Locking in Your Mortgage Rate - Quicken Loans Zing BlogI recently wrote an article about mortgage rate-locking 101. I thought I’d follow up and tell you about what can go wrong with rate locks because things often do. But don’t worry! Now you’ll be in-the-know.

Rate Lock Pitfalls

After applying for a mortgage, interest rates and points are usually locked in for a specified amount of time. Your locked-in rate is the interest rate you’ll pay for the life of your loan (like the 30-year fixed rate). Over the span of 30 years, a half point or half a percent may mean thousands of dollars. Interest rates may go up or down, so locking in prevents your costs from fluctuating while the loan underwriting is in process.

Unfortunately for some borrowers, rate locks can be blown, that is, your agreement to close your loan by a specified date couldn’t happen for multiple reasons. Understand that some people don’t have rate-lock issues. Even when they do, most rate locks are typically extended without a problem. Some lenders will charge a fee, but some don’t. Either way, it’s nearly impossible to get that original rate back if rates have raised and your rate lock expired. It’s a good idea to address your options for extending the rate with your lender prior to application or at the very least prior to the rate expiration date.

Location, Location, Location

Some borrowers live in states like New York where agencies take longer to process paperwork. Currently, dealing with the Notary of New York takes about a week. State documents like a lien on the house for subordination have about a 50-80 day turnaround, and this may take extra time if you have a CEMA loan as well. Add this all up, and the odds of completing a loan within 30 days seem improbable.

Residents in Texas may also have problems closing loans in a short time. Currently, they have more regulations than other states dealing with home equity loans. These regulations aren’t a bad thing, but it takes more time to determine how much residents can borrow.

FHA Loans

The Federal Housing Administration insures loans to people with lower incomes or credit scores to provide homes that they would not normally be able to afford. When buying a house with an FHA-insured loan or refinancing with an FHA-insured loan, an appraiser has to evaluate your house. They will look for things such as chipped paint on the sides of the house, a leaky roof and badly stressed carpet. Because of this mandatory appraisal, some borrowers might find they need to repair the entire deck in order to close on their loan. Coming up with the money in a short amount of time and waiting on repairs often means blowing the locked-rate period. The good news is that borrowers can usually roll the costs into their loan amount (called “escrow holdback”) and have the repairs done immediately if their loan-to-value of the house amount is low enough. If a company doesn’t allow escrow holdbacks, they may allow you to hold proceeds from the loan in an escrow account to pay the contractor once the work is completed.

The Season of Appraisals

Speaking of appraisals, this’ll probably be the biggest reason your rate lock is blown and was the number one stressor in closing loans this summer. Let me explain why this happened.

Appraisers who are contracted by third parties to evaluate a home have normal busy seasons. Typically, this is in the spring to mid-summer when people are selling their homes.

To understand the market, know that refinances are normally low when home purchases are high. Inversely, refinances are high when home purchases are low. That’s typically the way the market has been…

…Except for recently. The economy was finally turning around, especially for people trying to buy homes or refinance. Both refinances and home purchases were high because of very low interest rates. Because of this and added laws governing that most loans need appraisals to determine the value of a house and therefore the value of a loan, appraisals had to be done. Appraisers needed to determine values for both refinancing and home purchases at the same time. They were booked solid and the turnaround time to have an appraisal was at least 20 days, troubling when the rate is only locked in for 40 days, if that. There isn’t anything lenders can do to hurry this process, either, but thankfully, they can extend the rate lock most times.

Return to Sender

The mortgage process can be time-consuming due to documents that have to be returned to the lender, like W-2s from the last two years, veteran eligibility documents or bank statements. Returning these right away helps hurry along the process. Sometimes, however, people get busy with work, caught up with family, and don’t return documents quickly. Just remember that the more quickly you return them, the more quickly they can be processed and the better chances you have to not blow your lock rate.

Waiting for a Better Rate

Occasionally, a client blows the rate through their own doing. They think their rate might be high and if they wait, rates might go down. Lenders generally don’t recommend that people wait because chances are, the rates climb higher and you’re out of luck.

When rates go down before closing, you may want to jump on that lowered rate, but that isn’t always the best idea. First, it’ll probably cost you money because your mortgage lender has paid to secure your current rate and hold that price. Changing it could disrupt the whole process, including the date you close your loan

It’s not a good idea to change your lock rate mid-process unless the costs are truly worth the benefits in the end. If you’re really interested in lowering your rates, talk to your mortgage banker to see if that’s possible.

