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Make sure your quote is “locked”
By Justin Hunter
Obtaining a mortgage will be one of the biggest decisions and transactions you will ever make in your life.
There are many terms and stipulations to understand throughout a wide variety of offered programs before you even decide to apply for a mortgage.
Once you have the program and rates you want, quoted from a reputable lender, make sure your quote is reliable by having it “locked.”
The September 8, 2006 article, “Lock That Quote In,” posted on Realty Times and written by David Reed, emphasizes the necessity to have your quote “locked” before continuing the mortgage approval process.
“Mortgage rates aren't any good if you can't lock them in. No matter what you're being quoted, if the lender or mortgage broker can't lock those things -- beware.”
Reed explains how he lost a client to another lender who beat his quoted price by a full percentage point; which is virtually unheard of.
“In fact, I dare say I've lost as many or more loans that I've won. It's just sometimes when I get beat, and any loan officer out there can back me up on this one, by someone quoting interest rates that are simply not available it burns me up. It just isn't fair.”
Reed further clarifies that he understands that the potential client will eventually lose out. But regardless, the client was outright stolen from a liar. Some things just are not fair.
“What will happen is that the loan officer quoting ultra-low rates is simply hoping that rates go down so he can honor his rate quote or tell my prospect that rates went up after he got the application.”
After Reed found out he had lost his potential client, he asked if he (the client) received a Good Faith Estimate.
The client responded that he did receive the Good faith Estimate in writing but the rates could not be locked in until the application was submitted and the appropriate fees associated with it were paid.
“‘Hmmm,’ I said, ‘Usually someone can lock you in without an application or especially paying any fees, but I guess this loan officer since he has such low rates might have special requirements.’ I tried to be as diplomatic as possible and certainly with all due courtesy.”
Reed still lost the deal. But he knows that the prospective client will wish he took his time to lock in rates when the application process gets rolling. The rates promised by the lender were impossible to uphold, but the lender will not be caught lying because he or she can blame the rate increase on a variety of factors. Too bad the quoted rate wasn’t locked in.
“Okay, I know that there are fees that are sometimes paid to lenders upfront for a long term lock or perhaps a lender takes a commitment fee at the beginning of a construction project, but overall a consumer should be able to get what they're quoted.”
Although most lenders will not blatantly lie to a client to get his or her business, the lender will always try to get the most money possible out of the transaction. Be careful when dealing with your mortgage and have everything in writing, including a locked quote.