Achieve your best rate

Typically, lenders honor their rate locks. But Mortgage Secrets advises you to leave nothing to good-faith oral promises. With shady loan reps, or in periods of heavy loan volume, those our-word-is-our-bond rate locks often prove insecure.

Confirm the Lock and Price in Writing

You decide that it's time to lock. You telephone the loan rep; she checks rates and fees. You tell her to lock. She says, "It's done. We've got you 6.5 percent for 30 days. That should give us plenty of time with several days to spare."

You then ask the loan rep to fax or e-mail the agreed terms of the lock. Alternatively, fax or e-mail the loan rep your "understanding." Request a response. In fact, this "confirm-in-writing" precaution works to prevent disagreement in all types of discussions that take place orally. Profit from the lessons I've learned, often the hard way. I once suffered a world of grief when I acted on a lawyer's erroneous advice given orally. Later, he lied and denied it—just what you would expect from a lawyer. After that experience (which cost me more than $100,000), I now scrupulously confirm in writing.

Don't Let Your Lock Expire

You can bust your own lock if you don't timely fulfill your loan rep's (or loan underwriter's) requests for documents, explanations, or other paperwork that's necessary to move the loan forward. Anticipate, clarify, research, and prepare. Learn what's expected of you. Meet these obligations promptly.

Sometimes, though, lenders don't meet the deadline for one of three reasons:

  • Third-party failure: Your closing depends on the work of outside parties that the lender doesn't control (credit repositories, appraisers, title insurers, surveyors, property inspection services, and so on). When these people err or delay, the loan process stalls. In many instances, real estate agents can use their influence to speed up third-party providers. Agents hold the power of future referrals.
  • Lender mistakes or neglect: Before a third party delivers, the lender must place the order. Sometimes they forget, or the lender misplaces documents, ignores necessary verifications, or employs too few file handlers to expedite its overflow of applications. Sometimes the loan underwriter decides at the last minute he requires another document, explanation, or verification.
  • Improper intent: When interest rates jump .5 percent or more above the locked rate, the lender could lose money on that loan, or if the lender can deliver the loan at a rate substantially above a locked rate, it may gain thousands of dollars in overage. Bottom line issues can seriously test the lender's ethics. A loan rep only needs to find some quasi-legitimate last minute reason to delay. "We're really sorry, but the underwriter now insists that you (or the seller) repair that leaky roof before closing."

When you know why locks expire, you can head off trouble. Remain involved in the loan process. Don't badger the loan rep every day, but do ask for a flow chart of who, why, where, and when. Track the scheduling. Verify that all steps are moving forward on time. Where you see foot-dragging, push for cooperation—even if it means that you (or your realty agent) call third-party providers and diplomatically insist on service.

By the time you lock your rate, the lender should have scheduled the commitment process and set a tentative closing date. Ask the loan rep whether the lender will honor the locked rate if it causes the delay. If so, include that promise when you confirm your lock's terms and fee. If not, you're forewarned. Speed the process along—or pay a penalty for the lender's ineptness (that is, if interest rates go up during the loan processing period).

Finally, if you sense purposeful delay, stand firm. Insist that closing take place as scheduled or you'll use every consumer right and regulatory complaint procedure available. Should that fail, insist that the lender honor the otherwise expired rate lock. Also, search for alternative ways to remedy the cause of the delay. For example, rather than require preclosing repairs, you or the sellers could post a sufficient sum of money into a repair escrow account, or the lender could withhold funds at closing pending repairs. Think through a problem. You can discover multiple ways to solve it and close on schedule.

What Does the Lender Mean by "Market Rate"?

Some lenders will lock in your mortgage interest rate, yet will give you a float down if rates fall between the time you apply and the date your loan closes. "Good news," your loan rep tells you, "rates have fallen and we can now close your loan at 6.75 percent instead of 7.0 percent. You're going to save $56.30 a month."

Yes, that's good news, but it may not reflect the full drop in rates that has occurred. If market rates are really at 6.5 percent, by getting you to accept 6.75 percent, your loan rep will pocket an extra $1,000 or so in commission. Even with float downs, verify that you receive the full float down that you are entitled to. (For example, compare your rate to the ones shown at bankrate.com.)

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