This is coming from experience with my personal residence that I am buying and supposed to close by 4/24. Each lender is different and policies change consistently so please ask your lender for further clarification on yours if you have any questions. This is solely for your understanding and to be aware of it.
First question: What is a rate lock? With a rate lock, lenders are obligated (with a few exceptions) to offer a home loan at an agreed-upon rate regardless of whether mortgage rates have changed between the time of the loan approval and the closing date. In my example, I was locked in at 3.375% for 60 days and the rate lock expires on 4/10. Now, with the federal hike of interest rates, my rate if I close on 4/24 is 3.75%. It may not sound like a lot, but it is in terms of the long run. It is approximately $60 a month more on my mortgage and over 30 years, it adds up to $21,600 approximately that I would be giving the bank in INTEREST!
As far as my situation, the rate lock started the minute I was under contract for the home. Once attorney review was done, I was supposed to schedule a home inspection, but the seller asked to push it back since there were repairs that were still needed. A month passes and I finally have the home inspection done and there are still repairs that need to be done. (That is another story for a later date.) Anyways, after that, there was also an oil tank sweep that needed to be done and scheduling it was a nightmare with the listing agent. Overall, this process for my inspections took about 45 days or so and for sure we were not going to close by the scheduled date which was 3/30. So the attorney and I extended the contract for the closing to 4/24. Little did I know of the issues that would cause me soon.
So I asked the lender to extend the closing due to the seller’s fault in taking their time. They said they could and it would have to close by 4/10 or else my rate would expire as I mentioned above. So I frantically mentioned this to my attorney to get things rushed so we can close. She was shocked about the situation as the appraisal hadn’t even been done which is required to close the house. I spoke with my attorney and my attorney and I had a three-way call about the situation with a representative of the lender. During this conversation, the representative said that the extension for 4/24 would be granted and there would be no increase. I thought the situation was settled. (First lesson, get it in writing.)
A few days later, the lender said they would still have to increase it even after the representative told me they wouldn’t. Now, since I did not know about the rate lock expiration and since the extension of the loan was to 4/24, I am stuck with the rate increase which was unacceptable in my eyes. I asked the lender why that would be the case if it is not my fault the contract had been extended. In fact, we suggested we wanted to close asap in the contract. The lender then mentioned that the policy was if the seller was taking their time, it is not their fault and they can increase the rate. However, if it was due to their negligence, they would honor my rate. Conveniently, I mentioned what the representative told me and now they are looking over the phone call after reaching out to the social media team for support on my issue.
In conclusion, the issue is still being resolved, but the lender did mention that they could keep my rate as is for an additional cost of ½ a point which totals to be about $850 at closing for my deal. If all else fails, that would be the route I would have to go with. Regardless, the lesson here is to make sure when your rate lock expires. Then, if there is an extension of the closing, what happens with the rate. Also, in what terms would the rate increase. Finally, are there any options you have to keep your rate such as paying points.
First question: What is a rate lock? With a rate lock, lenders are obligated (with a few exceptions) to offer a home loan at an agreed-upon rate regardless of whether mortgage rates have changed between the time of the loan approval and the closing date. In my example, I was locked in at 3.375% for 60 days and the rate lock expires on 4/10. Now, with the federal hike of interest rates, my rate if I close on 4/24 is 3.75%. It may not sound like a lot, but it is in terms of the long run. It is approximately $60 a month more on my mortgage and over 30 years, it adds up to $21,600 approximately that I would be giving the bank in INTEREST!
As far as my situation, the rate lock started the minute I was under contract for the home. Once attorney review was done, I was supposed to schedule a home inspection, but the seller asked to push it back since there were repairs that were still needed. A month passes and I finally have the home inspection done and there are still repairs that need to be done. (That is another story for a later date.) Anyways, after that, there was also an oil tank sweep that needed to be done and scheduling it was a nightmare with the listing agent. Overall, this process for my inspections took about 45 days or so and for sure we were not going to close by the scheduled date which was 3/30. So the attorney and I extended the contract for the closing to 4/24. Little did I know of the issues that would cause me soon.
So I asked the lender to extend the closing due to the seller’s fault in taking their time. They said they could and it would have to close by 4/10 or else my rate would expire as I mentioned above. So I frantically mentioned this to my attorney to get things rushed so we can close. She was shocked about the situation as the appraisal hadn’t even been done which is required to close the house. I spoke with my attorney and my attorney and I had a three-way call about the situation with a representative of the lender. During this conversation, the representative said that the extension for 4/24 would be granted and there would be no increase. I thought the situation was settled. (First lesson, get it in writing.)
A few days later, the lender said they would still have to increase it even after the representative told me they wouldn’t. Now, since I did not know about the rate lock expiration and since the extension of the loan was to 4/24, I am stuck with the rate increase which was unacceptable in my eyes. I asked the lender why that would be the case if it is not my fault the contract had been extended. In fact, we suggested we wanted to close asap in the contract. The lender then mentioned that the policy was if the seller was taking their time, it is not their fault and they can increase the rate. However, if it was due to their negligence, they would honor my rate. Conveniently, I mentioned what the representative told me and now they are looking over the phone call after reaching out to the social media team for support on my issue.
In conclusion, the issue is still being resolved, but the lender did mention that they could keep my rate as is for an additional cost of ½ a point which totals to be about $850 at closing for my deal. If all else fails, that would be the route I would have to go with. Regardless, the lesson here is to make sure when your rate lock expires. Then, if there is an extension of the closing, what happens with the rate. Also, in what terms would the rate increase. Finally, are there any options you have to keep your rate such as paying points.
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