After I Lock My Interest Rate Will My Rate Change
If there are no changes to your loan application and your loan closes on or before the rate lock expiration date, we will close your loan at the locked interest rate.
However, your interest rate may change from the time of your initial rate lock if there are changes to the factors used to determine your interest rate. These kinds of changes may also be called “rate or price adjusters” because they can raise or lower the interest rate on your loan.
Here are some examples of changes that may raise or lower your interest rate:
- The appraised value of the property is different than the value used when you initially locked your loan.
- Your credit profile or qualifying income changes between the time you initially locked your loan and the loan closing.
- Your requested loan amount increases or decreases after you initially locked your loan.
- The type of loan you are applying for changes.
- Your down payment amount changes.
- Some of your income information, such as bonus or overtime income, cannot be verified.
If your interest rate or costs associated with the interest rate change, we will send you an updated Interest Rate Lock Agreement.
Can I Change Mortgage Lenders After Locking My Rate
A rate lock doesnt lock you into the deal if you find better terms and lower closing costs from another lender, you can opt to go with that lender after your rate lock with the first lender begins.
However, consider the implications of changing lenders at this stage. Think about all the work youve done with the initial lender so far, and any money you might have already paid for an appraisal, a credit check or other fees. If you switch lenders now, youll need to do all of that again, which might not be worth the hassle or time.
How Long Should The Lock Last
Before choosing a lock-in period, determine the average time for loan processing in your market. Ask your lender to estimate the time necessary to process your loan and verify the information with other realty and mortgage professionals. Locks average 30 days but can range from 15 to 60 days or more. Longer is usually better. If the loan doesn’t close on time, lenders can extend your lock for free, charge more for the extension, or charge an additional percentage of the loan amount.
Is There A Downside To A Loan Lock
There is rarely a reason not to lock a loan. Interest rates change daily, sometimes even hourly. To protect yourself against the marketplace’s volatility, it’s a good idea to lock your rate once you are satisfied with it.
Just remember that if the rate was acceptable when it was locked three weeks ago, a drop of an eighth of a point or so isn’t the end of the world. You don’t need to try to squeak out every dime to get a good deal. The important thing is that you end up with a home you’re happy with at a price you can afford.
Review Your Mortgage Needs
When your mortgage term comes to an end, you have to pay off your mortgage in full or renew it. This is a good time to review your mortgage needs and make sure you have the right product.
To help you find the right mortgage, consider if:
- your budget allows you to increase your payments to pay off your mortgage sooner and save on interest
- you want to change your payment frequency
- youre likely to make additional payments
- youre satisfied with the services offered by your current lender
- you want to consolidate other debts that have higher interest rates and increase the amount of your mortgage
- you still need optional life, critical illness, disability or employment insurance
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How Much Does A Rate Lock Cost
Rate locks arent free, but that doesnt mean youll necessarily see a line-item charge for them. Most lenders do not charge a separate fee for rate locks within a certain period of time the cost of the lock is often baked into the rate youre offered.
Lenders usually charge an additional fee for extending the term of the rate lock period, however, so ask about what to expect if you need to extend the lock.
When Should You Lock In A Mortgage Rate
It’s a crucial part of closing on your home.
It’s a crucial part of closing on your home.
Its truly rare to finance a home without a mortgage.
In fact, 60 percent of homebuyers finance their homes with a mortgage, according to the National Association of Realtors . If youre one of them, youll have to decide when to lock in your mortgage rate after all, you cannot close a purchase involving a mortgage until you lock in your interest rate.
Heres what you need to know about mortgage locking options, when you should lock, and how much it costs.
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Should I Hold For A Lower Mortgage Rate Lock
Everyone becomes a trader when rates drop. Here are two common consumer refrains during this rate drop:
Ill just hold for better, this corona thing is going to get worse.
The rate market will improve because markets wont like .
Word to the wise: rate markets are run by the most sophisticated investors in the world. And even they dont know how markets play out when it gets volatile like this.
The 10-year Treasury Note provides a decent signal for where mortgage rates might go.
The 10-year Note just dropped just below 1% for the first time, and Wall Street estimates say itll drop another 0.25%, then maybe settle around 0.85%.
