This is the best way to avoid one of the most famous scams the mortgage industry plays on the public. When you apply for the loan at XYZ Mortgage Company you get quoted a great rate say 4%. No other mortgage company can beat this rate so you do the loan with XYZ. But at closing the rate on the paperwork shows 6.9%! What happened? XYZ scammed you. And if you say no to the loan at closing you lose the house because the contract will probably expire. So most people just take the loan at the much higher than market rate. The way to avoid this is to get your mortgage company to LOCK your rate, and to show you the confirmation of the rate lock. Each lender sends either a fax or an email confirming a rate lock. This then goes into the loan file. DEMAND to see this confirmation. It is the only way to be sure that you will not get scammed at the closing table. Real estate novices and enthusiasts alike are always savvy enough to shop around for lenders providing the lowest mortgage interest rates. In addition, they may seek out more favorable terms and easier repayment periods. When you've found a lender willing to provide you with the terms you need, it makes sense to apply through them. The question stands: will the outlined terms be the one you follow? With rates changing by the day, how do you ensure your costs stay down with mortgage loans? A way to calm the storm is by asking for a lock commitment. To start, a lock commitment is a promise made by the lender to keep a certain interest rate for a period of time throughout the loan application process. Remember, the interest rate upon application filing could be 6.9% while the interest rate upon application processing could increase to 7.4%. Many times, the quote you apply for does not remain the same throughout the application process. For this reason, it is important to search for a lender that will lock down the interest rate through all phases of the mortgage application process from application to approval. Lock commitments serve a myriad of benefits. For starters, loan applications can take a very long time to be prepared. Lock in protection could make or break your ability to pay for the mortgage. Keep in mind that lock commitments could work against you in preventing you from taking advantage of price drops (unless you get prior consent from the lender.) Analyze the market trends and mortgage interest rate activity to make the best educated guess on whether mortgage rates will go up or down. Remember, lock commitments are meant to be acted upon. If you don't settle for the interest rate specified during the lock in time frame, you might lose the interest rate. All processing delays may negatively impact keeping the rate as well. Delays might be caused by lenders waiting for additional paperwork from you during the application process. In addition, lenders might be at fault for delays, especially when there is a high demand for their loans when the market dictates falling interest rates. Your lock commitment should also state all approved terms, how long the promise is valid, and any conditions needed to follow through with the loan (i.e. a lender receiving an insurance policy or a required credit score) Lock commitments are best served on paper. Verbal agreements are very sketchy and hard to deal with in the courtroom should a legal situation arise. Expect to pay a small fee for a lock in, which can be made either up front or upon settlement. If it's a flat fee or a percentage of the total mortgage total varies according to lenders. Look to a lock commitment today to secure the favorable mortgage rate for your home buying future.
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