You are a smart shopper. Whether it's for a bad credit mortgage, an FHA loan, or a debt consolidation home equity loan, you know what to do--get online or on the phone, touch base with several lenders, and get your disclosures quickly. Once you have decided which lender you like best, it's time to apply for your mortgage. But what about that rate quote? Is it guaranteed? What are your rights when it comes to mortgage interest rate quotes?
Recent mandated changes to the Good Faith Estimate (GFE) disclosure make it easier to discern what your mortgage interest rate is and what the costs of getting that rate are. Now, you can see at a glance if your rate is locked or not--the disclosure should tell you right at the top how long the quoted rate is guaranteed. If you have not locked your rate there should be no date on the form. Interest rates are driven by financial markets and move almost like stock prices--often changing several times a day!
Once you have locked your interest rate, you should get another GFE showing what your interest rate is and how long it is guaranteed. The new GFE should also reflect any changes in the pricing of your mortgage. Recent mortgage reforms force the lender to give an accurate estimate--no baiting and switching--and differences exceeding tolerances defined by law between the last disclosure that you receive and the actual costs become the lender's responsibility. When it comes to locking, though, you still don't have an absolute guarantee. Remember:
* Your loan is not locked until you are explicitly told it is and you get it in writing. Do not assume that your rate is locked just because you called someone and left a message to lock in your rate.
* Once you lock, the clock starts. Locks can range from 7 days to six months or more, with longer locks being more expensive. If you don't close on time, or "blow the lock," you could end up with a higher rate or having to pay a fee to extend your lock. So make sure that you do your part and quickly provide everything the lender needs to close your loan.
* Sometimes you might blow a lock and it's not your fault--the seller took too long to return an addendum, the real estate agent neglected to order tests or inspections, or the lender sat on your file too long. Don't hesitate to ask whoever caused the delay to foot the bill for an extension.
* Not everyone chooses to lock their rates. If your closing is a while out, perhaps if you are buying a house under construction or the seller wants a long escrow, it may be impracticable and expensive to lock your rate. You save the fees on a rate lock (which can range from an eighth of a point to one point or even more) if you elect to float your rate. In addition, if rates drop, you benefit by not being locked in. That said, if a higher rate would jeopardize your loan approval you probably want to play it safe by locking.
When should you lock your rate? In most cases, if the rate is acceptable to you you probably want to lock it in and then get your documentation in on time to close.
