Lock durations can vary for mortgage financing, but most lenders lock in the interest rate for 30-60 days from the date the loan application is submitted. As long as the loan is closed within that lock-in period, the lender honors the agreed upon interest rate.
Some consumers are misled by advertising that quotes unrealistically low rates based on 15-day lock durations. This is called 'short-pricing.' The lender basically knows the borrower doesn't have time to meet their conditions and have all the necessary paperwork in order within that brief time period. As a result, the lender is not obligated to honor the low rate that was listed in their advertising.
For simple refinance transactions, a 30-day lock-in period is more realistic. For purchase transactions, which are typically much more complex, you're much safer going with a 60-day lock, even though the interest rate might be a little higher than the rate you see quoted on billboards and the Internet.
Borrowers should make sure they have a written rate lock agreement, and allow themselves a reasonable amount of time to close their loan. I prefer to lock in all my clients as soon as their application is filed, rather than gamble with predicting short-term interest rate movement. My team and I focus more on assisting clients with long-term goals and management of their mortgage debt to secure a strong financial future.
Rate Lock Duration
4 comments • Karl Peidl - Accredited Loan Consultant • August 15 2008 10:21AM
This is assuming that the loan program is available 60 days from application. I've had many loan programs eliminated while waiting to close escrow, even banks go out of business while in escorw. Be careful, get the loan closed asap, while the loan and guidelines are still in effect. Stevo
Have not heard of "short pricing" before. Thanks for sharing this information. yes, locking in early is the bst and that's what our team also does.
Good luck to you in growing your business.
Carole Lhuillier
Keller Williams Realty
It really is unfortunate how many firms take advantage of the fact that consumers don't understand a lot of the little details about the mortgage business. We do our best to educate our clients when we tell them things that don't agree with what other lenders are [misleadingly] saying in their ads.
Steve - Disappearing mortgage programs are definitely an issue, but many times they will grandfather in any loans that are already locked under the previous guidelines. This just emphasizes the importance of locking early.
Carole - Thanks for stopping by. Keep protecting your clients' interests.
Education is very important, although many consumers don't know who to believe. Those who are misleading others or misrepresenting themselves are hurting us all.