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I seem to recall that once your loan application paperwork is submitted, and accepted, the rate was locked in then... I have received a commitment/pre-approval letter from my bank, that states the rate of interest listed that can change, and I understand this. My loan counselor has told me, when I asked about rate lock;
"I have been in this business a very long time, and a rate can never be locked in without an accepted sales contract".
Huh??? I seem to recall the rate was locked in by virtue of an accepted the signed application, at least the last time I got a mortgage many years ago... How the heck do you go home shopping where without a lock, rates could jump and knock you out of the running, or even drop during the process, potentially allowing a higher purchase cost?
My loan counselor also told me to not submit the "uniform residential loan application" paperwork that was included with the commitment letter, just hang on to the commitment letter, and don't send back the loan application??? On the loan app it does state the rate of interest, # of months of the loan, loan amount, and of course asks for a signature. I asked him directly via email, and in his reply, only stating the quote above, he dodged my question, which I will ask him again. Gotta say, my whole experience with this lender has my gut screaming.
I'm confused as heck, and would really appreciate some insight into this situation. Thank you, and thanks for reading my long post.
You cannot lock in a rate until you have an executed contract. Rates change daily. Rates can be based on 30 day closings, 45 day closings, 60 day closings... until you have a contract, you don't know what rate to lock in. The further out the closing, the higher the rate as they charge you to protect against rates increasing.
Rates also depend on amount financed. Less than 150 is normally higher than more than 150k. Type of loan makes a difference, and there is a cap on fha loans ( here its 271k). So if you find a house for 270k, you could do a conventional or fha. Some houses will not allow fha financing, so that would change loan program and rates.
Just to add one more response that backs up your broker/lenders position... we are in the middle of negotiations and will be getting a conventional loan; can't lock until we have a contract.
If a 1/4 or even 1/2 percent change in interest rates is going to seriously affect your ability to qualify for a loan, I would say you're living too close to the edge.
Thanks for the education everyone. I was going to pay cash for any potential home, but wanted to use cheap money, while I continue to add to my investments which I live on. I retired at 46 three years ago, so I'd rather have my $$$ working for me, rather than tied up in a non income producing asset. I was thinking/concerned about larger jumps in rates, just the same, the lower I can lock in, the better.
Now if I could just find a property, to utilize my loan...
Thanks for the education everyone. I was going to pay cash for any potential home, but wanted to use cheap money, while I continue to add to my investments which I live on. I retired at 46 three years ago, so I'd rather have my $$$ working for me, rather than tied up in a non income producing asset. I was thinking/concerned about larger jumps in rates, just the same, the lower I can lock in, the better.
Now if I could just find a property, to utilize my loan...
Same situation. Don't want to use cash. Rates are so good right now, but the lower the lock the better. Now just to get a contract...
1. if you can pay cash, then your offers should be for cash.
2. I cannot imagine that the contract in your state/locale requires you to pay cash at the closing table just because you qualify to pay cash.
3. A "huge jump" in rates would be 1/2%, to 4.5% (or slightly less). Presumably you're earning more on your investments than that still.
I seem to recall that once your loan application paperwork is submitted, and accepted, the rate was locked in then... I have received a commitment/pre-approval letter from my bank, that states the rate of interest listed that can change, and I understand this. My loan counselor has told me, when I asked about rate lock;
"I have been in this business a very long time, and a rate can never be locked in without an accepted sales contract".
Huh??? I seem to recall the rate was locked in by virtue of an accepted the signed application, at least the last time I got a mortgage many years ago... How the heck do you go home shopping where without a lock, rates could jump and knock you out of the running, or even drop during the process, potentially allowing a higher purchase cost?
My loan counselor also told me to not submit the "uniform residential loan application" paperwork that was included with the commitment letter, just hang on to the commitment letter, and don't send back the loan application??? On the loan app it does state the rate of interest, # of months of the loan, loan amount, and of course asks for a signature. I asked him directly via email, and in his reply, only stating the quote above, he dodged my question, which I will ask him again. Gotta say, my whole experience with this lender has my gut screaming.
I'm confused as heck, and would really appreciate some insight into this situation. Thank you, and thanks for reading my long post.
It can be done, there's no law prohibiting it. Decades ago, "lock and shop" was very popular. And then Dodd Frank came along. Now, when six pieces of critical information is known, the lender must disclose. Today, the last final piece of the information you is always the property address. And to disclose, most lenders want to review the contract. But, a contract is not actually required to disclose. As long as you and your lender are aware, there's no reason you couldn't lock once you knew what property you were going to offer on. The lender is required to re-disclose within 72 hours of receiving new information. The danger being between the time you locked and when the contract is ratified and lender notified.
If your offer is not accepted, the lender re-enters your information (no new credit needs to be pulled), you lock dies and you start all over again....and the reason most lenders want you under contract. But it is not required by law, likely company policy.
Thanks SmartMoney. I knew I wasn't crazy (at least about this situation). Geez, times go by so quickly... The last mortgage I did have, definitely was a "Lock and Shop", at an as I recall 6.25% rate. All of this has me thinking back to those "Lost another loan to DIETECH" commercials. Sorry to say IMO, but buying or selling a home sux.
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