Locking Your Loan When you're looking for a mortgage with the most favorable interest rate, and the lowest points and other up-front charges. When you find the most favorable terms and the lender that you want, you'll apply to that lender. Lock-ins are a way to ensure that at settlement what you requested from your lender is what you'll get. What is a Lock-In? A lock-in, also called a rate-lock or rate commitment, is a lenders promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is processed. Depending upon the lender, you may be able to lock in your interest rate and points when you file your application, during processing of the loan or when the loan is approved or later. Pro Con Lock-Ins protect you against increases while your application is processed. A locked-in rate may prevent you from taking advantage of price decreases. Lock Considerations Will Your Lock-In Be in Writing? It is wise to obtain written, rather than verbal, lock-in agreements. Fully understand how your mortgage lenders lock-ins work and have a tangible record of your arrangements with the lender in the event of a dispute. You should also obtain a blank copy of a lenders lock-in form to read carefully before you apply for a loan. If possible, show the lock-in form to a lawyer or real estate professional. Same as for sole proprietorship plus Federal tax return forms K-1 and 1065 for last 2 years (signed). Will You Be Charged for a Lock-In? Lenders may charge you a lock-in fee that may or may not be refundable if you do not close your loan. The amount of the fee and how it is charged will vary among lenders and may depend upon the length of the lock-in period. How Long Are Lock-Ins Valid? Lock-ins of 30 to 60 days are common but lock-in time periods may range from 7 to 120 days. Usually, the longer the period, the greater the fee. Before deciding on the length of your lock-in factor in any delays that might impact settlement (construction issues, etc.). Ask your lender to estimate (in writing, if possible) the time needed to process your loan and ask for a lock-in with as few contingencies as possible. What Happens if the Lock-In Period Expires? If your lock-in period expires, you might lose the interest rate and the number of points you had locked in. Most lenders will then offer the loan based on the prevailing interest rate and points, which may now be higher due to market conditions.
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