One of the first rules of getting a mortgage loan is shopping around and negotiating the best deal. You should do this before you start shopping for the house because the size of your mortgage dictates the house you buy. When you’ve done all that shopping and negotiating, you want to make sure the deal is still on the table once you’ve found the house. To make that happen, you should get a lock-in.
When to Get a Lock-In
There are basically two times in the mortgage loan process that you should get a lock-in. The point at which you actually lock-in your mortgage terms will depend on your lender. Some lenders let you lock-in mortgage terms when you’re pre-approved for the mortgage. Pre-approval usually happens before you start house shopping.
You can also lock-in your mortgage at application time. Because mortgage applications can take weeks and mortgage rates often change during the time that your application is pending, locking in your mortgage loan will ensure you get the terms you negotiated.
Once you lock-in your mortgage rate, your interest rate won’t change, not even if mortgage rates go down unless you’ve made a negotiation with your lender to adjust your rate downward.
Lock-In Fee
Just like mortgages, mortgage lock-ins have terms. You may have to pay a lock-in fee. Sometimes the fee is due upfront or it can be paid at closing. Some lenders may not refund the lock-in fee if you decide not to take the mortgage or if you’re turned down for some reason or another. The lock-in fee may be a flat fee or it may be a percentage of your mortgage loan.
Lock-In Period and Expiration
Lock-ins only last a certain amount of time, anywhere from 7 days to 120 days is possible. Longer lock-in periods may have a higher fee. If you want to get the mortgage terms you negotiated, you need to settle your mortgage within the lock-in period. Ideally, your lock-in period should give you enough time to have your loan processed and close on the home.
You could lose your interest rate and points if your lock-in expires. This isn’t guaranteed, but it can happen if mortgage rates have gone up since the time you first applied for your mortgage. Delays in the mortgage processing time increase the likelihood that your lock-in will expire.
If your lock-in expires, you’ll most likely be offered interest rate and points based on market conditions at that time. If interest rates have gone up, then you may have to get a higher interest rate. On the other hand, if interest rates have gone down, you can take advantage of a lower interest rate.
Getting Through the Lock-In Period
To improve the chances at getting your mortgage completed during the lock-in period, make sure you have all the documents your lender needs upfront. This includes the purchase contract for your home, bank account information, pay stubs, W-2 forms, tax returns, credit card account numbers and addresses for your creditors. If your lender asks you for additional information, return the documents as soon as possible.