This wouldnt cause rates to drop much further than todays levels. And waiting to see carries way more upside rate risk right now.
If you pass on a 30-year fixed in the low 3% or high 2% range, youre very likely to regret it.
If you really want to be a trader because you think rates will drop, heres your play:
Ask your lender to do a no-cost refi.
Your rate will be about .125% to .25% higher than a normal-cost loan , but trading a higher rate for no closing costs means youre free to refi again if rates drop more later.
Again, talk through this with your lender and theyll do the math you need to make the right decision.
You Can Flip To A Fixed Rate
Amar and Sarah had a meeting today with our team, and Sarah asked a very good question that wed like to share with you.
Do we lock in at the current variable rate?
Heres the situation.
Weve worked with Amar and Sarah and obtained an approval for a variable rate mortgage for their newly built home, with possession date at the end of November.
While reviewing and signing the mortgage commitment, a discussion around interest rates was initiated. Bob demonstrated the difference in payment amounts and amortization between the current fixed and variable rates available .
Through the process Bob indicated that if they heard rumblings about interest rates changing then they could lock in at anytime from the variable rate to a fixed rate which prompted Sarahs question, do we lock in at the current variable rate?
The answer is no, you would lock in at the best fixed posted rate at the time but you want to be careful because if your mortgage has been secured with a chartered bank, their posted rates can be a lot higher than the best discounted rate. It is very important to have the right lender from the start.
Amar and Sarah were relieved that the flexibility of locking in to a fixed rate at any time was available, and they are very excited about the upcoming possession of their new home and were excited for them!
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What Are The Risks If The Loan Is Not Locked
Let’s say you decide to wait. You’ve narrowed down where you will get a mortgage and looked at all your loan choices. Maybe you’ve even decided on the loan product you want. But the housing market is falling. The Federal Reserve has cut interest rates twice, and you expect them to drop further. So you decide not to lock.
This is no different from gambling. Rates may go down, and your gamble could pay off. In that case, you would have been a little worse off if you had locked your loan. But if rates go up, you have no protection. You will pay a higher rate if you remain with that lendera lock would have prevented the increase.
What To Do After Rates Fall After A Lock
If the interest rates have dropped after you have locked the rate, you can withdraw the current application and start a new one. There are risks involved with this approach with some being
Losing money that you have already paid on appraisal and other costs, like credit checks you will have to spend again when you make a new application.
Paying more to process the new application for lenders or brokers with high fees.
You have to wait longer to close on your home, which can complicate the purchase if the seller needs to close the sale by a given date. This is not an issue you have to worry about when refinancing.
If the difference between the current locked rate and the new rate is big, it might be a good idea to drop the loan application especially if you have only spent a few hundred dollars to get the rate. It is better to lose a few hundred and save thousands.
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Can A Mortgage Company Change The Terms
Lea Uradu, J.D. is graduate of the University of Maryland School of Law, a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, Tax Writer, and Founder of L.A.W. Tax Resolution Services. Lea has worked with hundreds of federal individual and expat tax clients.
Buying a home is stressful enough without worrying about whether your mortgage company can change the terms before closing, or afterward. In fact, under specific circumstances, a mortgage company can change the terms. Here are the details.
Once You Lock Your Rate Youll Still Have Flexibility
The idea of locking may seem limiting, but youre not actually handcuffed to one final option. In fact, youll still be able to:
- Select a different type of loan: When you lock your mortgage rate, youre essentially requesting that we hold all of the rates available to you across all of our products for that day. So for example, if you later decide to change from a fixed-rate to an adjustable-rate mortgage, well honor the original days rates for whichever loan type you choose.
- Change your mind on taking credits versus paying points: When you lock your rate, youre also locking all of the points and credit options associated with that rate. For instance, if you decide later on that you want to pay more points up-front for a lower rate, well do that math based on the original rate you locked.
- Make changes to your application: Even after you lock your rate, you can still make changes to your loan amount or add a co-borrower .
You can lock your rate when it works for you and still adjust your options to meet your goals. If you like what you see, you can lock your rate instantly online.
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Mortgage Rate Lock Faq
What happens if my mortgage rate lock expires before closing?
