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FYI
What
Is A Rate Lock?
It's just a fact of life that interest rates and points fluctuate according to market conditions and are based primarily on what it costs to obtain money in order to make mortgage loans.
At Corridor Mortgage Group we understand such fluctuations may have a serious impact on borrowers. So, at the time of loan application, we offer our borrowers two options for determining the interest rate and total number of points for their loan.
Choice # 1 = Lock In
There are four components to a rate lock:
- Loan program
- Interest Rate
- Points
- Length of Lock
To "Lock-In" means you elect to reserve the interest rate and points according to the present market conditions for a specific length of time for a specific loan program. This means that the interest rate and points will not change during the lock-in period irregardless of the changing market conditions whether they are favorable or unfavorable.
This is a valuable protection in the event the market gets worse and interest rates rise. However, no one can predict the future, and it is just as likely that rates could get better. You must use your best judgment at the time you make your loan application.
Choice # 2 = Float
To "Float" means to defer the decision to lock the interest rate and points until a later date. The prevailing market conditions will then determine the terms of the lock-in at that time.
The option to lock-in or float the interest rate and points is entirely your choice. Employees of Corridor Mortgage Group have no authority to advise you of such matters nor should you rely on such advice.
The decision to "lock-in" or "float" will be made on a document entitled the "Financing Agreement" which is filled out when you prepare your loan application.
Other Things You Should Know About Locks
- Rate Locks Are For A Specified Period Of Time
The longer the length of the lock, the higher the points or the interest rate. That's because the lender takes a greater risk in guaranteeing an interest rate for an extended period of time. So, it is important to choose a period of time in which you can close the transaction.
- What If A Lock Expires?
If the transaction does not close in the specified time, then the lock is said to "expire." Again, lenders lose money if your lock expires. In that event, most lenders will offer an extension. However, market conditions will likely determine the cost of such an extension.
- Loans Must Be Locked Before Settlement
Corridor Mortgage Group requires loans to be locked within 3 calendar days prior to settlement. This is necessary in order to properly draw up the closing documents in a timely fashion in preparation for settlement.
- Lock & Shop Programs
If you are purchasing a new home, most lenders will not allow a lock until the property is actually selected. However, there are a few lenders that will allow you to "Lock-and-Shop" allowing you to lock-in before you find a house. This would be very helpful in a market where rates are expected to climb.
What Next?
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