Preventing a Blown Rate Lock

While a lender may do most of the work, there are some things you can do to prevent a blown rate:

  • Work with a company that caters to your lifestyle. You know what you’re comfortable with and now all you need to do is send over some documents to help the underwriters determine what works best for you.
  • Don’t wait to send in forms and paperwork because every lender has a different policy on what happens after the rate expires. If you’re working with a lender that locked your rate for 30 days, but all the paperwork has to be sent by US mail, it’ll be hard to keep up with your rate lock waiting for snail mail.
  • Know how busy you are and how often you can make trips to a lender’s office for signatures. Some companies like Quicken Loans use technology to process loans faster, either by website, phone apps and SMS text messaging.

What to Do If Your Rate Lock Is Blown

  • Don’t freak out; it’s not the end of the world. Your lender should let you know in advance what’ll happen in case this happens or if they anticipate the closing date to be moved.
  • Rate lock extensions are common, but may come at a price. Find out in advance what to expect.

If your rates are about to expire, call your mortgage banker to verify what’ll happen. Lenders are great at knowing in advance if they can’t close your loan on time and have policies set in place to either prevent that from happening, or what to do when it does.

If you have any questions, comments, or concerns about rate locks, let us know!

 

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This Post Has 27 Comments

    1. Hi Evelyn:

      The rate lock extension fee is rolled into the closing costs when she would pay by check or roll into the loan amount depending on how you structure things. Hope this helps!

      Thanks,
      Kevin

  1. You need to stay on top of Quicken. They let my lock expire, even though I was always prompt providing everything. I shopped around, picked Quicken based on their loan estimate. Everything is clear and ready to close, and I get a voicemail from a mother new person wanting to talk about the “new rate” since my lock expires the night before. Went from 3.75 to 4.5, and my monthly payment went up $200.

    Never use an online lender like Quicken. Use someone local that won’t let this happen. They would never let your lock expire one week before closing. My local lender had a higher fees so I chose Quicken. Big mistake. Bait and switch and now I’m out thousands!

    1. Hi Chris:

      We would love to look into what happened here. This certainly isn’t the client experience we strive to provide. I’m going to get this over to our Client Relations team to look into this. Thanks for reaching out!

      Kevin Graham

  2. I am in the process of buying a home and we are going FHA. Everything (Including our purchase agreement) was submitted on time and there have been no delays or issues at all, we were scheduled to close today March 15th (today). Our purchase agreement stated that we (the buyers) would not be able to move in until June because the house would not be ready until then.

    Last Wednesday, I was informed by my lender that we are unable to close because we would have to move in within 60 days of closing on an FHA loan and they are trying to charge me $2,000 for a rate lock extension fee. My lender has admitted to us that they didn’t fully read the purchase agreement. However, they are unwilling to pay for the extension fee.

    What should I do in this situation? Fight to have it waive or find a new lender?

    1. Hi Mario:

      I can confirm that if you get an FHA loan you have to move in within 60 days of close. You can try to fight it, but who knows if it will do any good in terms of getting them to pay the fee.

      If you do need a new lender by the end of this process, we would love to take a look at your situation for you. We don’t do loans until the house is complete, but if you’re going to be waiting to close anyway, it wouldn’t make a difference.

      In order to get in touch with one of our Home Loan Experts, you can fill out this form or call (888) 980-6716.

      Thanks,
      Kevin Graham

  3. Hi there,

    I had to extend my locked interest rate. How many times can they extend your locked interest rate?

    Just so everyone knows, I did everything I was suppose to do. I’m the buyer in this situation, and I’ve been ready with all my paperwork months ago. I had an interest rate of 3.625… then my lender pulled a fast one on me when they updated the loan amount due to the seller not making changes and I had to take the place as is. My interest rate increased to 4.25%.

    So back to my original question, how many times can you extend for?

    Thanks,
    Bill

    1. Hi Bill:

      In theory, there is no hard limit to the number of times you can extend. The one thing you need to know is at some point, your lender will start charging you for the extension. Rate locks are like insurance and the lender has to pay in order to lock the rate and protect you against market movement. The longer you have to lock, the more money it starts to cost. All lenders have different policies regarding when they start to charge.

      Thanks,
      Kevin Graham

  4. I am in the process of refinancing my house. The rate lock (3.625%) expired on Dec. 5. I have submitted all paperworks to the lender and what’s left is the appraisal.
    However the lender is having difficulty placing an appraiser due to the severe shortage in the state I live. With only two weeks left before the rate expires, they even admitted not confident they can get the appraisal done and complete the loan process.
    If it does happen, the rate lock extension is available under this situation, correct? Or I need to re-negotiate the rate with the same lender and start to shop around again?
    Just my own opinion, I feel the lender rather let go my business and refund the appraisal fee than making an effort to place an appraiser, since the interest rate has gone up so much since the election.

