Mortgage Rate Lock And Locking Rate During Mortgage Process

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This BLOG On Mortgage Rate Lock And Locking Rate During Mortgage Process Was UPDATED On February 1st, 2019

A rate lock is when a lender locks a mortgage rate for a certain period of time. A lender will do a mortgage rate lock for a period of the following:

  • 15-day lock
  • 30-day lock
  • 45-day lock
  • 60-day lock

When a mortgage does a rate lock, that mortgage interest rate is protected in the event the mortgage rates go up.

  • On the flip side, if the mortgage interest rates go down, the borrower is stuck with the rate lock
  • Cannot cancel the rate lock for the lower rate
  • A lender needs to do a rate lock-in order for an underwriter to issue a clear to close
  • The longer the rate lock is, the more of a premium that it costs
  • In a way, a rate lock is like an insurance policy protecting a higher mortgage interest rates

The rate lock is more important on a refinance mortgage process than it is on a home purchase process.

The Mortgage Process And When Do You Lock Your Rates

The mortgage process is a series of stages a borrower goes through. Somewhere in the mortgage process, the lender will need to lock the rate for your mortgage loan.

Here is the basic mortgage process:

  • The first stage of the mortgage process is the pre-approval stage
  • A borrower will consult with a loan officer
  • The lender will pre-approve the borrower by completing a mortgage loan application, running credit, reviewing docs, and running the file through the automated underwriting system for an automated approval
  • Once borrowers have a solid pre-approval letter, they can enter into a real estate purchase contract

Once borrowers have an executed home purchase contract signed by the sellers, the mortgage process starts.

Role Of The Mortgage Processor

A mortgage processor will process mortgage loan and submit it to the underwriter:

  • Once the underwriter reviews file, the underwriter will issue a conditional loan approval
  • Once borrowers satisfy the conditions on the conditional loan approval, the processor will ask the loan officer to do a mortgage rate lock
  • The file will be re-submitted back to the underwriter for a clear to close
  • The mortgage underwriter will make sure that there is enough time with the mortgage rate lock before issuing a clear to close
  • Once the underwriter issues the clear to close, docs will be sent out to the title company and the title company will schedule the closing

The wire will be wired to the title company on the closing date and the closing will be done at the title company.

Can Mortgage Rates Change During Mortgage Process?

Mortgage Rates can change several times per day.

  • When a loan officer issues the Loan Estimate, which used to be the Good Faith Estimate, it states a mortgage interest rate
  • This rate is an estimation and normally is higher than the actual mortgage rate the borrower will get
  • However, the mortgage rates will be floating until the loan officer locks the mortgage interest rates
  • Mortgage rates will fluctuate daily and change
  • Borrower’s mortgage rates are not guaranteed until the mortgage loan originator locks the mortgage rate
  • Most mortgage loan originators will lock a mortgage interest rate once the borrower gets a conditional mortgage loan approval
  • Other loan officers may not lock it until all conditions have been satisfied and the file is ready to be submitted for a clear to close
  • On refinance mortgage borrowers, many loan officers do not want to take a chance of mortgage rates sky rocketing
  • They will not take any chances and lock the mortgage interest rates way before the conditional loan approval

Other loan officers will do a long term 45 day or 60-day rate lock on a refinance the minute the mortgage loan is registered.

15 Day Rate Lock Versus 30 Day

Most loan officers will do a 15-day mortgage rate lock or 30-day mortgage rate lock.

  • However, there are times where the rate lock expires and when this happens, the loan officer will ask for one free lock extension
  • However, multiple rate lock extensions will cost and sometimes lock extensions can cost a lot especially when rates are on the upswing
  • With TRID, loan officers need to especially pay with the closing date and make sure that they have enough of a mortgage lock period

Home Buyers and Homeowners who need to qualify for a mortgage with a national direct lender with no overlays on government and conventional loans can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

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