If your rate lock expires before closing, youll have to re-lock a rate in order to close the loan. If rates havent moved, your new rate will likely be the same rate you originally qualified for. If rates increased during the lock period, your rate will likely go up. But if rates have fallen, you will not get a lower rate. Youll likely still get the original rate you locked in.
Can you lock in a mortgage rate with more than one lender?
Yes, you can lock in a mortgage rate with more than one lender. Some borrowers decide to lock a rate with Lender 1 and let their rate float with Lender 2. That way, if rates fall, they have a backup. They can lock in a lower rate with Lender 2 and cancel their application with Lender 1 with fewer consequences.
Can you change lenders after locking a rate?
Yes, you can change lenders after locking a rate. But youll have to start the application process over with your new lender. That means getting pre-approved, submitting all your documents, and waiting for underwriting twice. All in all, closing a mortgage or refinance usually takes more than a month. So if youre anywhere near the closing date on your original application, consider your options very carefully before deciding to change lenders.
Can you negotiate mortgage rates?Can I back out of a mortgage rate lock? Is it smart to lock in a mortgage rate?Can my loan amount change after the rate lock?
What Is Float Down
With a traditional lock, both the lender and borrower make a commitment and assume some risk. The lender commits to providing the agreed-upon rate even if interest rates go up. The borrower agrees to pay the agreed-upon rate even if mortgage rates go down.
Those who want to get the lower rate no matter what happens can choose to purchase a float down option when they lock or even after locking. It usually costs 0.5% to 1% of the loan amount. A float-down provision on a $300,000 loan might cost $1,500 .
Float down options allow you to get the lower rate if interest rates have fallen when its time to close on your mortgage. There is no standard float down agreement, so pay attention to all provisions.
Often, for example, the rate at closing must be at least .25% lower for the float down provision to kick in. Some float-down agreements only apply to rates when its time to draw your final loan documents.
Others give you one chance during escrow to lock a lower rate if they drop before your closing date.
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You Have Plenty Of Time To Close
If your closing date is still several weeks away, discuss a float down with your loan officer. Preparing a new loan estimate may take a few extra days. If youre planning to close in a shorter time frame, however, you risk closing late if you try to renegotiate your interest rate lock right before your signing date.
How Your Loan Can Change After Closing
If you choose an adjustable-rate mortgage , your loan amount will change according to the terms of the mortgage. There are many varieties of ARMs, from 7/1 to 5/1 to 1-year. The numbers refer to periods when the mortgage rate will change. Its important to understand the parameters of your loan before signing on the dotted line.
Your property taxes and homeowners insurance premium might change periodically. Your escrow account, which your mortgage company sets up, typically pays these types of items. Its likely that over the life of the loan, the amount of the escrow expenses will change and consequently impact your total payment to the mortgage company.
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How Long Can You Get A Float Down Rate For
Some lenders allow you to float down the rate until closing, while others set limits. For example, you might be able to request a lower rate just once after asking for a rate lock. But always check with the lender, and ask whether they charge a fee.
All of the mortgage lenders in the table below are our partners.
How Long Does A Rate Lock Period Last
Rate locks can last between 30-60 days. It is a good idea to take the time and research more about how long it takes to close a loan in your area when talking about the length of the lock. If the lender is facing a backlog of mortgage applications as a result of the low rates, then it is best to go with the longest time possible.
When discussing the mortgage rate lock with a lender, you need to ask them whether they are going to prioritize applications for new home mortgage purchases over refinancing. If this is the case, you need to lock that period so you can cover the mortgage application process.
You also have an important part to play. Do your part to move the process faster by turning in the documents required by the lender, such as:
Proof of income
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When To Lock In Your Mortgage Rate
If youve received a rate youre comfortable with and know you can afford, your best bet is to lock it in.
You might be tempted to wait it out, float your rate and see if you can get a lower rate before locking in. However, the risk that comes with that likely wont be worth the potential savings. If you want to take this route, you’ll need to check mortgage rates regularly and be ready to move quickly. You should also check with your lender to see if you have a deadline for locking in.
How do you decide whether to lock or float? The safest bet is usually to lock, but if you really want to take the risk, the best time to float is typically when rates are falling.