Mortgage Refinancing – Locking Your Mortgage Loan

Locking in your loan is the process where your loan originator guarantees your rate and any points you have agreed to pay. “Locking” is a deceptive term; what you think you’re getting isn’t actually what you were qualified for. Here are several tips regarding rate locks to help you avoid overpaying when mortgage refinancing.

Your loan originator is the retail mortgage company that provides you a written guarantee of the interest rate and points you were qualified. The loan originator does not qualify you for an interest rate or actually guarantees that rate; that is done by the wholesale lender your mortgage company represents. Every wholesale lender uses a form where the retail originator requests your rate guarantee and that particular day’s published interest rate. You can only lock in a particular interest rate from the time rate sheets are issued each day until the cutoff time. Cutoff is usually 4:00pm in the wholesale lender’s time zone.

Your mortgage company receives the guarantee from the wholesale lender that will include the duration of the lock. The interest rate your mortgage company receives is the wholesale rate; they will add their own markup depending on the length of your lock period and how gullible they think you are. The longer the lock period you request, the higher the retail markup of your interest rate will be. Your mortgage company isn’t going to tell you about the wholesale interest rate you were qualified so it is your job to find out what that interest rate is.

The retail markup of your mortgage interest rate by the loan originator is called Yield Spread Premium. Mortgage companies charge Yield Spread Premium because the wholesale lender pays them an additional point for each .25% they overcharge you on the interest rate. One point is one percent of your loan amount; the mortgage company receives this in addition to the origination fees you pay for their services.

Before you agree to a lock period you should find out what the realistic time frame for completing your loan. If it will only take 15-20 days choosing a 30 day lock period should be sufficient. The mortgage company might try to sell you an “extended lock” for an additional fee; however, you should rarely consider paying this fee unless you need it for your peace of mind. The purpose of the lock is to allow you sufficient time to close on the mortgage. If you are unable to close before the lock expires, the mortgage company will raise your interest rate.

Make sure you get the rate lock in writing. Until you have this written guarantee, you do not have an interest rate. Don’t leave it up to the mortgage company to tell you when to lock in your mortgage interest rate, make getting this written guarantee your first priority once you have chosen a mortgage company. How can you find the mortgage interest rate you were qualified by the wholesale lender and avoid paying retail markup? You can learn this and more by registering for a free mortgage tutorial.

To get your free mortgage tutorial visit RefiAdvisor.com using the link below.

Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing - What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.

Claim your free mortgage refinance information guide today at: http://www.refiadvisor.com

Mortgage Refinancing Information

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