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The Difference Between a Quoted Interest Rate and One That's Locked

by Kate Ford

Locking interest rates is a process full of uncertainty for mortgage borrowers. For instance, how does anyone know when to lock? More importantly, how can you be assured the rate you were quoted has been locked?

These are common questions for mortgage applicants. Let's look at the answers and see what can be learned.

1 -- When is the best time to lock?

First of all, I am certain interest rates will do one of three things. Go up, go down or remain the same. This is a guarantee you can take to the bank!

So then how can anyone decide when to lock? Here's a tip. Yesterday is over. You won't know tomorrow's rates for another day. But you can take action based on today's information.

Do today's rates give you an acceptable monthly house payment? Then lock! In fact I would take it a step further by saying if you are in doubt, lock!

One suggestion though. If you decide to lock (more on this in a moment) ... lock and don't look back. Some borrowers experience remorse if interest rates decrease. Remind yourself you were pleased with the rate on the day you locked.

2 -- How can you tell the rate you were quoted has been locked?

Of course you've heard the stories from neighbors and relatives. Toward the end of the mortgage process, they discovered their house payment was going to be a few hundred dollars greater than they'd been quoted.

How can these unpleasant surprises be avoided? I thought you'd never ask.

If you remember nothing more than these two words, IN WRITING, I am happy. You must get your mortgage rate lock in writing. No homeowner should get to the closing table only to find the final interest rate is a half percent higher than anticipated.

But before we continue, I'd like to remind you of something. This is your loan. No one cares more about it than you. This is not to say your lender is lacking concern. I'm just pointing out that ultimately, only you will be responsible for the payments during the next 30 years.

So take control of your interest rate by asking these questions and getting answers in writing.

At what point in time can I lock my rate?

What is your float down policy? Can I get a lower rate if interest rates drop after I lock? Please give me an example.

Is there an up-front charge to lock my rate? Is this a deposit to be applied to my loan fees or an additional cost?

For how long is a mortgage rate locked?

What happens if my lock expires before my loan closes? Could my rate be extended? Would I be charged for an extension?

A quoted rate is not the same as a locked rate.

On the day you lock, you must protect yourself. Do not settle for anything less than a written lock agreement with your name and property address in addition to the following information:

  • Locked Interest Rate
  • Loan Fees (on the day of locking)
  • Loan Amount (on the day of locking)
  • Loan Program (Ex: FHA, VA, Conventional)
  • Loan Type (Ex: Fixed, Adjustable)
  • Loan Term (Ex: 30 years, 15 years)
  • Lock Period (Ex: 15 days, 30 days, 45 days or 60 days)

Don't settle for uncertainty over your mortgage rate. Take charge by asking these questions and getting a written lock agreement. It is worth repeating again. Take charge of your rate because it's your mortgage payment, your home and your life.

Kate Ford, a mortgage insider with more than 20 years experience, now creates mortgage and real estate information websites with a unique twist. Her site Get Your Best Mortgage Rate is dedicated to helping homeowners translate the secret language of mortgage lending to find the best rates at the lowest cost. For more information, visit Kate at Get Your Best Mortgage Rate.


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