Home Loan Workbook

WHAT IS A LOCK-IN AND HOW DOES IT WORK?

Some of the essentials to consider are the interest rates, lowest points, upfront charges and how to calculate them. Once you find the most favorable terms for your needs, work your way through the application process and get to the settlment stage, the real consideration is whether or not you will receive what you’ve bargained for. Will you find that the rates have changed, which automatically ups your cost structure? That’s where a lock-in holds value to you as a future homeowner. A lock-in - also commonly referred to as a “rate-lock” or “rate commitment” - is a lender’s promise to hold a certain interest rate and number of points for you while your loan application is being processed. The loan application process may take several weeks (or longer) to prepare, document, and evaluate. During this time period, mortgage costs are likely to fluctuate. However, if your interest rate and points are locked in, you are protected against rate increases during the application period. While having a lock-in sounds like a no-brainer, there is a small risk. You may run into an instance where rates decrease. Therefore, a lock-in may prevent you from taking full advantage of any price drops. Depending upon your lender, you may have the opportunity to lock in a lower rate in the event that one becomes available during the application period. As a future homeowner, keep in mind that the mortgage bankers at USA Mortgage have your best interests in mind. In eorts to bring you that much closer to your dream home, we do our best to process loan applications quickly and provide the lowest rates possible. While mortgage rates change by the day, our customer service remains the same.

Q: Will your lock-in be writing?: USA Mortgage has forms that set out the exact terms of the lock agreement.

Q: Will you be charged for a lock-in? Typically, the lender will promise to hold a particular interest rate and number of points for a given number of days. In order to receive these terms, you must settle on the loan within that time period. A common lock period is 30-60 days, however some lenders may oer them for a shorter period of time. On the flip-side, you may find some lenders will extend their lock in period up to 120 days. Additional fees could be involved. Q: What happens if the lock-in period expires?: It’s possible that you can lose your interest rate and the number of points you had if the lock-in period expires. This can occur if there are delays in processing, regardless if they are caused by you or the lender.

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