    1. Hi Kim:

      I can’t comment on whether another lender would rather let go of your business. I can tell you that typically you would have to get a rate lock extension before the lock expires. You can ask the lender to be sure.

      If you end up having to shop around, we can certainly take a look at your options. You can get a customized loan solution through Rocket Mortgage in minutes. If you would prefer to get started over the phone, you can call 888-728-4702. Hope this helps!

      Thanks,
      Kevin Graham

  5. My rate lock expired due to an appraisal rejection and need for second appraisal. My mortgage broker did not extend the lock for whatever reason. Now (post election) my rate went from 3.625% to 4.25% because of the delay. Is there any laws protecting me from this rate hike? Its a pretty significant rate increase.

    1. Hi Jerry:

      Unfortunately, if you didn’t lock before the rate increase, there are no laws protecting you against market movement. The only laws that exist prevent adjustable-rate mortgages from increasing over a certain amount per year.

      Thanks,
      Kevin Graham

  6. I recently went through an online lender and by less than a few days my loan was expired. Are most lenders able to extend this date? The information I was asked to provide was very time consuming and caused me to go late. What are my best options?

    1. Hi Ray:

      Lenders can extend the deadline. Sometimes there’s a fee involved because they are keeping your rate over a longer period which means they are more exposed to market movements. However, this isn’t always the case. I can tell you that we pride ourselves on the speed and simplicity of our process. I would encourage you to check out Rocket Mortgage and look into your options. You can also call 888-728-4702.

  7. We recently went past a 45-lock period, for a variety of reasons due to 3rd parties (slow response on HOA forms, slow response on HELOC) and the lender (wild goose chase for forms I was not even legally entitled to see).

    Fortunately, the lender extended for 10 days at their cost, but I’m still a bit perplexed there was any cost at all since the market rate is now (very slightly) lower than it was when we locked. Why would there be a cost associated with extending a rate that is now essentially at or even above market?

    1. Hi James:

      I understand why this is confusing. From a lender’s perspective, a rate lock works a lot like an insurance policy. The lender makes a payment in order to lock that rate in the market for you for a certain amount of time. If you need that insurance policy for an extra month, the mortgage company is charged and that cost is sometimes passed on to the client depending on the policies of the lender. It sounds like they’re taking care of it for you at this point, but that’s how it works. Hope this helps!

      Thanks,
      Kevin Graham

      1. Kevin or anyone else who may know:

        What happens if the lender primarily caused the majority of the delays past the original lock date, but current market price, given all the fees, is substantially less?

        If we rewrote the loan brand new at their current market rates, are extention fees still “owed” regardless, and to whom is the organization (or entity) that collects & recieves these “extention fees”? Is there a 30 day “wait period” LAW that applies to ALL lenders to be able to relock with same lender (vs pay more than $10k in extention fees), or is this a lender specific rule?
        If original loan is just on one person but proposed new loan is written on both husband amd wife both with same credit scores and same debts, is this a good reason to be able to just reloack a new application with same lender, so that both of us can be on the loan vs just my husband?

        Under what “conditions” are “extention fees” actually “received” by….(someone?)? And when and under what conditions must those fees get paid – regardless if loan is closed (paid daily or with each new disclosure and new close dates), or , post closing post closing only?
        – if and when loan closes only, or no matter if the loan ever closes and client / prospect decides to go elsewhere due to the fees being too substantial?

        do they still (the lender) have to pay all those fees no matter what? (they are a large, national direct lender online specializing in just residential loans).

        What happens to those fees, and are they paid DAILY by the lender, or at closing?

        Who specifically is charging these “extension fees” ……ie the Feds? Fannie Mae? The selected lender who is UW the loan?

        Furthermore, how does this change if that “direct lender” just writes and funds the loans from their own reserves only to soon after, package and resell?

