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| Real Life Information... on Home Related Topics - Mortgage Information |
Locked-In Interest Rate--Floating Points. Under this option, the lender lets you
lock in the interest rate, while permitting or requiring the points to rise and fall (float)
with changes in market conditions. If market interest rates drop during the lock-in
period, the points may also fall. If they rise, the points may increase. Even if you float
your points, your lender may allow you to lock-in the points at some time before
settlement at whatever level is then current. (For instance, say you’ve locked in a
10½ percent interest rate, but not the 3 points that went with that rate. A month later,
the market interest rate remains the same, but the points the lender charges for that
rate have dropped to 2½. With your lender’s agreement, you could then lock in the
lower 2½ points.) If you float your points and market interest rates increase by the
time of settlement, the lender may charge a greater number of points for a loan at
the rate you’ve locked in. In this case, the benefit you might have had by locking in
your rate may be lost because you’ll have to pay more in up-front costs.
Next: Mortgage Lockins Cont’d
Back to: Mortgage Overview
lock in the interest rate, while permitting or requiring the points to rise and fall (float)
with changes in market conditions. If market interest rates drop during the lock-in
period, the points may also fall. If they rise, the points may increase. Even if you float
your points, your lender may allow you to lock-in the points at some time before
settlement at whatever level is then current. (For instance, say you’ve locked in a
10½ percent interest rate, but not the 3 points that went with that rate. A month later,
the market interest rate remains the same, but the points the lender charges for that
rate have dropped to 2½. With your lender’s agreement, you could then lock in the
lower 2½ points.) If you float your points and market interest rates increase by the
time of settlement, the lender may charge a greater number of points for a loan at
the rate you’ve locked in. In this case, the benefit you might have had by locking in
your rate may be lost because you’ll have to pay more in up-front costs.
Next: Mortgage Lockins Cont’d
Back to: Mortgage Overview
Mortgage Lock-ins Cont'd
Will Your Lock-In Be In Writing?
Some lenders have preprinted forms that set out the
exact terms of the lock-in agreement. Others may
only make an oral lock-in promise on the telephone
or at the time of application. Oral agreements can
be very difficult to prove in the event of a dispute.
Some lenders have preprinted forms that set out the
exact terms of the lock-in agreement. Others may
only make an oral lock-in promise on the telephone
or at the time of application. Oral agreements can
be very difficult to prove in the event of a dispute.
Some lenders' lock-in forms may contain crucial information that is difficult to under
stand or that is in fine print. For example, some lock-in agreements may become void
through some unrelated action such as a change in the maximum rate for Veterans
Administration guaranteed loans. Thus, it is wise to obtain a blank copy of a lender’s
form to a lawyer or real estate professional.
It is wise to obtain written, rather than verbal, lock-in agreements to make sure that
you fully understand how your lender’s lock-ins and loan commitments work and to
have a tangible record of your arrangements with the lender. This record may be
useful in the event of a dispute.
stand or that is in fine print. For example, some lock-in agreements may become void
through some unrelated action such as a change in the maximum rate for Veterans
Administration guaranteed loans. Thus, it is wise to obtain a blank copy of a lender’s
form to a lawyer or real estate professional.
It is wise to obtain written, rather than verbal, lock-in agreements to make sure that
you fully understand how your lender’s lock-ins and loan commitments work and to
have a tangible record of your arrangements with the lender. This record may be
useful in the event of a dispute.
Lenders may charge you a fee for locking in the rate of interest and number of points
for your mortgage. Some lenders may charge you a fee up-front, and may not refund
it if you withdraw your application, if your credit is denied, or if you do not close the
loan. Others might charge the fee at settlement. The fee might be a flat fee, a
percentage of the mortgage amount, or a fraction of a percentage point added to the
rate you lock in. The amount of the fee and how it is charged will vary among lenders
and may depend on the length of the lock-in period.
Lenders may offer different options in establishing the interest rate and points that you
will be charged, such as:
Locked-In Interest Rate--Locked-In Points. Under this option, the lender lets you lock in
both the interest rate and points quoted to you. This option may be considered to be a
true lock-in because your mortgage terms should not increase above the interest rate
and points that you’ve agreed upon even if market conditions change.
will be charged, such as:
Locked-In Interest Rate--Locked-In Points. Under this option, the lender lets you lock in
both the interest rate and points quoted to you. This option may be considered to be a
true lock-in because your mortgage terms should not increase above the interest rate
and points that you’ve agreed upon even if market conditions change.
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