How to make sure your rate lock doesn’t expire when you need it most

With closings taking longer and longer, often up to three months for co-ops, it can be very difficult to manage locking in a good interest rate without growing new gray hairs. This is because there are penalties associated with extending that rate lock AND a higher price for locking in a rate at longer than the standard 60-day term. Most buyers choose to lock in at a certain rate to take out the volatility factor and ease their minds, yet end up being that much more stressed when the expiration date nears. Sometimes, those fees can truly add up.

Here are the three most important things you can do when dealing with rate-lock scenarios:

If you’re buying a co-op, don’t lock in your rate until after your interview appointment with the board is set (or at least until you have clarity on their schedule). Yes, that late. Many make the mistake of locking once the contract is signed, but what if the board meets every 60 days and it just met? Even if all of your i’s are dotted and t’s are crossed with respect the bank side of the equation, don’t underestimate the board process and its related bureaucracy.
- Along these lines, CoopandCondo has recently outlined, beautifully we might add, the steps to get from contract to closing. Notice how much there is to do before you get to the point of setting up an interview with the board. The post underlines the fragile and fluid nature of the process, and where potential delays may arise that may take you past your rate lock expiration date.
Shop around for quotes on rate locks. Just make sure you standardize your inquiry to be able to compare apples to apples. Ask every lender the same question. I.e. What’s your rate for a 60-day lock with a 740 credit score, no points down, on a $900k loan? Otherwise, you will be left comparing pricing based on different underlying assumptions.
Consult with your mortgage professional and ask all of your questions upfront. Don’t wait until you near the expiration date to learn about the process. Play out different scenarios together of longer versus shorter lock terms and compare the cost implications to decide on which option best suits your needs.