Make Sure You Get Your Rate Lock In Writing
Posted by Hamid Grinage on Tuesday, June 16th, 2009 at 3:50pm.One of the results of these turbulent economic times that we find ourselves in is what's known as "Rate Lock Failure". This refers to a situation where a borrower has been offered a "locked" interest rate (meaning the interest rate quoted cannot change if the deal closes within the lock period). The locks are usually offered in writing, although sometimes they are verbal or done by email. The problem is that not all lenders honor these locks in every instance. It's common knowledge among mortage professionals, but not as well known among first time home buyers.
The worst thing that can happen is for a buyer to expect to be signing a loan application based on an interest rate that was agreed upon and locked in, only to find that now the lender isn't offering that rate anymore and the borrower will have to accept a higher rate. It goes against all the principles of honesty, ethics and fair dealing, however it happens all the time. What recourse the borrower may have will depend on several factors, including whether or not the lock was in writing.
It also seems that these lock failures are more common when interest rates are on the rise, because that means that the lender is taking a hit becaue they have already agreed to a rate that was lower. In addition, it's more likely you will suffer a lock failure if you are with a smaller company. The big boys such as Wells and B of A have more of a rep to uphold, so they are more likely to honor a rate lock as opposed to some obscure, small company no one has heard of.
When you talk about locking a rate with your broker, be sure you ask to get the rate lock in writing.
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