Yield Spread Premium is a common reason for losing your rate lock.
Questions to ask before you lock.
Search questions and answers at Ask Kate Mortgage Rate Lock Center I.
More questions and answers at Ask Kate Mortgage Rate Lock Center II.