If possible, show the lock-in form to a lawyer or real estate professional. Thus, it is wise to obtain a blank copy of a lender’s lock-in form to read carefully before you apply for a loan. For example, some lock-in agreements may become void through some unrelated action such as a change in the maximum rate for Veterans Administration guaranteed loans. Some lenders' lock-in forms may contain crucial information that is difficult to understand or that is in fine print. Oral agreements can be very difficult to prove in the event of a dispute. Others may only make an oral lock-in promise on the telephone or at the time of application. Some lenders have preprinted forms that set out the exact terms of the lock-in agreement. This commitment usually will state the loan terms that have been approved (including loan amount), how long the commitment is valid, and the lender’s conditions for making the loan such as receipt of a satisfactory title insurance policy protecting the lender. Generally, you will receive the lender’s commitment only after your loan application has been approved. A loan commitment is the lender’s promise to make you a loan in a specific amount at some future time. It is important to recognize that a lock-in is not the same as a loan commitment, although some loan commitments may contain a lock-in. However, a locked-in rate could also prevent you from taking advantage of price decreases, unless your lender is willing to lock in a lower rate that becomes available during this period. This protection could affect whether you can afford the mortgage. But if your interest rate and points are locked in, you should be protected against increases while your application is processed. During that time, the cost of mortgages may change. One point equals one percent of the loan amount.) Depending upon the lender, you may be able to lock in the interest rate and number of points that you will be charged when you file your application, during processing of the loan, when the loan is approved, or later.Ī lock-in that is given when you apply for a loan may be useful because it’s likely to take your lender several weeks or longer to prepare, document, and evaluate your loan application. (Points are additional charges imposed by the lender that are usually prepaid by the consumer at settlement but can sometimes be financed by adding them to the mortgage amount. Therefore, you should not rely on the terms quoted to you when shopping for a loan unless a lender is willing to offer a lock-in.Ī lock-in, also called a rate-lock or rate commitment, is a lender’s promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is processed. The quoted terms may not be the terms available to you at settlement weeks or even months later. In most cases, the terms you are quoted when you shop among lenders only represent the terms available to borrowers settling their loan agreement at the time of the quote. This brochure explains what these arrangements mean. Lock-ins on rates and points might offer you a way to ensure that what you shop for is what you get. But when you get to settlement, will you actually receive the terms you applied or bargained for? Or will you find that the rate has changed - and that your costs have gone up? When you find the most favorable terms and the lender that you want, you’ll apply to that lender. When you’re looking for a mortgage, you’re likely to shop among lenders for the most favorable interest rate, and the lowest points and other up-front charges. For information on recent regulatory changes, as well as additional information about shopping for and using consumer financial products, please visit the CFPB's website. On July 21, 2011, rulewriting authority for consumer protection laws related to mortgages, credit cards, bank accounts and other consumer financial products transferred from the Federal Reserve Board to the Consumer Financial Protection Bureau (CFPB). FRB:A Consumer's Guide to Mortgage Lock-Ins
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