I’m closing on a property next week on conventional 20% down loan. My lender locked the rate 4.75% at least 2 months ago and I believe rates have dropped a little. I’ve already asked the lender to run an update but is he actually going to drop my rate? Let me rephrase, is he legally bound to drop it if the rates truly have dropped or can he flat out refuse to re run as it’s too close to the settlement or simply alter (lie) and say that rates are the same.
That's an interesting conundrum I would like to see what answers you get.
I've always worried if locking in was a good thing to do for the sake of dropping rates but then again just knowing IF the rate increases, the lock in secures the Note at a lower rate.
If rates have gone down they can redo your loan package with the new rate. My understanding is, as crazy as this may sound, is that it will have to go through the underwriting process again. Ask the lender how long that will take and if it can get done prior to your scheduled close. This usually means you have to re submit all your documents.
The lender is no more morally/ethically obligated to lower your rate than you would be to pay a higher rate had the market increased since you locked.
When a loan is "locked," you are pricing out the rate based on the market at the time for how long it was locked. In your case, the lender agreed to keep you at the 4.75% rate for 60 days (which is a very long time) even if rates go up. It is an agreement between both parties, the lender and you.
Some lenders will recast the rate, but there is a cost to doing so. Unless your new rate would be lowered by 1/2 a point or more, it's most likely not worth it.
I agree with @Michael Cohen when you lock in a rate you are making a commitment to the lender because if you break that lock it can cost the lender. Rates have not changed that much so starting the process over with a new lender in my opinion will not be worth the slightly lower rate you might receive.
Thank you very much everyone. The rates haven’t dropped much so I’ll stick to the current situation; moreover, I’m closing towards the end of next week so really there’s no time left either.
Read your rate lock letter and ask. Certainly doesn't hurt to ask the question.
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