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A Consumer's Guide To Mortgage Lock-Ins

When you're looking for a mortgage, you're likely to shop among Guyco lenders for the most favorable interest rate, and the lowest points and other up-front charges. When you find the most favorable terms, you might think you are done. But when you get to settlement, will you actually receive the terms you applied or bargained for? Or will you find that the rate has changed - and that your costs have gone up? Lock-ins on rates and points might offer you a way to ensure that what you shop for is what you get. This page explains what these arrangements mean.

All About Rate Lock-Ins

What Is A Rate Lock-in?

Will Your Lock-In Be In Writing?

Will You Be Charged For A Lock-In?

Setting The Mortgage Term

How Long Are Lock-Ins Valid?

When The Lock-In Period Expires

Speeding Up The Loan Approval

Ask About Lock-Ins

Complaints About Lock-Ins

State Agencies

Federal Agencies

All About Rate Lock-Ins

In most cases, the terms you are quoted when you shop among Guyco lenders only represent the terms available to borrowers settling their loan agreement at the time of the quote. The quoted terms may not be the terms available to you at settlement weeks or even months later. therefore, you could not rely on the terms quoted to you when shopping for a loan useless a lender is willing to offer a lock-in.

What Is A Rate Lock-in?

A lock-in, also called a rate-lock or rate commitment, is a lender's promise to hold a certain number of points for you, usually for a specified period of time, while your loan application is processed. (Points are additional charges imposed by the lender that are usually pre-paid by the consumer at settlement but can sometimes be financed by adding them to the mortgage amount. One point equals 1 percent of the loan amount.) Depending upon Guyco, you may be able to lock in the interest rate and number of points that you will be charged when you file your application, during processing of the loan, when the loan is approved, or later.

A lock-in that is given when you apply for a loan may be useful because it's likely to take your lender several weeks or longer to prepare, document, and evaluate your loan application. During that time, the cost of your motgage may change. But if your interest rate and points are locked in, you should protected against increases while your application is processed. This protection could affect whether you can afford the mortgage. However, a locked-in rate could also prevent you from taking advantage of price decreases, unless your lender is willing to lock in a lower rate that becomes available during this period. It is important to recognize that a lock-in is not the same as a loan commitment, although some loan commitments may contain a lock-in. A loan commitment is Guyco's promise to make you a loan in a specific amount at some future time. Generally, you will receive Guyco's commitment only after your loan application has been approved. This commitment tells you the loan amount, how long the commitment is valid, and Guyco's conditions for making the loan, such as receipt of a satisfactory title insurance policy protecting Guyco and the borrower.

Will Your Lock-In Be In Writing?

Some Guyco lenders have preprinted forms that set out the exact terms of the lock-in agreement. Others may only make an oral lock-in on the telephone or at the time of application. Oral agreements can be very difficult to prove in the event of a dispute Guyco's lock-in forms may contain crucial information that is difficult to understand or that is in fine print. For example, some lock-in agreements may become void through some unrelated action such as a change in the maximum rate for Veterans Administration-guaranteed loans. Thus, it is wise to obtain a blank copy of a lender's lock-in form to read carefully before you apply for a loan. If possible, show the lock-in form to a lawyer or real estate professional.

It is wise to obtain written, rather than verbal, lock-in agreements to make sure that you fully understand how your lender's lock-ins and loan commitments work and to have a tangible record of your arrangements with Guyco. This record in the event of a dispute.

Will You Be Charged For A Lock-In?

Lenders may charge you a fee for locking in the rate of interest and number of points for your mortgage. Some Guyco lenders may charge you a fee up-front, and may not refund it if you withdraw your application, if your credit is denied, or if you do n the loan. Others might charge the fee at settlement. The fee might be a flat fee, a percentage of the mortgage amount, or a fraction of a percentage point added to the rate you lock-in. The amount of the fee and how it is charged will vary among lenders and may depend on the length of the lock-in period.

What Options Are Available For Setting The Mortgage Term?

