Real Estate News

Rates Drop During Your Lock Period? Here’s What to Do

Written By: David Reed
Sunday, July 12, 2020

Lower rates mean lower monthly payments which means more people can qualify for a home loan. But you cant get these low rates just by calling up your mortgage company and telling them you want a lower rate. Youll have to submit a loan application, document the file, get credit pulled and other actions on your part before you get to a position where your loan can be locked. Your loan officer can provide you with when its okay for you to lock with a Lock In Agreement. These agreements can vary somewhat from lender to lender but in general they spell out the lock procedures, when youre eligible to lock and what happens when your lock expires before you close on your transaction.

Lenders take rate locks very seriously, just as consumers do. When someone locks in a mortgage, lenders, in essence, reserve that rate for you and assigns it to your loan amount. Your rate lock protects you from interest rate swings up until your closing. The lock agreement will also tell you what happens if your lock period expires before you close. A common lock period might be for 30 days with some as short as 10 or 15 days. The longer the lock period, the more expensive it will be. But the lock needs to be at least as long as it takes to close your transaction.nbsp;

What if rates fall during your lock period? Many might first think just to wait it out, let the lock expire and re-lock at the new, lower rate. But thats not likely to happen. Most agreements state that in the instance of a locked rate, the borrower will be awarded the higher of the expired rate or the new rate. But theres another way that just might work in your situation.

If rates fall just a little bit, the lender wont be very inclined to make any sort of an adjustment, especially if youre getting closer to your settlement date. If rates fall by say 0.125, dont expect very much love from your lender. But if rates fall by 0.25 or more, the lender might take your request a bit more seriously.

Lenders know there really is no agreement that says if you submit a loan application that means you cant cancel your loan and go somewhere else. You certainly can. And thats where you start to have an upper hand. You really want to get the new lower rate, but you also are thinking about resubmitting all your loan documents yet again to a new lender. New pay stubs, new tax returns, bank statementseverything. But you can if you want.

If your locked rate is 0.25 higher or more than whats currently available, your lender will, or should, listen. Lenders would rather make some sort of rate adjustment at this stage instead of losing the deal altogether. Youve certainly spent time submitting documents but so too has the lender shed out no small amount of overhead during the process, as well.nbsp;

When making a request for a rate drop, dont expect to get the absolute lowest rate available but one very close to it. You may also need to pay a small fee to get the new, lower rate. The numbers will pretty much mesh all this out and tell you whether or not its a good idea. But if it is, there is a process. You just first have to ask.

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