        Who is the one recieving payment for these “lock extension fees”? If a direct lemder, wouldnt it just be them charging themselves the extension fees??

        caused a large amount of extension fees unto the loan, and added those on to the total cost of the loan? We wrote and locked the loan over 3 months ago, and we had a “float down” lock contract originally (but post numerous extensions i no longer see the float down condition in the loan) added it on to the cost of our loan so high that, even today’s rates are substantially less

  8. I am going through a refinancing process. The lender constantly is adding new items it has questions about. A few days before the rate lock expired, I was asked to provide a credit card statement I already provided to the case specialist I’d been working with. Because the lender said it could not read clearly the uploaded statement, at their suggestion, I forwarded it in an email. Days later, they asked for it again. This time it was a new case specialist because the other one no longer was on my refinancing. The former one never forwarded what I’d sent her. So I forwarded the email I sent her to the new case specialist. Then I got another request for proof that I had at least $2000 for closing costs. I’d never been told that, since the closing costs were being put on my loan. I called the new case specialist and he said that that was a mistake (their request for proof). I told him we were a day away from the lock expiring, he said “Oh, no problem, we’ll extend the rate.” Now, I get a notice that the new lock in rate is higher because we missed the deadline. It’s their fault the deadline was missed. This seems like a racket.

    1. Hi E:

      It really does sound like you need a new lender and the left hand doesn’t necessarily know what the right hand is doing. I’m going to recommend you talk to one of the Home Loan Experts. If nothing else, they can probably give you advice as far as the rate lock. However, it doesn’t sound like your loan is being handled correctly by the lender. Maybe we can work with you and get you refinanced. You can fill out this form or call 888-728-4702 and we’d be happy to take a look.

      Thanks,
      Kevin Graham

      1. These Q and As using real situations are extremely helpful! Kudos to those working hard in the industry to respond, and add “real value” in the form of some possible direction and clarity, and thank you to whoever created this valuable response (and not “deleting” issues theyd rather not highlight but IS happening in the industry! Reading other people’s nightmare stories and unfair treatment actually, in a sad way for everyone, made me feel better and less alone. Mortgage lending has been the worst experience ive ever had in business, and it seems there is an army of people who truly have no regard to us on the other end as humans, and FAMILIES needing help! Our lemder FICO scores were even over 790, and we have low debt and good, solid work history for 23 yrs of full time service to the municipal fire dpt! We all get treated more like “livestock” . If there are easier, faster, more simple and clear loans out there to do, they no longer care about “ethics” and possibly investing extra care and time needed to “help” another family in a major lifechanging way…and just do the work and spend the time to help make sure the loan is underwritten and completed correctly, and actually RESEARCH the Fannie Mae product and UW guide for clarity in situations you may not have personally dealt with before yet it is all clearly laid out in the Fannie Mae sales guide online – just type amd search on the “key word” to find the nessesary clarity and guide for what actions might need to be taken from there (if any). But no one does this, and it seems everyone is so scattered and inefficient that they lose touch what is even the going on with the condition of the loan and the applicant. So much time wasted. Brains and logic, in addition to actually “caring” about “thy neighbor” – all out the window…..they move their focus to what is “easy”, and forget those outside of the cookie cutter average- go for the quick buck, and dont worry about even using the experience helping someone as an opportunity to actually learn something more about your craft so that you can just get that much more knowledgeable and experienced with time…even for a three quarters of a million dollar loan so they can buy out their partner’s share vs having to sell it.

  9. My bank was is asking for an extension to a rate lock, the rates are actually lower. I asked about it expiring and locking under the new rate. They said it would have to wait 30 days before I can lock in a new rate. Is that true or can they just lock in with the new rates?

      1. Hi Michael:

        I can’t speak for the policies of other lenders, but if you let your rate lock expire with us, you have to wait 30 days before you can lock your rate again.

        Thanks,
        Kevin Graham

        1. Do you have to wait 30 days for a new lock In the case where i want to be added to the loan in addition to the title? So in this case, the original loan app was just on my husband and there were huge delays and huge extensions. Mid process before all the extensions i asked to be added to the loan but they said we would have to do a whole new app and be a pain (cant recall if had to wait 30 days or not to just redo loan to add me on). However now that we have so many loan extension fees due to their delays and inefficient structure, it would be mich better to start from scratch…only they say we have to wait 30 days to “lock”, and “we dont know how much rates will increase by the time 30 days comes” ! But if we redit it to add me on the loan, why wouldn’t we be able to just lock at current market rate and transfer over the docs from the old app as long as we get updated statements also, and update credit scores?

          1. Hi Debbie:

            Lenders have different policies regarding rate locks. I’m going to recommend you speak with one of our Home Loan Experts. However, I will answer what I can.

            Rate lock policies are set by the lender including extension policy. Lenders charge to relock the rate because the longer it remains locked, the longer it could be out of step with current market pricing. If rates are actually higher now, your rate lock is like insurance for you. It cost the lender to buy this insurance. That’s the best way I can put it. Adding you to the loan at this point would probably involve a new application because they would have to redo all qualifying factors. You can get in touch with us at (888) 980-6716 to go over options you might have. Hope this helps!

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