If you’re in the process of refinancing your mortgage you might be losing sleep over your rate lock. Last week mortgage rates rose from 5.6% to 5.8% almost overnight. If you didn’t lock your rate in writing you’re looking at higher mortgage rates this week. Here are the basics you need to know about locking in your mortgage rate when refinancing.
Locking in Your Mortgage Rate
The purpose of a mortgage rate lock is to hold the interest rate you agreed long enough to give you time for closing. You must have written confirmation of your rate lock or you do not have an agreement with the lender. Even when you get your mortgage rate locked in writing, rate lock agreements guarantee very little and are usually structured so that the lender can change the agreement at will. Despite this lack of confidence in your lenders written word it is still better to lock in writing than not at all.
What Documents Lock in Your Mortgage Rate?
Once you notify your broker that you want to lock a specific mortgage rate you should receive a written rate lock confirmation from the lender. This document will be faxed, emailed, or created online for your broker confirming the lock. Your rate lock outlines the terms of your mortgage including rate, points, Yield Spread Premium and the expiration date of the lock.
Make sure that this document comes from the lender, not your mortgage broker. Your broker can never guarantee a rate that isn’t locked by the wholesale lender. A common bait and switch tactic used by many brokers is providing bogus or doctored rate lock confirmation and then switching you to a higher priced loan offer when the deal falls through. When this happens a dishonest mortgage broker will often blame you and say the rate lock expired because of something you did.
Your mortgage broker may also give you a doctored rate lock confirmation because their markup of your mortgage rate will be clearly displayed on this document. This commission based markup of your mortgage rate is not only completely unnecessary but is completely dishonest in most cases.
You can learn more about protecting yourself from shady mortgage brokers with my free mortgage refinancing videos.