You probably took your time choosing the perfect interest rate before you locked it. Unfortunately, it does happen where a borrower can’t close on their loan before the rate lock expires. What are you supposed to do?
Luckily, you have options. Some of which you might like and others which you may not like.
Ask for a Rate Lock Extension
Some lenders offer a free rate lock extension for a short period of time. Not all lenders offer this, so don’t assume that you’ll get it. But, it’s worth asking the lender about it. If you only need a day or two, they may be willing to extend the offer. If you need a few weeks, though, the offer may be a little different.
If your lender isn’t willing to offer the rate lock free of charge, they may offer it for a fee. Ask the lender what they would charge and then decide if it’s in your best interest to pay it. Remember you’ll pay many closing costs, and the rate lock fee will just add to them. Give it careful consideration before you decide to pay it.
Take the Current Market Rate
If you don’t want to pay the extension fee or your lender just doesn’t offer one, you may be able to take the current market rate, but only if the rates are worse today. Lenders usually offer the option to either extend the lock or take the higher current rate. If rates fell, they will likely only offer a rate extension.
If the current market rate is acceptable, you can lock it in and hopefully have enough time to get your loan closed before this one expires. Of course, you should talk with your loan officer to get a good idea of how much longer it will take to get your loan closed. Are the issues they are having something major? If so, you may need another 30 – 60 days for the rate lock. If it’s minor things that can be cleared up in a day or two, though, you may be able to take a shorter lock period, which should cost you less in the end.
Use a Different Lender
If you’ve already gotten through a large part of the underwriting process, you probably don’t want to start over again with a new lender, but it may be your only option.
If you have to start over, keep in mind that you’ll have to incur the appraisal and title fees again. The first lender may also require you to cover those fees since they are a third-party service. You would have paid the fees if you closed on the loan, and the lender may still owe them even if you don’t close the loan.
Talk with your current lender about the possibility of transferring the appraisal and any title work over to the new lender. This still incurs a fee, but less than you may incur if you have to pay for two appraisals and two title searches.
Each lender differs in their policies, so make sure you know where the lender stands ahead of time so that you can determine the right steps to take.
The ideal situation is to get your loan closed before the rate lock expires. If you don’t, consider your options carefully. Weigh the pros and cons of paying the extension fee and maybe even try negotiating with the lender. They may be willing to budge a little bit. In the end, you should make sure you get an interest rate you are comfortable with at fees that you can afford