Rate locks protect you as a borrower from rate changes over a specific time period. The lock guarantees that your lender will offer you a specific combination of interest rate and points. This means that if market rates rise after the rate lock, you will get the lower rate, even though this disadvantages the lender. However, if rates decline after a rate lock, you may not be able to get the benefit. It may be very helpful to consult an attorney about a rate lock and other aspects of your property transaction. At Pulgini & Norton, we are experienced Boston real estate lawyers who represent homebuyers, sellers, and lenders in connection with Massachusetts transactions.Understanding a Lock-in or Rate Lock
In general, the Massachusetts mortgage industry is competitive, and you should shop around and make sure that the lender with which you want to work is licensed in Massachusetts. If you decide to lock in an interest rate, you should make sure that the rate lock is in writing and that you keep a copy. The rate lock should be from an actual underwriting lender, bank, or credit union, rather than a mortgage broker. Mortgage brokers in Massachusetts are not allowed to issue rate lock commitments, although they may arrange a rate lock for you with your actual underwriting lender and give you a written copy.
You should provide the documents requested by the lender before the expiration of the rate lock and contact your lender during the process. If we represent you, our attorneys can make sure that the process is going smoothly.
A borrower may lock in a loan as soon as they receive approval. Often, however, homebuyers wait until a seller accepts their purchase offer before securing a rate lock. This is because it may not be clear at the start of your search for a home how many days it will take to find one that is appropriate. If you lock in too early, you may miss the opportunity to get a better rate, or you may need to obtain an extension. Alternatively, it may be possible to get a float down option, which allows you to get a better rate during the lock period if the rates decrease.
The rate will usually be locked for a long enough period to allow the lender to generate all of the loan documents. The time period for the lock may be between 10 and 60 days. The rate offered will depend on a variety of factors, such as market rates, credit score, property type, and location.
You should be aware that a rate lock is an additional cost. A longer rate lock may have a higher interest rate, which may be expensive for a borrower. Accordingly, the interest rates of a 10-day rate lock and a 60-day rate lock may be quite different. In some cases, lenders may be willing to extend a rate lock or provide a float down option.Protect Your Interests by Consulting a Real Estate Lawyer in Boston
A mortgage is a huge financial commitment. As a homebuyer, it is important to understand when and how to obtain a rate lock. At Pulgini & Norton, our Boston real estate attorneys guide people through each step of a property transaction, including obtaining a mortgage. We represent buyers, sellers, associations, and lenders in Cambridge, New Bedford, and Quincy, as well as other Massachusetts communities. Call Pulgini & Norton at 781-843-2200 or contact us through our online form for a free consultation with a mortgage lawyer.