Will a mortgage commitment require me to rate lock now?

Question

My wife and I signed the agreement of sale for a new construction condo yesterday. We already had our pre-approval but the condo is requiring us to get our Mortgage Commitment before July 31, 2007 because they will be starting construction after that. Expected closing date is November 15, 2007. Will the required mortgage commitment before July 31 mean that I have to rate lock by then as well or not? I gather what that will do is lock me in to one mortgage company either way. Thanks!

Answer 1

The specific answer to your questions is: NO.

You can get a Mortgage Commitment and not lock the rate. Just to clarify what another poster said, there is actually no 100% Guaratee after a loan commitment. There is a virtual 100% Guarantee but nobody knows if somehting comes up in Title Work, or the Lender screwed up or something. Remember lenders are not liable for not closing a commited application, they can say no whenever they want, read your Loan Commitment well.

Answer 2

Many times, lenders will not want to rate lock you - especially when your projected move date is not until November. Rates could fall drastically and you could be locked into something horrible. They want you to have the best deal and probably wouldn't even if you begged.
Usually, an actual mortgage commitment means that you have applied for and have been approved for the loan. You are a 100% guarantee at that point. After that, your escrow period begins - that is typically 6-8 weeks and then you close. This is a special case since your process has started way before the place is finished. I would talk to my lender and ask what procedure is common in a case like this. The mortgage company would be going out on a limb this early in the game if they said that they will give you the loan 7 months from now....a lot can change. Contact your lender and they will know what to do.
Good luck!

Answer 3

If I'm not mistaken you just don't want to be committed to a mortgage lender?

The builder wants to know that you are FULLY approved with a lender by July 31st- this will probably require some type of commitment on your part like an application fee or a deposit with a lender. Most lender's won't lock an interest rate until 60 days from your anticipated closing date and in your case I would wait until Mid October before considering a rate lock (when was the last time you heard of a new construction home being completed on time?)- extensions on a locked interest rate can be costly.

So to get to the core of your question, you can still shop around for rates after you have your mortgage commitment from a lender. If you choose a different lender you risk losing your application fee/ deposit and it is a bit unethical but ultimately your choice.

Good luck and I hope you enjoy the new home!

Answer 4

A mortgage commitment does not require a rate lock but it will typically specify your maximum qualifying rate. The builder realizes the market will change but are looking to make sure you fit the guidelines as of today. If you are trying to finance with a sub-prime type loan, you will want to be sure to make sure the programs are still available when you get within a reasonable time to close.

If you need assistance, I am happy to help counsel you with the placement of your mortgage.

Answer 5

Call whomever you are going to get your mortgage from and talk to someone you like. If the first person you talk to is not treating you right, hang up and call again and get someone else. Once you find the right person, get their direct number and start a working relationship with them. Tell them your situation and they will tell you what you need to do. There will be a lot more questions that come up, so keep this person's number handy.