Switch Lenders After Mortgage Rate Lock Expires
by Kristen in Crown Point, Indiana and by Ofelia in Walnut, California
Hi Kate, What happens if I let a rate lock expire and go to a different bank? I am a first time home buyer and feel like the bank I'm working with has really put me through the wringer. I found a home I loved and the sellers had been doing some renovations that were to be completed before the closing. Please help me! I'm not sure where to turn.
I signed a purchase agreement through my real estate agent with a closing date 90 days in the future to allow the seller time to complete repairs.
I went to the bank and was informed that putting a lock on a rate for 90 days would cost me an extra fee, so I should come back in a month and sign the rate lock and loan application paperwork then.
At this point I was very annoyed because I had taken off of work only to have a conversation that I could've had over the phone.
I went back to the bank a month later, only to discover upon my arrival that the mortgage banker I had been working with had been promoted and they had assigned me to a new banker, without informing me.
I met with the new banker who seemed very unfamiliar with my situation, and she said she would mail me the paperwork I would need to sign for the rate lock (again, I took time off of work for a conversation that could've happened over the phone).
Of course when I received it, I learned that rates had gone up a whole .25% and that my banker was based in Illinois, while the home I was buying was in Indiana.
I also learned just how unfamiliar she was with my situation when she immediately ordered the appraisal after receiving my signed application and rate lock, even though the seller was not finished with their repairs, and the appraiser would want all repairs completed before he did the appraisal. Finally I was able to get the banker to put a hold on the appraisal until repairs were completed.
Now we are nearing the end of the 60 day lock and I received a call that the bank has transferred me to yet another mortgage banker, and this one is over 40 miles away, again in Illinois, while the home I am purchasing is in Indiana.
She was asking for things such as my attorney's information (in Illinois real estate transactions require an attorney, while in Indiana they do not). She clearly did not seem familiar with my situation at all. I asked the seller how repairs were coming and he said they still needed more time to do them.
I am fine with this, but I know we are nearing the end of my 60 day lock with the bank.
The bank says I will have to extend the lock at a cost to me, and that I cannot just allow it to expire and then reapply for the loan. Is this true?
At this point I am so fed up with how this bank has shuffled me around from banker to banker, and I just want to allow the rate to expire and then apply for the loan at a different bank.
Legally, can I do this? Will I be subject to fines from the bank?
Thanks for your help!
Kate Answers: Can I Switch Lenders After Mortgage Rate Lock Expiration
Yes, you have been put through the wringer and quite unjustly at that.
I was once taking a mortgage application from a new customer who interrupted our appointment to ask if I was planning any vacations. It seems that during his last loan process while he was building his home, he had a similar experience to yours which resulted in a higher interest rate.
Banks Are Obligated to Process Mortgages Professionally
I'll never forget the look of relief on his face when I promised to be in the office until his mortgage closed. He ended up becoming my long-term customer and we laughed over his question many times in the future.
Even so, it is truly no laughing matter to be treated unprofessionally by a bank. And while you are subject to the written terms of your signed and dated mortgage rate lock agreement, the bank is obligated to provide you with a knowledgeable representative, sufficiently competent to handle your loan process.
Read Your Mortgage Rate Lock Agreement
That being said, I'm afraid what the bank told you about re-locking after the expiration date to avoid an extension fee is a common policy. You should confirm this by reading your mortgage rate lock agreement
But I doubt there is anything in your state laws that would prohibit you from allowing the rate to expire and then switch to another lender. Before you jump ship though, find out if you've agreed to pay a cancellation fee or if you will lose any up-front deposits, for example, for appraisal or credit reports.
If your lender threatens you with fees, insist on getting a copy of the written cancellation terms, previously signed and dated by both the banker and you.
To File a Lender Complaint
Bottom line, the bank has not acted professionally and you have every right to speak with a supervisor (and that person's supervisor) until you get the sympathetic ear of an employee with authority to make decisions.
Additionally, I urge you to contact the Indiana Attorney general's office where you can file an online complaint if you are not satisfactorily heard by the lender.
Good luck and best wishes,
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