A lock confirmation is a written document that your Mortgage Professional should provide you once your interest rate is locked. In fact, if you don’t receive a Lock Confirmation once you have instructed your loan originator to lock, demand one. No skirting from the Loan Originator allowed!
Your Lock-In Agreement/Confirmation should include the following information:
- Date the loan was locked
- Borrowers Names
- Property Address
- Loan Amount
- Lock Expiration Date
- Interest Rate
- Origination Fee
- Discount Point
- Whether or not there’s a Prepayment Penalty
- ARM information (Margin, Index, Adjustment Caps, Life Cap and if it features a Conversion Option)
- Any lock in fees (including non-refundable) if any. This generally applies towards locks with longer lock periods.
- Terms of the lock (see below)
- Signature place for borrowers
- Signature of Loan Originator
- Name and Address of Mortgage Company
Why is this so important? For starters, once you agree to lock in a certain interest rate, a clock begins ticking and counting down towards the lock expiration date. If you get too close to that date, you may need a lock extension which could have a fee depending on what the pricing is at that time.
Equally, and possibly more important, you want to make sure that your Loan Originator has in fact locked your mortgage rate. There are some Loan Originators out there who will say they have locked in your rate when in fact, they have not. They’re gambling the market with hopes of still locking in your rate at what they have told you, but they’ll make a little extra on the back end OR the rate you want isn’t quite available so they’re gambling the market will improve and they’ll lock you once that rate appears. But what if it doesn’t? Having a document that shows that the Loan Originator committed that rate to you may help you should you need to make them honor the rate (you may have to seek their manager or higher).
It’s quite possible, especially in this volatile of a market where we are averaging two rate changes per day, that you may give the LO permission to lock in your rate and when they go to do so (even if it’s the moment you hang up the phone), the rates may be changing. A Mortgage Professional will be upfront with you and let you know if this has happened (for better or worse). An actual Lock-In Agreement/Confirmation should not be provided until the rate is actually locked in.
Changes to the loan application may also impact the mortgage rate which would then change the lock. For example:
- Credit score changes during the transaction discovered from a new report may impact the rate for better or worse.
- Changes in loan to value (after the appraisal is received).
- Change in level of documentation for the loan.
- Loan programs being terminated or guidelines tightened.
- Investor pricing changes with less time permitted than what the lock will allow.
- Information on loan application not accurate, misrepresented or changes (such as employment or the Underwriter determines occupancy to be different than stated on application).
Again, a Mortgage Professional will notify you of these changes and how they impact you as soon as they become aware.
Some lenders also offer a Forward Lock Agreement which is different than a confirmation…I’ll give you the scoop on a Forward Lock in another post soon. Stay tuned!