What is a Kentucky Mortgage Rate Lock?

What is a Kentucky Mortgage Rate Lock?

A Kentucky mortgage rate lock-in or mortgage rate-lock is designed to protect borrowers from interest rate increases during a mortgage loan application process. It basically is a promise by the lender to make a mortgage loan available to a borrower for a specific interest rate and with a specific number of points, regardless of whether interest rates go up or not while the loan is being processed. With a mortgage rate lock, a lender basically guarantees to hold a particular interest rate for a borrower for a predetermined length of time. Typically, lock-in periods range from one month to four-months though longer periods may occasionally be available. Sometimes a lock-in might apply only for the period from when a mortgage loan application is submitted to when it is actually approved.

A  Kentucky mortgage rate lock is an extremely useful contract to have particularly during periods when interest rates are increasing or fluctuating a lot. Mortgage loan applications can take several weeks to process. During that time, there is no guarantee at all that the interest rate that was prevalent at the time the application was submitted will still be available at the time the loan is finally approved. Without a rate lock, there is no assurance that quoted terms and interest rates will still be available to the borrower at settlement time. Sometimes, lenders also quote extremely competitive interest rates and mortgage points in order to attract borrowers but then approve them at substantially higher rates and different terms. A rate lock-in is one way of ensuring that this does not happen.

Many lenders charge a fee for locking in a mortgage rate. The fees can vary by lender and by factors such as the duration of the lock-in period. Generally the longer the duration of the lock-in period, the greater is the fee. Sometimes, borrowers have to pay the mortgage rate lock fee upfront to the lender. In other cases, the lender may permit the borrower to fold in the rate-lock fee into the closing costs, or even make it a part of the total amount being financed. In general, borrowers should always attempt to get kentucky mortgage rate lock agreements in writing from the lender because oral guarantees can be hard to prove later.

A Kentucky mortgage rate lock is not a loan commitment though. All that it guarantees is a particular interest rate. While they are useful to have in most circumstances, sometimes a rate lock can be a disadvantage. For instance, if interest rates fall during the loan approval process, a borrower could end up with higher terms than what might be currently available at that time. Many lenders though are willing to write lock-ins that permit rates to float downwards with prevailing market conditions.

Kentucky Mortgage Rate Lock

Joel Lobb
Senior Loan Officer
text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.com
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). USDA Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.



3 thoughts on “What is a Kentucky Mortgage Rate Lock?”

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  2. What Options Are Available for Set­ting the Mortgage Terms?

    Lenders may offer different 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, the lender 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 agreed upon even if market conditions change.

    Locked-In Interest Rate–Floating Points. Under this option, the lender 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 10½ 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 the lender charges for that rate have dropped to 2½. With your lender’s agreement, you could then lock in the lower 2½ points.) If you float your points and market interest rates increase by the time of settlement, the lender 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, the lender 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 and points. 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.

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