How to Lock in Your Rate
Locking the rate on a mortgage means obtaining a lender’s commitment that they will make the specified loan at the specified mortgage rate, points and other fees within a specified future period. It used to be quite easy. The problem is that borrowers don’t know beforehand what a lender will want to check before locking, or how long it will take. Policies differ between lenders, and at any one lender the rules may differ for different categories of customers.
The following may or may not be required before a borrower can lock: application completed and submitted; required disclosures such as Truth in Lending signed and returned; required income documentation provided; required asset documentation provided; required information about homeowners insurance, home owners association and existing lender on a mortgage refinance, provided; appraisal completed; title report completed indicating no title issues.
Lenders are not very good at disclosing their requirements to lock, and there are no mandatory disclosures. The problem is compounded by an ambiguity in the Good Faith Estimate (GFE), which is a required disclosure of rates, fees, and other loan characteristics that must be provided to the borrower within three business days of the submission of a loan application. At the time the GFE is issued, the loan may or may not be locked. If it is not locked, the rates and fees shown on the GFE are of value only as a history of what might have been.
What is a borrower to do?
Step one is to get the lender to clarify its ground rules for locking, preferably in writing. They should provide a set of general rules upfront, which might become more precise after you have submitted an application.
Step two is to take charge. All of the requirements to lock listed above except the appraisal and title report apply to documents that you provide. If the lender is willing to make the two exceptions conditions for retaining the lock rather than requirements to lock, which most of them will, you have control over when you can lock.
Step three is to protect you. The prices you lock are those quoted by your lender after you have been cleared to lock, not the prices quoted to you when you selected him. The initial price quotes probably compared favorably to the prices quoted by other lenders, but the lock prices may be a different story
The lock price should be the same as the price the lender would quote to your twin brother initiating the exact same deal on the lock day. If you can price your deal on the lender’s Web site, you can’t be gamed.
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