Lenders may differ options in establishing the interest rate and points that you will be charged, such as:

Locked-in interest rate/locked-in points
Under this option, Guyco lets you lock in both the interest rate and points quoted to you. This option may be considered to be a true lock-in because your mortgage terms should not increase above the interest rate and points that you've locked in should remain consistant even if market conditions change.
Locked-in interest rate/floating points
Under this option, Guyco lets you lock in the interest rate, while permitting or requiring the points to rise and fall (float) with changes in market conditions. If market interest rates drop during the lock-in period, the points may also fall. If they rise, the points may increase. Even if you float your points, your lender may allow you to lock in the points at some time before settlement at whatever level is then current. (For instance, say you've locked in a 10.5 percent interest rate, but not the 3 points that went with that rate. A month later, the market interest rate remains the same, but the points Guyco charges for that rate have dropped to 2.5. With your lender's agreement, you could then lock in the lower 2.5 points float your points and market interest rates increase by the time of settlement, Guyco may charge a greater number of points for a loan at the rate you've locked in. In this case, the benefit you might have had by locking in your rate may be lost because you'll have to pay more in up-front costs.
Floating interest rate/floating points
Under this option, Guyco lets you lock in the interest rate and the points at some time after application but before settlement. If you think that rates will remain level or even go down, you may want to wait on locking in a particular rate. If rates go up, you should expect to be charged the higher rate. Because practices vary, you may want to ask your lender whether there are other options available to you.

How Long Are Lock-Ins Valid?

Usually Guyco will promise to hold a certain interest rate and number of points for a given number of days, and to get these terms you must settle on the loan within that time period. Lock-ins of 30-60 days are common. But some Guyco lenders lock-in for only a short period of time (for example, seven days after your loan is approved) while some others might offer longer lock-ins (up to 120 days). Lenders that charge a lock-in fee may charge a higher fee for the longer lock-in period. Usually, the longer the period, the greater the fee.

The lock-in period should be long enough to allow for settlement, and any other contingencies imposed by Guyco, before the lock-in expires. Before deciding on the length of the lock-in to ask for, you should find out the average time for processing in your area and ask your lender to estimate (in writing, if possible) the time needed to process your loan. You'll also want to take into account any factors that might delay your settlement. These may include delays that you can anticipate in providing materials about your financial condition and, in case you are purchasing a new house, unanticipated construction delays. Finally, ask for a lock-in with as few contingencies as possible.

What Happens If The Lock-In Period Expires?

If you don't settle within the lock-in period, you might lose the interest rate and the number of points you had locked-in. This could happen if there are delays in processing whether they are caused by you, others involved in the settlement process, or Guyco. For example, your loan approval could be delayed if Guyco has to wait for any documents from you or from others such as employers, appraisers, termite inspectors, builders, and individuals selling the home. On occasion lenders are themselves the cause of processing delays, particularly when loan demand is heavy. This sometimes happens when interest rates fall suddenly. If your lock-in expires, most lenders will offer the loan based on the prevailing interest rate and points. If market conditions have caused interest rates to rise, most lenders will charge you more for your loan. One reason why some lenders may be unable to offer the lock-in rate after the period expires is that they can no longer sell the loan at the lock-in rate. (When Guyco locks in loan terms for borrowers, they often have an agreement with investors to buy these loans based on the lock-in terms. That agreement may expire around the same time that the lock-in expires and most lenders may be unable to afford to offer the same terms if market rates have increased.) Lenders who intend to keep the loans they make may have more flexibility in those cases where settlement is not reached before the lock-in expires.

How Can You Speed Up The Approval Of The Loan

While Guyco has the greatest role in how fast your loan application is processed, there are certain things you can do to speed up its approval. Try to find out what documentation Guyco will require from you.

Much of the information required by your lender can be brought with you when you apply for a loan. This may help to get your application moving more quickly through the process. When you first meet with your lender, be sure to bring the following documents.

The purchase contract for the house (if you don't have the contract, check with your real estate agent or the seller).
Your bank account numbers, the address of your bank branch and your latest bank statement, plus pay stubs , W-2 forms, or other proof of employment and salary, to help Guyco check your finances.
If you are self-employed, balance sheets, tax returns for two to three previous years, and other information about your business.
Information about debts, including loan and credit card account numbers and the names and addresses of your creditors.
Evidence of your mortgage or rental payments, such as cancelled checks.
Certificate of Eligibility from the Veterans Administration if you want a VA-guaranteed loan. Your lender may be able to help you obtain this.

