Bad Credit Mortgage Shopping: Get It Locked In

By Gabriel Traverso
Mortgage Credit Problems Columnist

No matter what sort of loan you're in the market for, your rate is not guaranteed until you lock it in--and get the lender's commitment in writing. Rates are disclosed in a Truth-in-Lending (TIL) form, but may be subject to change until you get your loan rate and terms locked in.

Mortgage Terminology: What Is A Lock-In?

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When shopping for a home loan it helps to know the industry terminology. A lock-in is a written guarantee from the lender that your loan will close at the agreed rate (assuming that you have met your obligations to the lender and get approved for your loan). Usually the lock-in agreement will show the interest rate for your loan and the duration of the lock, while the points are generally listed on your Good Faith Estimate.

This agreement often will only lock in these terms for a limited time--15, 30 or 60 days, depending on your terms. A lock in obligates your lender to close your loan at the rate you have agreed on as long as nothing else, like your ability to qualify, has changed. Some lenders offer "float down" locks, which allow you to close at a lower interest rate if the market rates go down. This means that if locked in with one lender you don't have to pull the plug and start over with another to get the better rate. This is an important feature--ask about it.

Bad Credit Mortgage Shopping

In today's market your bad credit may limit your options and such deals as zero-down home loans may no longer be available to you. Now you need to research your options if you want to get a good deal on a mortgage, it won't just walk up and sit in your lap. The lock-in is a tool you will need to use in order to shop smarter as you look for a good home loan.

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