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New Jersey Mortgage Rate Lock-In

What exactly is a New Jersey mortgage rate lock-in?  And how can it help you save money on your mortgage. A NJ mortgage rate lock-in is a lender’s promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is processed.

Depending upon the lender, 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 New Jersey mortgage rate 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 and evaluate your loan application. During that time, mortgage rates may change.  Therefore, the cost of the loan also changes.

But if you locked in your interest rate and points, you should be protected against increases while your application is being processed. This protection could save you a considerable amount of money.

However, with a New Jersey mortgage rate lock-in, you can also miss out on price decreases.  A mortgage rate lock-in is not the same as a loan commitment, although some loan commitments may contain a lock-in.

A loan commitment is the mortgage lender’s promise to make you a loan in a specific amount - at some future time.

Usually, you will receive the lender’s commitment only after your mortgage application has been approved.

Will Your Rate Lock-In
Be In Writing?

Some lenders have preprinted forms that set out the exact terms of the New Jersey mortgage rate lock-in agreement. Others may only make an oral lock-in promise on the telephone or at the time of application. Oral agreements can be very difficult to prove in the event of a dispute.

Some lenders' lock-in forms may contain crucial information that is difficult to under­stand or that is in fine print. For example, some NJ mortgage rate 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 mortgage rate lock-in form to read carefully before you apply for a loan. If possible, show the New Jersey mortgage rate 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 the lender.

This record may be useful in the event of a dispute.

Will You Be Charged for a New Jersey Mortgage Lock-In?

Lenders may charge you a fee for your New Jersey mortgage rate lock-in. Some 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 not close 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 New Jersey mortgage rate lock-in period.

How Long Are New Jersey Mortgage Rate Lock-Ins Valid?

Usually the lender 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 to 60 days are com­mon.

But some mortgage companies may offer a lock-in for only a short period of time (for example, 7 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 New Jersey mortgage rate lock-in period should be long enough to allow for settlement, and any other contingencies imposed by the lender, before the lock-in expires.

Before deciding on the length of the NJ mortgage rate lock-in , you should find out the average time for processing loans 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 NJ mortgage rate lock-in with as few contingencies as possible.

What happens if the mortgage lock-in period expires?

If you don’t settle within the New Jersey mortgage rate 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 the lender.

For example, your loan approval could be delayed if the lender 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 to investors at the lock-in rate.

When lenders lock in loan terms for borrowers, they often have an agreement with investors to buy these loans based on the New Jersey mortgage rate lock-in terms. That agreement may expire around the same time that the lock-in expires and the lender 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 New Jersey mortgage rate lock-in expires.