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rate lock question

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Anonymous
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rate lock question

So when I started this whole home buying process about a month ago my loan officer told me we would lock a rate sometime in the first week or two of September (I needed a mid to end of October close).  I called her today to ask about when that might happen and she told me she had already locked me at 5.75% for 60 days. . . My questions are...1.  Should she have consulted me before locking?   and 2.  Is 5.75% a good rate at this time?

 

Thank you!

 

Lucy

Message 1 of 14
13 REPLIES 13
Anonymous
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Re: rate lock question

I don't know the specifics about locking in a normal situation, because ours is a short sale and the timing of loan UW and bank approval is not really happening. However, our LO told us that once the seller bank approves our short sale, we are officially approved for the loan and can lock for 60 days at any time after that...and the rate floats until we lock.

 

I don't know for sure, but I would say the LO should not have locked you until you chose to do so. And furthermore, while I don't have the specifics about your type of loan, credit, points, down payment, or anything else, 5.75% seems like kind of a terrible rate for right now. As of our loan application last week, we were floating at 5.25%, and if we were paying a point it would have been 5.00%.This whole locking without permission at a high rate seems kind of shady to me.

Message 2 of 14
ShanetheMortgageMan
Super Contributor

Re: rate lock question

When was it locked?  Makes a difference. 5.75% for 60 days is not that low of a rate compared to what most people are getting right now, but it also depends on what your closing costs are.  Did you get a GFE for the 5.75% interest rate that was locked in?  If not, then I'd recommend you request one so you can see what more or less the final figures will look like.  In my opinion the loan officer should discuss locking in the interest rate with you before doing so though, they should tell you why it might be a good time to lock, or why you might not want to lock, and if you were to lock in today what the different rate/fee combinations would be and what they'd recommend for your plans (long term vs. short term).  Some loan officers take the approach of "I promised them a certain rate and that is the rate I am going to deliver", if they live up to that promise then whether that is above or below the market rate could be a bad or good thing.  It just depends on what you are expecting and the type of loan officer you are working with.  You can also inquire about any float down options, that is where if the interest rate gets a lot lower than when you locked in, you can get that new lower interest rate or meet halfway there.
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Message 3 of 14
Anonymous
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Re: rate lock question

Thanks Icinva and Shane. The sales contract I signed had 5.75% on it...which I understood to mean if I couldn't get a loan at that rate or better I could back out of the deal. The GFE I got was figured @ 5.75% which I thought was high end of the range so was comfortable I wouldn't get surprised with higher costs. I am getting 6% seller assist (about 7K) for closing costs. I thought there would be some sort of discussion and or further explanation of what my options were before we locked a rate...if I wanted to wait...what trends were etc... I was hoping I might be able to get something a bit lower just due to what I have been hearing rates have been. I'm not sure exactly which date she locked it. She did not mention anything about float down options. I think I will call her tomorrow and ask her to explain further. From your responses I'm thinking I should ask what date she locked, why she locked at that rate, if I have a float down option and if that is the best rate people are getting through her these days? Do I have any options if I don't like the answers she gives me or if I want to try for a better rate?

 

thank you,

 

Lucy

Message 4 of 14
DallasLoanGuy
Super Contributor

Re: rate lock question


@Anonymous wrote:

. My questions are...1.  Should she have consulted me before locking?   and 2.  Is 5.75% a good rate at this time?

 



 

1. yes

2. depends on fees and loan amount.... but likely high

 

Retired Lender
Message 5 of 14
Anonymous
Not applicable

Re: rate lock question

I locked in last week at 5.125 and I had to sign some paperwork in order to do it. I close Oct 30th
Message 6 of 14
Anonymous
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Re: rate lock question

I locked in yesterday at 5.125 buying 0.750 point on a VA loan , good for 90 days
Message Edited by jimmytftw35 on 09-09-2009 09:52 PM
Message 7 of 14
Anonymous
Not applicable

Re: rate lock question

What could be the motivation for a mortgage broker to lock anything 
but the lowest available rates for their client?  I have to say I am disappointed I 
was neither consulted nor well informed about this important step in 
the process.

I already filled out a mortgage application with this broker (signed about a hundred places). 
Is there anything stopping me legally (generally speaking) from 
looking for someone else who might get me a better rate at this point in the game?  Can I ask her to keep looking for a better rate for me or now that she locked me is this the best she'll be able to do for me (assuming there is no float down option)?

 

 

Message 8 of 14
Anonymous
Not applicable

Re: rate lock question

unfortunately, some LOs are less than honest, and the bottom line is ALL of them are out for a commission. I know there are totally trustworthy LOs out there who want to help as much as they can, but there are also money-grubbing LOs who won't tell you the whole truth, because their commission is what kind of loan they can sell you. this is the whole point of shopping around, to hopefully cut down on some of this.you wouldn't even believe some of the "great" loans LOs tried to get me to look into...luckily I had done my research and I knew that a 5/1 ARM at 6 1/4% interest was AWFUL. I didn't have any interest in an ARM, but this one LO would not give it up. It was really unbelievable. 

 

Anyway - I haven't gotten far enough in the process to know the details, but as far as i'm aware, nothing is binding you to this loan. all the commitment letter (if you even have one yet) is saying is that THAT bank will lend you the money. nothing should be stopping you from finding a better loan somewhere else, and honestly, a half point of interest might be worth doing if you could find better elsewhere. your problem at this point would be having another loan approved and ready in time for close. 

 

you also take an additional hit on credit, but that shouldn't be a huge deal as long as your scores weren't borderline. 

Message 9 of 14
ShanetheMortgageMan
Super Contributor

Re: rate lock question

A mortgage broker is typically approved with multiple lenders, and while most do not prefer to.... if they were trigger happy and went cavalier, or actually discussed with their client and determined it was the best time to lock... and it ended up rates got a lot lower afterwards, they have the option to go with one of their other approved lenders to take advantage of the lowered rates.  Like I mentioned, most prefer not to, as it hurts their relationship with the lender they already submitted, locked, and got your loan approved at... but in extreme or unique situations it is warranted.  Now if your rate was locked awhile ago, perhaps the loan officer did feel that rates might be going up from there on out, and locked it in to prevent you from getting an even higher rate.  Since we don't know the lock date, it's tough to say.  Or they could've seen your purchase contract, and just said Lucy is getting a 5.75% rate, to be a fly on the wall at the time would've be helpful.  It sounds like your situation might be warranted for your loan officer to check around with their other approved lenders.

 

You always have the option to back out of your application with your current lender or motgage broker, but realize that going to a new lender will require the loan process to start over again, the old lender or broker won't work with the new one to familiarize them with the loan details or anything.  I assume you are going with an FHA loan, if so, it will also require your current broker to release the FHA case # to the new broker or lender that you choose to go with, so they will have to work together for that one part though.  In that situation your current broker is required by HUD to be cooperative with the FHA case # transfer.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 10 of 14
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