Why Your Loan Originator Needs a Complete Application BEFORE Locking a Rate

A home owner contacted me wanting to know how their rate could change so much from their original lock with his current lender for his refinance.   He thought this was his scenario:

15 Year Fixed Rate at 5.375% (I’m assuming that he was paying a point–I cannot tell from this lenders lock confirmation).  Here are the other factors this rate was based on for a $417,000 loan amount:

  • Rate Term Refinance (no cash out, he’s actually bringing cash to closing in order to bring his loan amount down to the conforming level).
  • 700 Mid Scores
  • 62% Loan to Value

The LO locked in the rate based on this information about two weeks ago and just provided a "lock confirmation".  It’s actually a lock request with the lender she’s brokering the loan to.   Two weeks later, the borrower finds out that his loan is being priced based on the following:

15 Year Fixed Rate at 5.75% or 15 Year Fixed Rate at 5.375% plus 1.50 additional points.  Why the change?  After 2 weeks, the LO lets the borrower know that the loan is repriced due to:

  • Cash Out Refinance = 0.75% Hit to Fee.  He has a second mortgage that is being paid off with the refinance that was not from when he purchased his home. Fannie/Freddie classify this (paying off a non-purchase money second) as a "cash out" refinance, even though he’s bringing cash to closing.
  • 627 Mid Credit Score with a 70% loan to value = 0.75% Hit to Fee.  This came to a surprise to the borrower who actually thought his scores were much higher.  With Fannie/Freddie’s credit score (risked based) pricing, this is another whammo to the borrower.

Cash out and the borrowers credit scores should have been known to the Loan Originator if not prior to locking the loan, then mere moments afterward.  The LO should have immediately notified their client of the differences between the information used to lock the mortgage and reality.

Loan to value can be tricky for a LO to know with certainty…especially these days.  We often have to rely on our clients to give us an honest estimate of what they feel their home is worth based on what other homes like theirs have sold for in their neighborhood.   Until we have the appraisal, we do not know how the home will be valued.    

I’m sharing this story because there are valuable lessons here for us to learn from.


  1. If you’re serious about locking in a mortgage rate, complete a loan application for your Mortgage Professional and allow them to run your credit.
  2. Obtain a written Lock Confirmation within 48 hours of locking in your rate.
  3. If you smell something fishy…it’s probably shark.

Loan Originators:

  1. If you have bad news (lower credit score, repriced lock, low appraisal, etc.) deliver it right away.  Don’t wait…it’s not going to go away.  Let your client know in full detail what you’re having to deal with and what steps you’re going to take to remedy with.
  2. Whenever the terms or cost of the proposed mortgage change, contact your client and provide them with an updated Good Faith Estimate. 

Currently, this borrower feels the LO gambled his mortgage interest rate.  After reviewing the documentation I’ve been provided, I think it’s more likely that she was just really a really poor communicator.   Perhaps she was hoping rates would improve enough to absorb the significant 1.5% hit to fee…I can really only guess.

This is far more than a getting a "rate quote" and saying, "that sounds good, lock it".  When you’re locking in your interest rate, you are commiting to the Loan Originator and the Loan Originator is making a commitment to the lender that the loan will be funded.  Your lock is only as good as the information used when it was submitted to the lender. 

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