Sometimes I can’t remember what I have and haven’t talked about before, but I thought since I have been asked the following question so many times in the last week, I would at least write a little blurb about it.
Does it cost money to lock a rate?
While I am not exactly sure why this has been such a popular question lately, here goes my best answer…
The Initial Rate Lock
When you are working with your loan officer to get your initial paperwork submitted to the lender, at some point in the process, your loan officer will lock your loan with the investor that your loan will end up being purchased by.
The lock process itself is easy for him to do and usually takes only a couple of minutes.
When the rate is officially locked with the investor, the investor issues something called a “lock confirmation” to the loan officer – so the loan officer knows for a fact that your loan has been locked or not.
It is really simple – if he hasn’t gotten a lock confirmation, he knows that the rate isn’t locked!
Common Rate Lock Periods
When your loan officer has locked your loan, he will lock it for a period of time. Common periods of time given by investors include: 10, 15, 25, 30, 45 or 60 day locks. Typically, an investor will pick any 3 of the above periods and if the loan officer wants to lock for a period different than those listed, he can contact the investor directly.
Rate Lock Extensions
If for some reason, your loan is taking longer than the loan officer expected it to when he originally locked it – he will need to file for a rate lock extension. Typically, this is where the loan officer will bring up to the borrower that a rate lock costs money.
Because it really does cost money to “extend” a lock – it is all just a matter of who is paying – you or the loan officer.
The easiest way to figure out who pays in my opinion?
Find out why you need to extend the lock. If it is because you as the borrower didn’t get paperwork back in a timely manner, it might be your fault – so you should be willing to pay. If on the other hand, the loan officer just mis-judged the amount of time it would take to get your loan done, it might be the “right” thing if the loan officer pays.
Does a rate lock cost money?
The short answer is – generally the first time, no. Or, at least — it shouldn’t.
But if you need a lock extension or have to re-lock a loan because it was locked incorrectly, then yes.