Loans and Lock-ins

The process for approving mortgage loan applications can take several weeks. During that time, interest rates could rise sharply, depending on market fluctuations. When talking to your lender, ask the following:

• How long does the average application take?
   
• How long do you expect this application to take?
   
• Has there been an increase in applications, which may slow down processing?

Most lending institutions offer what is called a "lock-in" of your interest rate and the points charged, during the process of loan approval. The lock-in may be offered on application, during the process, or after the application has been approved.

The period for the lock-in may vary from one to four months. You need to ascertain what charges there are for this service, and whether the charge is higher for a longer period. Check to see if they will renegotiate, if there is a significant drop in the interest rates, and what financial penalties may be levied. All offers of a lock-in by the lender, need to be set down in writing so you have a reference, should questions arise.

Many things can impede the loan approval process, including incomplete information from the borrower, or errors by the lender. Sorting the problem out takes time, and your lock-in period can expire before the loan is approved. Before this can happen, ask the loan officer:

• What rate will I be offered if the lock-in expires?
   
• Will you refund any of the lock-in fees if the period expires?
   
• Is any portion refunded if the period expires, and I cancel the loan application?
   
• Is there an extra fee if I want to lock-in another offer, after the first one has expired?