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The innocent mistake that derailed my mortgage refinance

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I was all set to refinance my mortgage. With rates going up, I didn’t want to miss my chance to consolidate a HELOC I had used for renovations at a lower interest rate, along with my primary mortgage.

It was a great plan to cut my interest costs and my monthly expenses, until a misunderstanding with my loan originator meant I missed my window after all. Even for someone who writes about mortgages for a living, it can be easy to overlook some of the fine print and cost yourself money.

I decided not to go through with my refi once I crunched the new numbers, but here’s what I learned from the experience. I hope you see this as a cautionary tale so you don’t make the same mistake.

What happened to my mortgage refinance?

My misadventure was all about the rate lock, which is the lender’s guarantee of a quoted interest rate at closing even if the market moves up or down.

Every lender has their own process for locking in your mortgage rate once you receive a quote. The lender for my refi required written confirmation from me of my salary and the rate and term I was agreeing to lock in on the day I planned to secure the lock. I dutifully emailed my salary information but wrongly assumed that signing off on the loan disclosure qualified as agreeing to the rate and term.

I went about my business, ignorant of the fact that the lender required all three pieces of info in an email from me. My fate was sealed after my loan originator never followed up when he didn’t receive written confirmation of the rate and term I intended to lock.

By the time my loan made it to processing about three days later, rates on the market had jumped up. Since I unwittingly had not locked in my rate, I would have been on the hook for higher monthly payments and more interest. My original quoted rate was 3.125 percent. By the time my paperwork was filed it had jumped to 3.25 percent, which is what I thought I had locked in. But, once the loan was in processing, the market had moved up to 3.5 percent interest and my refi no longer made financial sense.

“Communication, communication, communication. I cannot stress that enough,” said Debra Johnson-King, a member of Bankrate’s Financial Review Board and a community development manager at The Mortgage Firm. “You really have to stay on top of it as the client, but even more so, your loan officer really needs to make sure you stay on top of it.”

She emphasized that every lender has its own process for locking in the rate, but borrowers should keep on top of their loan officers and confirm that the rate is locked as soon as possible.

Did I have any recourse to retroactively lock my rate?

Unfortunately, there wasn’t very much I could do. Although the loan officer was not as communicative as he perhaps should have been, it was on me for not following the lender’s policy to the letter. In theory, Johnson-King told me, my loan officer could have honored the rate he quoted me in the loan disclosure by sacrificing some profit margin, but there’s no obligation for lenders to do that.

“As a client, you can’t lock the rate, the loan officer has to lock the rate,” she said. “Once they saw that, perhaps if they sent you some documents to sign and you didn’t sign them, they should have gotten on the phone with you.”

To the lender’s credit, although they did not honor the rate they had quoted me, they did at least refund the fees I paid upfront, despite that money technically being nonrefundable.

Although I was disappointed that my refi fell through, I was certainly glad to recoup hundreds of dollars in application fees for a loan I would never receive. I was prepared to mount more of an effort to get that money back, too, and Johnson-King said that would have been the way to go.

“You can ask to speak to the manager or appeal to a higher-up and explain to them,” she said. “If it’s really, really obvious that it was the fault of the loan officer, then perhaps the manager could step in and go ahead and honor that.”

What to look out for with a mortgage application

As a loan applicant, it’s important to read every letter of every document you receive to make sure you’re not missing any important steps. But, Johnson-King said, it may be even more crucial to find a lender and a loan officer who takes a hands-on approach to guiding you through the application process.

“Work with someone that suits your style,” Johnson-King said, and she advises all loan originators to be careful about gauging their clients’ knowledge and comfort level about the process.

Make sure to check in with your loan rep at key points in the process:

  • Once you receive your quote
  • As soon as you submit your paperwork to confirm your rate lock
  • After your home appraisal
  • Before closing
  • Whenever you have a question

Bottom line

It can be easy to get bogged down in paperwork and miss important steps during a loan application, and those little oversights can cost you money. Don’t be afraid to ask your loan officer questions and to get on the phone if you don’t think you’re being answered in a timely manner. Mortgage applications are extremely time sensitive, after all.

And if you and your originator are not on the same page, Johnson-King said, it’s OK to move on.

“What I tell my clients: you’re the captain of this ship,” she said. “If you don’t like the vibe that you’re getting from the loan officer originator that you’re working with, go to somebody else.”

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Written by
Zach Wichter
Mortgage reporter
Zach Wichter is a mortgage reporter at Bankrate. He previously worked on the Business desk at The New York Times where he won a Loeb Award for breaking news, and covered aviation for The Points Guy.