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When can I lock rates?

My loan application has been submitted, and we received a list of conditions.  Today, we have completed those conditions, but my broker says we cannot get a 15-day lock until after the lender has reviewed those conditions, which may take 2-3 days.  My only option, according to him, is a 30-day lock, which will be a much higher rate.  Is this true?
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November 24 2010 - US
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Answers (6)

Higher fee, yes.  Much higher rate and fee, no.  Typically the difference between a 15 and 30 day rate lock should only be about .25% in fee for the same rate

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December 02 2010
This is a complicated question. Most borrowers do not understand the relationship between the lock period and the interest rate.

15 Day Locks -- For 15 day locks you must have a complete and approved loan file. A 15 day lock is done when the loan is already approved. Because most customers do not want to wait to see what their interest rate is while they are submitting documentation and getting their appraisal done, 15 day locks are rare. If you are confident the market will go down, it might make sense. But most people want to know what their payment will be before they move forward on a loan. This lock is where the best price is. On any give day a 15 day lock is priced with a lower rate than a 30 day lock. Usually its between 1/8th -- 1/4th lower than the 30 day lock. But as mentioned above you cannot lock this, until your loan is approved. Lenders might very a little on this policy. But I have not seen any which allow 15 day lock without the loan already being approved. 

30 Day Lock -- This is what 99% of the lenders out there are advertising. And this is what 99% of customers end up going with. Nearly all the quotes on Zillow are based on a 30 day lock period. In that case, a complete loan application is NOT needed to lock. No documentation is needed, only the credit report, usually. The normal process is to take the application, determine if you like the offer, choose to lock, and then move forward. You and the loan officer then have 30 days, or a little less usually because the loan must be delivered to the servicer/investor within those 30 days, to close the loan. 
This is usually 1/8th -- 1/4th higher than a 15 day lock.

45 Day lock -- Not as common, but it works the same as a 30 day lock, only there are 45 days more to complete the process. This is 1/8th -- 1/4th higher than a 30 day lock. This also is rare. If I know the loan is going to take a long time to close, maybe because it is a purchase and there things which need to happen before you can close, it might make sense to go with this option. But when customers hear the higher price most opt to wait until they are within the 30 days of closing before they lock, simply because the price is lower. However, if someone is very confident that interest rates will go up, and they want the security of locking in that payment and interest rate, then this could be a good option. 

I hope this helps.

What it sounds like happened is that your lender sold you on 15 day lock prices without explaining that that is only available if your loan is already approved, and you are not to that stage yet.

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December 01 2010
Wifey246,

If possible, another solution would be to take the 30-day lock and offer to pay your lender the difference in cost (not rate).  So, if they're telling you that you can get 4.25% for a 15-day lock at 0 points (for example), and 4.375% for a 30-day lock at 0, ask them what it would cost to get 4.25% for 30 days.  Sometimes this alternative is the best, if not perfect.  they may charge you a fraction of a point to get the lower rate for the additional days, and you may decide it's worth it.  There is a price associated with sleeping well at night --- especially if you think you're being held hostage by your lender.

I'm not saying what they're doing is right or even justifiable, but I am saying your negotiating tactics may lead you to an acceptable compromise.

Best of luck and please let me know if I can help.

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November 29 2010
The spread you are being told is too high. Most banks do not allow a 15 day lock until you have a clear to close. Your conditions should have been reviewed by now, do you have a clear to close?
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November 29 2010
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This is a purchase loan.  The last time he showed me pricing, it was 1/8th point between 15 and 30 days. 

The holidays plus the  North/South Korea situation is making me very nervous. 
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November 24 2010
Could be.   Often the lender shortest lock period will only be available for files that have reached the clear to close stage.

Considering the holiday coming up, a 15 day lock today with condition review still pending would be very risky, especially if refinance transaction.  

That said, the difference in pricing from 15 to 30 day lock is going to be very small.   What kind of difference are you being told there is in what is available on 30 vs 15 day lock?
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November 24 2010
 
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