This Article On Locking Mortgage Rates During Mortgage Process Was PUBLISHED On July 22nd, 2019

Gustan Cho Associates at NEXA Mortgage, LLC offer highly competitive interest rates on their mortgage products.

• Many clients are confused during the mortgage process
• Many are unclear in Locking Mortgage Rates During Mortgage Process
• Locking Mortgage Rates is different for each client
• Unfortunately, your loan officer does not have a crystal ball
• Locking Mortgage Rates is still a gamble based on market trends
• In this blog, we will detail the process for Locking Mortgage Rates During Mortgage Process
• We will explain how to take the gambling factor out of the process

The mortgage process can be stressful and confusing, that is why we are here to help guide you through the process.

Steps In The Mortgage Process

Once you have a purchase contract for the home you’re buying, your loan officer will send you a full loan disclosure package.

• This disclosure package will detail all the information associated with your mortgage loan

This disclosure package will clearly tell you if your interest rate is currently “locked” or “floating” on your LOAN ESTIMATE.

The loan estimate is the most detailed disclosure meant to educate you on the fees associated with the transaction.

• There are times when there is a fee to lock your interest rate
• That fee refers to DISCOUNT POINTS
• Once the disclosure package is sent, you may lock your interest rate at any time
• It is possible to lock your rate in at the time disclosures are sent
• For a refinance transaction, you may also lock your rate in at any time
• The industry-standard rate lock is good for 30 calendar days
• You can lock in for longer, 45 or 60 days
• Depending on your mortgage qualifications, we also have customizable rate locks
• These rate locks may be given for a specific amount of days, such as 22 days for example
• The longer you lock your interest rate in for, the higher the cost that rate is
• A 45-day lock will be more expensive than a 30-day lock

For more information on rate lock-ins, see this article on the CFPB’S WEBSITE. Examples

Factors Changing Mortgage Rate

Due to the lack of mortgage guidelines prior to the calendar year of 2010, many misconceptions of the mortgage process were born.

• Prior to 2010, the mortgage process was the Wild Wild West
• Many loan officers were paid higher commissions for charging higher interest rates
• They could be paid on what is called a yield spread premium
• However, the federal government stepped in after the catastrophic real estate crash of 2008
• Regulators put in The Dodd-Frank Wall Street Reform and Consumer Protection Act called Dodd-Frank for short
• Part of this act regulates and protects the American people from being charged higher interest rates and paying loan officers more commission

Loan officers are now paid the same for every type of loan, interest rate, and terms you agree to.

Loan Officer Commission Versus Mortgage Rates

The standardization in commissions is meant to level the playing field.

• A loan officer is paid the same for all mortgage types
• Meaning they are paid the same whether you use an FHA or conventional loan
• They are paid the same regardless of the interest rate you receive
• Your rate will change based on your qualifications but will not change the loan officer’s compensation

For more on Dodd-Frank, please see the US SECURITIES AND EXCHANGE COMMISSION website.

Factors Affecting Mortgage Rates

The main factors that drive your interest rate are credit scores, down payment amount, and timeframe of the lock.

• For credit scores, it is pretty obvious
• The higher your credit score gives you a lower interest rate
• Rates move up and down based on credit scores
• Every 20 points is a break in mortgage rate pricing
• 640 through 659 will have a higher interest rate than 660 through 679
• This trend will continue every 20 points

680 through 699 will be slightly higher than 700 through 719 and so on.

Down Payment Pricing Adjustments On Locking Mortgage Rates

Just as credit score affects the interest rate every 20 points, down payment does affect the interest rate every 5%.

• Every increase in a down payment of 5% of the purchase price will lower the interest rate
• For example, putting down 10% will have a higher interest rate than putting down 15% and putting down
• 20% will have a lower rate compared to purring down 15%
• Of course, we all know the 20% down payment threshold for not having mortgage insurance on a conventional mortgage

However, many Americans do not have 20% to put down. Paying a slightly higher interest rate to obtain a home is worth it to thousands of Americans.

Loan Level Pricing Adjustments On Mortgage Rates

Loan Level Pricing Adjustments also referred to as LLPA’s are risk-based additions to your interest rate for conventional mortgages.

• These pricing adjustments are standard across the board at our spelled out by Freddie Mac and Fannie Mae
• Every lender will have the same loan level pricing adjustments
• These hits on your rate are put on directly by the agency

Examples Of LLPAs

What are examples of loan level pricing adjustments?

• Down payment
• Credit score
• Type of occupancy (owner-occupied, second home, investment property)
• Type of home (single-family, condominium, PUD, manufactured home)
• Number of units (single-family home or multi-unit property)

Please see FANNIE MAE’S WEBSITE for more on Loan Level Pricing Adjustments.

Best Time In Locking Mortgage Rates During Mortgage Process

As stated earlier in this article, unfortunately, we do not have a crystal ball to oversee the market.

• We can make a highly educated decision on the best time to lock your interest rate
• There is no guarantee the rate will not go lower
• We will monitor the market and study trends to achieve the lowest rate possible

Comfort Level By Borrower When Locking Mortgage Rates

The best time to lock your interest rate is at a time when you are comfortable with the rate itself and the cost associated (if any) with that rate.

• Rates do not always go down, many times they do go up
• Interest rates have the ability to jump up quickly based on the global market
• The mortgage market in 2019 has been all over the place
• Our economy is growing strong and rates have plenty to do with the market success
• Lower interest rates increase spending and boost the economy
• Mortgage rates are no different

For most Americans, their home is the largest investment they will make, so having a low-interest rate is important.

Locking Mortgage Rates During Mortgage Process On Construction Loans

Locking your interest rate on a construction loan can be a mind-boggling process.

• Depending on the construction loan program you select, the rate lock process will vary
• We offer a one-time close construction loan where you lock the rate with the same process as a standard mortgage
• Once locked in, the rate does not change
• Other construction programs have an interim loan during the construction phase and a permanent loan at the end of the construction phase
• Typically, you have an adjustable-rate (ARM) during the construction phase and you are able to lock in a fixed interest rate upon the home being completed

This program puts you at the mercy of the market during the construction phase. Please reach out to us for more details around construction loans.

Qualifying For A Mortgage With A Direct Lender With No Lender Overlays

We encourage you to reach out directly to Gustan Cho Associates for more information regarding the rate lock process. Please call Mike Gracz on (800) 900-8569 or text us for faster response. Or send an email to Mike at gcho@gustancho.com. Either Mike or one of the highly-skilled loan officers at Gustan Cho Associates will assist you through your mortgage questions. We are growing in more states across the nation. We are a one-stop-shop mortgage company without any LENDER OVERLAYS. We work seven days a week to offer top-notch customer service. It is important to remember that the lowest interest rate may not always be the best option for you in the long run. Please call us today to discuss you are mortgage qualifications.