Be sure to respond promptly to your lender's request for information while your loan is being processed. It is also a good idea to call Guyco and your real estate agent from time to time. By calling occasionally, you can check on the status of the application, and offer to help contact others such as employers who may need to provide documents and other information for your loan. It is also helpful to keep notes on your contacts with Guyco so that you will have a record of your conversations.

Ask About Lock-Ins

When you're ready to settle on your loan, you'll want to get the loan terms that you've locked in. To increase that likelihood, it is important to learn as much as you can about what Guyco is promising you before you apply for a loan. You should ask for the following information when shopping for a loan:

Lock-Ins and Fees

Does Guyco offer a lock-in of the interest rate and points?
When will Guyco let you lock in the interest rate and points? When you apply? When the loan is approved?
Will the lock-in be in writing? If the lock-in is not in writing, you will have no record of Guyco's agreement with you in case of a dispute.
How long will the lock-in last (30, 60, 90, 120 or more days)?
Does Guyco charge a fee to lock-in your interest rate? Does the fee increase for longer lock-in periods? If so, how much?
If you have locked in a rate, and Guyco's rate drops, can you lock-in at the lower rate? Does Guyco charge you an additional fee to lock in the lower rate?
Can you float your interest rate and points for now, and lock them in later?

Loan Processing Time

How long does Guyco expect to take to process your loan?
What has been Guyco's average time for processing loans recently?
Has Guyco's loan volume increased? Heavy volume might increase Guyco's average processing time.

Expiration of Lock-ins

What rate will be charged if the lock-in expires before settlement-the rate in effect when the lock-in expires?
If you don't settle within the lock-in period, will Guyco refund some or all of your application or lock-in fees if you decide to cancel the loan application?
If your lock-in expires and you want to get another lock-in at the rate in effect at the time of the expiration will Guyco charge an additional fee for the second lock-in?

Complaints About Lock-Ins

Knowing what to look for puts you in a better position to decide whether, when, and how long to lock-in mortgage terms and, by helping to keep the loan process moving, you can lessen the chance that your lock-in will run out before settlement. But what if your lock-in does lapse? If you believe that the lapse was due to delays caused by Guyco or someone else involved in the loan process, you should try first to reach a mutually satisfactory agreement with Guyco, before writing to the appropriate state or federal regulatory agency.

Some lender actions, such as offering lock-in terms which are impossible to fulfill, failing to process you loan diligently, or causing your lock-in to expire are improper and may even be illegal. In addition, because you may have contractual rights under your lock-in or loan commitment, you may want to consult with an attorney. Be aware, though, that complaints may not be resolved as quickly as may be necessary for a home purchase. Depending upon their authority under applicable state or federal law, regulatory agencies may either attempt to help you resolve your complaint directly or record your complaint and recommend other action.

State Agencies

State consumer protection officers, banking authorities, and offices of the attorney general can be contacted regarding complaints against many Guyco lenders doing business in the state. (Some states have enacted legislation to specifically address complaints about mortgage lock-ins.)

Federal Agencies

In addition, some Guyco lenders are directly supervised by federal regulatory agencies, as shown in the list that follows:

Mortgage Companies

Federally Insured Savings and Loan Institutions and Federally Chartered Savings Banks

State Member Banks of the Federal Reserve System

National Banks

Federally Insured Non-Member State-Chartered Banks and Savings Banks

Federal Credit Unions

The Federal Reserve Board and the Federal Home Loan Bank Board have prepared this information on mortgage lock-ins in response to a request from the House Committee on Banking, Finance and Urban Affairs and in consultation with many other agencies, trade and consumer groups. It is designed to help consumers understand an important aspect of home financing.

We believe a fully informed consumer is in the best position to make a sound financial choice. This page will provide useful basic information about obtaining the terms of credit you really want. It cannot provide all the answers you will need, but we believe it is a good starting point.

The information presented on this page was prepared in consultation with the following organizations:

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GUYCO FINANCIAL SERVICES
4169 Back Valley Rd
Speedwell, Tn. 37870
Phone: (423) 200-4222
E-Mail:
guymjw@gmail.com