Buying a home outright with out of pocket money is the easiest way to be a homeowner. However, not everyone can afford a $430,000 home, so they depend on a mortgage loan to purchase a home. Mortgage loans are good, but they come with interests that can rise over time. To check this, you may want to consider locking your interest rate. But what if you decide to do this with multiple lenders? Is it possible?
You can lock rates with multiple lenders. However, note that lenders normally charge a fee to ensure you are serious. So if you don’t mind losing the fee, you can go ahead with your plan.
Locking your mortgage rates will benefit you in the long run. Below, I have explained the possibility of locking your rates with multiple lenders.
Can a Lender Change the Interest Rate After Locking?
Can I Lock Rates With Multiple Lenders?
It has been proven that you can lock rates with a lender. But what if you decide to try it with multiple lenders? Is it possible? Before I answer that question, let’s understand a mortgage rate lock.
A mortgage rate lock is a commitment from a lender to stick to a mortgage rate for a certain time. Provided there are no changes to your loan application, and you close before your lock-in period ends, your interest rate should remain constant at closing as it was on the loan estimate. Most rate locks are available for 30, 45, or 60 days, although some lenders may provide longer lock periods.
The mortgage rate lock is based on these criteria:
- Your home’s value
- Your down payment
- Your closing costs
- Your credit score
- Your loan program
If your lender sees any changes to your former application before your closing, your interest rate could be altered. Locking in a mortgage rate is also connected to your loan program (for example, conventional, FHA, or VA), which means your rate could be altered if you change programs.
Why Should I Lock My Mortgage Rate?
You should lock your rate, so it stays that way till your closing. Mortgage rates change daily and in volatile markets, even hourly. Your rate won’t remain constant until you lock it in, and a higher rate could result in you paying additional thousands of dollars in interest rate over the loan’s lifespan.
Most lenders allow you to lock your loan once they have gotten your loan application, pulled your credit report and issued a loan estimate. If you are purchasing a home, lenders normally cannot lock your loan rate until you have an accepted purchase contract. But, some lenders offer options that let you lock before you have found a home and then apply it to home once you are under contract.
Your loan officer will lock in your interest rate based on the lender’s lock policy. In most situations, your rate can be locked as soon as your application is finished and your credit score has been confirmed. However, if you attempt to purchase a home, you may have to wait until you have accepted a contract to lock in your rate.
Other lenders may need conditional loan approval before locking or, regarding a renovation loan, receipt of the appraisal value that indicates how much your home will be worth after the renovation has been completed.
What Is the Cost to Lock in a Mortgage Rate?
You won’t pay a rate lock fee in most cases if it’s 60 days or less, though some lenders may charge a fee for longer-term locks that can be used towards your costs. Some construction lenders provide long-term locks to safeguard your interest rate while your home is being constructed.
You may be on the hook for a rate lock extension fee if your lender has to elongate or relock your rate because you don’t close by your lock expiration date. Ensure you communicate your rate lock period beforehand to prevent any rate lock elongation or relock costs.
Shopping around isn’t similar to the locking rate with many lenders. You’ll want to weigh up quotes from more than one company but only lock a rate with the one offering a deal that suits you. That’s because a rate lock is more of dedication on your end. There isn’t anything restricting home buyers who want to lock in rates with many lenders.
However, if you stick to this method, the fees related to two or more loan applications can easily invalidate the money saved with a lower rate. And, if you pull out of the underwriting process, you’ll have to start the loan approval process again with another lender, all before your loan ends.
So compare what you’ll save with a new lender’s rate against the cost linked with a new loan application. Of course, you’ll be liable for paying another set of appraisal fees, credit report fees, and any in-house origination or underwriting fees. Also, if you miss your closing date, the seller has the legal right to keep your hard-earned money.
Can a Bank Change the Terms of a Mortgage?
Why Your Mortgage Rate Lock Might Change?
Any inconsistency between your loan application and the information appraised by your lender can lead to a change in your locked rate. Here are some reasons why your locked rate could be altered:
You change the loan program: Interest rates are connected to the loan type you select. So, for instance, if you apply for an FHA loan and change to a conventional loan, the rate would have to be relocked based on conventional interest rates.
Your credit score changes: If your lender has to get a new credit report before you close, late payment or higher credit card balances could increase your locked-in rate.
