To Lock or Not to Lock (a loan)? That is the Question

Mar 4, 2019 04:19 PM

By: Primary Residential Mortgage, Inc.

To paraphrase Shakespeare, is it nobler to lock a loan than to roll the dice? Before you answer that question, what, exactly, is a “locked loan”? It’s basically an agreement with the lender (or bank) to honor a specific interest rate for a specific cost for a specific time period.

To put it another way, without locking a loan it would be very difficult for borrowers to get a mortgage and lenders to loan the money because interest rates could move enough to disqualify a borrower.

If a potential homebuyer does not lock a loan, and if the Federal Reserve increases interest rates, that may affect how much home you are able to afford. A simple interest-rate tick up could mean a whole lot of money out your pocket.

At Primary Residential Mortgage, Inc. (PRMI), we want to make sure you have the information you need to make the right decision for your situation, which is why our Loan Originators will answer the following questions for our customers:

Why should I lock my loan?

Locking is an essential part of the process. There isn’t a way to do a mortgage without locking in the rate. Locking the rate allows the underwriter to calculate affordability and credit qualifications against a fixed interest rate.

Is there a cost associated with locking a loan?

While there are specific products or programs that can cost money to lock in on, they are not very common in today’s mortgage market. PRMI does not charge a fee to lock your loan.

Can you relock a loan, and why would someone do that?

A relock occurs when a loan was locked and the lock is now expired or canceled and needs to be locked again. This scenario can happen for many reasons, but a good example is when the loan was locked, but the loan process experienced delays and the lock was canceled. When the issues with the loan process are resolved, the loan must be relocked.

PRMI has several advantages when it comes to locking loans. We allow all purchase transactions to lock as long as 180 days without a fee. We also permit locks on a purchase transaction without an address, so the borrower can lock in their rate before they shop.

If you are a risk taker, locking a loan might not be for you, especially if you think interest rates may fall; if you don’t want to “roll the dice,” then locking a loan will give you peace of mind – and maybe even a bargain -- throughout the homebuying process.

Contact your local Loan Officer today to learn more about your home financing options.