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| Real Life Information... on Home Related Topics - Mortgage Information |
It is important to recognize that a lock-in is not the same as a loan commitment,
although some loan commitments may contain a lock-in. A loan commitment is the
lender’s promise to make you a loan in a specific amount at some future time.
Generally, you will receive the lender’s commitment only after your loan application
has been approved. This commitment usually will state the loan terms that have been
approved (including loan amount), how long the commitment is valid, and the lender’s
conditions for making the loan such as receipt of a satisfactory title insurance policy
protecting the lender.
Next: Mortgage Lockins Cont’d
Back to: Mortgage Overview
although some loan commitments may contain a lock-in. A loan commitment is the
lender’s promise to make you a loan in a specific amount at some future time.
Generally, you will receive the lender’s commitment only after your loan application
has been approved. This commitment usually will state the loan terms that have been
approved (including loan amount), how long the commitment is valid, and the lender’s
conditions for making the loan such as receipt of a satisfactory title insurance policy
protecting the lender.
Next: Mortgage Lockins Cont’d
Back to: Mortgage Overview
Mortgage Lock-ins
Lock-ins on rates and points might offer you a way to ensure that what you shop for
is what you get.
All About Lock-Ins
In most cases, the terms you are quoted when you shop among lenders only
represent the terms available to borrowers settling their loan agreement at the time of
the quote. The quoted terms may not be the terms available to you at settlement
weeks or even months later. Therefore, you should not rely on the terms quoted to
you when shopping for a loan unless a lender is willing to offer a lock-in.
is what you get.
All About Lock-Ins
In most cases, the terms you are quoted when you shop among lenders only
represent the terms available to borrowers settling their loan agreement at the time of
the quote. The quoted terms may not be the terms available to you at settlement
weeks or even months later. Therefore, you should not rely on the terms quoted to
you when shopping for a loan unless a lender is willing to offer a lock-in.
What Is a Lock-In?
A lock-in, also called a rate-lock or rate commitment, is a lender’s promise to hold a
certain interest rate and a certain number of points for you, usually for a specified
period of time, while your loan application is processed. (Points are additional
charges imposed by the lender that are usually prepaid by the consumer at
settlement but can sometimes be financed by adding them to the mortgage amount.
One point equals one percent of the loan amount.) Depending upon the lender, you
may be able to lock in the interest rate and number of points that you will be charged
when you file your application, during processing of the loan, when the loan is
approved, or later.
A lock-in, also called a rate-lock or rate commitment, is a lender’s promise to hold a
certain interest rate and a certain number of points for you, usually for a specified
period of time, while your loan application is processed. (Points are additional
charges imposed by the lender that are usually prepaid by the consumer at
settlement but can sometimes be financed by adding them to the mortgage amount.
One point equals one percent of the loan amount.) Depending upon the lender, you
may be able to lock in the interest rate and number of points that you will be charged
when you file your application, during processing of the loan, when the loan is
approved, or later.
When you’re looking for a mortgage, you’re likely to
shop among lenders for the most favorable interest
rate, and the lowest points and other up-front
charges. When you find the most favorable terms
and the lender that you want, you’ll apply to that
shop among lenders for the most favorable interest
rate, and the lowest points and other up-front
charges. When you find the most favorable terms
and the lender that you want, you’ll apply to that
lender. But when you get to settlement, will you actually receive the terms you applied
or bargained for? Or will you find that the rate has changed -- and that your costs
have gone up?
or bargained for? Or will you find that the rate has changed -- and that your costs
have gone up?
A lock-in that is given when you apply for a loan may be useful because it’s likely to
take your lender several weeks or longer to prepare, document, and evaluate your
loan application. During that time, the cost of mortgages may change. But if your
interest rate and points are locked in, you should be protected against increases while
your application is processed. This protection could affect whether you can afford the
mortgage. However, a locked-in rate could also prevent you from taking advantage of
price decreases, unless your lender is willing to lock in a lower rate that becomes
available during this period.
take your lender several weeks or longer to prepare, document, and evaluate your
loan application. During that time, the cost of mortgages may change. But if your
interest rate and points are locked in, you should be protected against increases while
your application is processed. This protection could affect whether you can afford the
mortgage. However, a locked-in rate could also prevent you from taking advantage of
price decreases, unless your lender is willing to lock in a lower rate that becomes
available during this period.
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