Mortgage Rate Lock Talk

by Anna in New Jersey, by Peter H in Voorhees, NJ, and by Renee in Maryland

Ask Kate for mortgage rate lock talk - float downs, extensions, and broken locks: You should not have to agonize over locking in your mortgage rate! But know this, success in locking interest rates depends on choosing capable and conscientious mortgage representatives! This is why I say it's a necessity to qualify your lender and determine lock policies BEFORE choosing a mortgage company.


Question 1: Rate Lock Extension Rights after Underwriting Error

By Renee from Maryland

Kate, I have an approved loan as of last Thursday.

Rate lock expired on Monday. Loan company said to wait till Monday to sign the new rate lock extension. They want to settle on Wednesday.

I have read on CNN that interest rates dropped last week to an all-time low. On the internet I am seeing APR slightly less than our interest rate.

I must add our credit is excellent and our rate is 3.25%. Our loan rate had to be extended due to an underwriting error.

They are saying the rate lock protects us against rates going up but we don't get the benefit of rates dropping.

While that may be practice, what is the law? Should we go to another lender or can we force them to drop the loan rate?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Rate Lock Extension Rights after Underwriting Error

Hi Renee,

First of all, let's differentiate between law and policy.

Having a float down policy is not required by law. But if a float down policy exists, banks must adhere to their parameters. See the difference?

Policies among lenders differ: When borrowers are allowed to lock, the length of locks, what happens if the lock expires, the cost of re-locking...

Float Down Policies

Float down policies can be vastly different. Some are free. Others are costly. But banks are not required to have one in the first place.

Even if mortgage companies offer one, rarely do borrowers get the lowest rate, in the event the market improves after locking. The banks usually have a fancy menagerie of calculations that boil down to the borrower splitting the difference with the mortgage company.

For example, if you are locked at 3.5% and rates drop to 3.0%, by exercising common float down policies, you end up somewhere around 3.25%.

But it sounds like your lender does not offer a float down policy. To verify this, go through the terms of your mortgage rate lock agreement to know for sure.

If it turns out there is no such policy, you can still ask for a better interest rate! If the loan officer refuses, request the name of the supervisor. Be prepared to explain the underwriting error and why you think you should get the lower rate.

Avoid Mortgage Rate Lock Cancellation Fees

As long as you haven't agreed in writing (read the fine print) to paying a cancellation fee, the 2 biggest drawbacks in switching to another lender is that mortgage rates could go up before you have a chance to lock in and the processing has to start all over.

Only you can decide if the savings of a proposed interest rate is worth the risk.

Read Lock Agreements to Qualify Your Lender

Moral of the story? READ lock agreements before you sign them. More importantly, read them during the process of qualifying your lender. Knowing their lock policy helps you decide if they are the lender for you!

For more details on how to protect yourself from cancellation fees, go to Sly Mortgage Rate Lock Cancellation Fee.

Best wishes,

Ask Kate

Question 2: Commitment letter gave only 10 days for locked interest rate

By Anna from New Jersey

Kate, I got my commitment letter and the interest lock was good for only 10 days. I was going to closing before that day but turns out that the seller has some issues on title and needs extension.

My question is why this period was so short and if because of the sellers mistake I am going to get higher rate. Maybe I can be compensated.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Commitment letter gave only 10 days for locked interest rate

Hi Anna,

The lock-in period rarely has to be that short. However when a short term is chosen, the cost of the interest rate is significantly less to the mortgage company.

The shorter the lock period, the higher the profit margin. This means the bank (or a representative) chose to lock for 10 days to increase profits.

At this juncture, what are your choices?
  1. Pay for a re-lock (but why?).

  2. Contact your real estate agent and ask to be compensated because the seller delayed closing.

  3. Ask the mortgage company who authorized a risky 10 day lock-in period without your consent and tell them you expect the same rate to be re-locked at no cost to you.
As I told Linda when she asked who has to right lock the interest rate without her permission, Good luck. Be tough. Do not doubt yourself. Insist on being treated fairly.

Go here for more details go to Unapproved Mortgage Rate Lock Extension Fees.

Best wishes,

Ask Kate

Question 3: Mortgage Rate Lock Notice by Email

By Peter H in Voorhees, NJ

Kate, I received an email from my lender, a mortgage banker stating that I was locked in at 2.75% for a 15 year fixed FHA mortgage loan for 30 days. Now they tell me I may not be locked in. Can they do that?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Mortgage Rate Lock Notice by Email

Hi Peter,

Have I read correctly that they UN-LOCKED your mortgage rate? No way!

Don't sit back and accept this as fate because the bank acts like they are all-knowing and all-powerful. Someone is covering up a mistake at your expense.

Print out a copy of the email discussing your mortgage rate lock, ask for a supervisor, and tell them you expect to be locked at the same low rate AND cost that you were promised!

Go here for more details: Locking in Mortgage Rates for Refinancing.

Best wishes,

Ask Kate

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Comments for Mortgage Rate Lock Talk.

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Deposit to Lock Rate
by: Forrest K. from Loveland, CO

I am using Wells Fargo to secure a low interest 15 year loan at 3.25%, locked for 9 months. I was told that I need to deposit $2925 non-refundable but will receive a 'credit at closing as paid outside of closing'. What does this mean? Thank you.

Hi Forrest, Kate here... Let's break down the confusing lingo.

Without reading your documents, I would venture to say:
1. Non-refundable for an extended lock of 9 months probably means your $2925 is down the drain if you do not complete the transaction. Possibly if the transaction is not closed on time, possibly if not within your control.

2. A credit at closing would mean that $2925 is credited back to other closing costs, not an additional charge, unless... see #1!

3. Outside of closing could mean you get the credit in the form of cash, not credited to other closing costs. Or it could mean you paid it as an upfront deposit.

Either way, I'd ask:
1. Is the $2925 a deposit against other closing costs or coming back to you after closing?

2. If the later, when will you get it and who will guarantee you get it?

3. What if the allowable closing costs to which the deposit can be applied are less than $2925?

4. Does your specific loan program allow for you to receive cash outside of closing? Not all do! Don't assume your bank rep knows this upfront.

5. Will you need to verify enough savings to cover all closing costs? Or only the closing costs that exceed $2925?

This can make a difference in your approval. If you are not approved... see #1!

Pose these questions and get written answers, signed by the bank representative and yourself. Go here to read about written good faith estimates and written mortgage rate lock agreements that you must also get.

Best wishes, Kate

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You can also ask Kate about your mortgage at How to Find Your Mortgage Lender.

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