mortgage

When should you lock a mortgage rate?

Choosing when to lock the loan for refinance is easier. The settlement date for a refinance loan is driven only by the lender, while a purchase loan typically has a settlement date that depends on the seller as well as the buyer.

"Refinancing right now typically takes a little longer than a purchase mortgage, so we recommend a lock of 60 or even 90 days," Dal Porto says. "We have a lot of refinancing applications and the loan process is more complex. Now, every loan requires full documentation."

Dal Porto says the industry average for a purchase loan is 45 days from application to closing, while a refinance averages 60 to 90 days.

Working with borrowers

Although the term "rate lock" sounds unyielding, many lenders are willing to be flexible with borrowers when circumstances change.

For example, many lenders will negotiate with the borrower if rates fall to prevent the borrower from opting to go to another lender. Blackwell says lenders sometimes charge a small fee to float down the rate.

What if the lock expires before closing? Lenders may offer an extension on the lock.

Mendelson says lender charges for a lock extension vary. Normally, the fee is 0.25 of a point for every 15-day extension. Another option is to relock at the current mortgage rate.

Dal Porto says many lenders will negotiate the fee for extending the lock, particularly if the settlement is delayed due to a distressed property needing additional repairs.

Borrowers should also remember that a rate lock is not guaranteed in all circumstances. Borrowers can lose a rate lock if their circumstances change -- such as a shift in their credit score or in their debt-to-income ratio -- before settlement.

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