I assumed mortgage rate is locked, but lender told NO

7 Replies

Hi, I was in the process of buying a home in jersey city, NJ , I talked to many lenders and then finalized the lender who offered me best rate, lender told me that it's 1 float down mean if rates go higher I won't be affected but if rates go down then rate will go down once, I filled online application, submitted all documents. lender also gave me pdf document with mortgage rate and all other cost estimate.

Today when my attorney asked me for commitment letter, I contacted lender, then he told me that my rates are not locked and he needs to run again to see today's rate.

it was a shocking news for me, because today's rate are much higher then rate3-4 weeks back.

Just wondering if anybody else faced the same situation, what should be done, other then being a puppet in lender's hand.

@Raj G. Did you sign the Initial Disclosures and Loan Estimate (LE) when the loan was setup? On the LE it would have clearly said if the rate is locked or floating. If it says that its locked then the lender can't back out. Most likely its floating. If its floating then you missed the info and the lender has no obligation as they had informed you that it was floating.

Unfortunately there are too many unethical lender how will do and say a lot of things to lock you in, because they know that at the end you will take whatever they give you because you want to close.

Good services comes at a price, and sometime a 1/8-1/4 "better" rate is not worth it if the rate is just a mirage and/or the process will be dragged out and painful.

Good luck.

Hi @Upen Patel , Thanks for your reply.

 I am first time buyer, I didn't know all the formalities, I didn't sign anything with lender, but he gave me a pdf that has mortgage rate, loan amount other closing expense estimates, by getting this document , I thought my rate got locked.

As a lender, he should educate me that my rates are not locked yet and what I am supposed to do to lock the rate, but anyway learning experience, so now since appraisal is done, if he charge me more and I decide to go to other lender in that case, appraisal has to be done again..right?

One more thing, I heard that appraisal is scheduled by lender, but in my case it was done by listing agent. is it normal?

Unfortunately the American public is under the impression that the best way to get a mortgage is to shop around and pick the lender that offers you the best rate. This is perhaps the worst way to pick a lender. The reputation of the lender to act ethically, honestly, and who has the ability to actually close the loan is paramount. The best lenders actually overestimate their fees so that when they deliver better than they've quoted the client is even happier.

@Raj G. If you'd want to PM me, I can suggest some great local lenders who will deliver on their word.

Also, as @Russell Brazil noted, rates should not be the only criteria to base your decision. Go with a lender who will CLOSE the deal. Not sure what the swing in rates was in 2-3 weeks, but rate shopping for fractions of points is being penny-wise and pound-foolish!

Within 6 days of sending a fully ratified purchase contract to your lender (3 days if you consent to electronic receipt of disclosures), you should receive this document from your lender.

In the upper right corner, it has a "rate lock" portion that is legally binding.

Hardcore rate shopping at the preapproval stage, and/or when you're just on the phone, encourages dishonest behavior, because folks will quote unrealistically low to keep you on the phone, as OP just learned. 

I go the other direction, and both quote AND qualify ~0.25% above current prevailing market rates at the preapproval stage. For all I know, rates will actually go up 0.25% between now and when you are done house-hunting, so I consider this prudent (old Marine saying: "hope for the best, plan for the worst"). On top of that, pragmatically, it serves to weed out people that aren't a good use of my time. 

@Raj G., email your fully ratified purchase contract to whoever quoted you the highest. See if they aren't magically significantly lower, now that you have a ratified purchase contract and are a live deal. That's the person with the "under-promise, over-deliver" business model. 

Thanks @Russell Brazil , @Kanishk Dayal and @Chris Mason for replying.

I came to know that rates are not locked after home appraisal is done and when my attorney asked me for commitment letter..so seems like too late.

One thing, I didn't pay for home appraisal yet, not sure if this matters, listing agent(working as dual) arranged for appraisal while talking with lender.

after that when I asked lender new rate, he told me that he is working on new rate, but didn't gave me any rate yet, I keep on trying to reach him on Friday, tried today also, but no luck.

Earlier he used to call me almost every day, let's see what rate he offer me on Monday. 

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