Rate Lock Duration Explained

Dated: 05/19/2014

Views: 1202

Some useful information from a lender I work with: 

Rate Lock Duration Explained

Lock durations can vary for mortgage financing, but most lenders lock in the interest rate for 45-60 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- or 21-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.
At my bank, for simple refinance transactions, a 30-day lock-in period is realistic. However, for purchase transactions, which could be much more complex, borrowers are much safer going with a 45-day lock, even though the interest rate might be a little higher than the rate they see quoted on billboards and the Internet. To be clear, my team and I typically close purchase transactions in 30 days or less, but in an effort to protect our clients against volatility in the mortgage rate markets, we prefer to lock rates for 45 days on purchase transactions. It's better to be safer than sorry when dealing with mortgage rate movement.

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 Explained

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Eric Leigh
Mortgage Consultant
Idaho First Bank
Phone: (208) 880-0316
Fax: (208) 947-0441
License: NMLS #65666
Eric@EricsLoans.com
http://www.EricsLoans.com

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Phil Mount

Phil Mount is an agent at Front Street Brokers in Boise, Idaho. Phil became a licensed REALTOR in August 2009 after a 25 year career as a technology marketing professional. In his first year as an a....

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